After understanding what the stock is, we come to know that all the shares have their own value, and if the stock is listed in the stock market, that Price of the stocks decreases and increases on daily basis Now let’s move forward to know about the Face Value in Stock Market,
Every stock also has a PRICE, which is not CHANGE daily, Face Value doesn’t change with time unless the stock is split, therefore it is also known as FIXED PRICE.
- 1 What is Face Value?
- 2 How FV changes when the stock is split?
- 3 Effect of Stock Split on Face Value
- 4 Is there any Similarity in between Face Value and Market Value?
- 5 PAR VALUE, AT PAR, AT PREMIUM, AT DISCOUNT
- 6 So When FV Comes to Play in Role?
- 7 How Organizations used FV?
- 8 How to check the FACE VALUE of a stock?
- 9 Conclusion
What is Face Value?
FACE VALUE is nothing but a price of issuing price of each share when a company first time listed in the Primary Market of the stock market and launches its IPO i.e Initial Public Offering.
For example, the FACE VALUE of TCS shares is listed as Rs1 per common share, while Cipla’s Face Value = Rs 2.0
How FV changes when the stock is split?
Suppose XYZ Companies has launched its IPO with 10 lakh shares with Rs10 Each So its Equity Capital=Rs10*10lakhs share i.e FV*Total no of shares.
And the same Company Now, want to increase the No of shares to 20 lakh,
So now Its FV would be Rs5.
and Equity Capital would be the same i.e Rs5*20lakhs share i.e FV*Total no of shares.
Effect of Stock Split on Face Value
Often companies split shares on the price of their shares in the stock market so much that the price of their shares are available to small investors and they can invest in these shares.
Is there any Similarity in between Face Value and Market Value?
No, Both FACE VALUE and MARKET VALUE are different things, the MARKET PRICE of a stock depends on how much DEMAND is in the stock market,
But the face value of a SHARE is such a LEGAL PRICE, on which the total shares of that company are issued in the market,
Face Value is also Known as PAR value and can also be called the real value of the stock,
That is, if you receive a company’s share in PHYSICAL FORM, then there will be a value on that stock, which will be the FV of the share, FACE VALUE is the original value of a stock, or the initial value of that stock, in proportion to which the total capital of the company is divested, It can also be said that the face value is the accounting value of the stock for a company.
PAR VALUE, AT PAR, AT PREMIUM, AT DISCOUNT
PAR VALUE:–FACE VALUE is also called PAR VALUE, both are same, and there is no difference in it, if a stock is trading in the market on its face value, then such price will be called AT PAR.
DISCOUNT Value:-If a stock is trading less than its face value then in that case PRICE will be called DISCOUNTED VALUE or AT DISCOUNT.
PREMIUM Value:-If a stock is trading at a higher price than its face value, then in that case PRICE will be called PREMIUM VALUE or AT PREMIUM,
So When FV Comes to Play in Role?
We have discussed that face and market values are two different things and Current share price known as Market Price. So if you and I need to purchase any share, we have to pay the current share price which is a market price not Face value.
FV comes to play in the role when we purchase the shares from the primary market.
How Organizations used FV?
- For PAYMENT of DIVIDEND– Whenever the company declares the dividend, then it is calculated only on FACE VALUE.
- For STOCK SPLIT – STOCK SPLIT also has the face value of the main basis.
- To give SHARE Bonus – Stock bonus is also announced on the basis of the company’s FV.
- For the calculation of the company’s growth– If the company’s growth is to be calculated then an investor can easily make a decision by comparing the company’s current value of PRICE to its face value.
- In the event of a company termination or bankruptcy, the shareholder has the right to get the capital at just FV.
How to check the FACE VALUE of a stock?
The company can also change the face value of its stock. Companies can split their shares and change their face value.
The face value of a stock is published by the company’s financial statement (BALANCE SHEET and SCHEDULE)
You can check out the National Stock Exchange NSE or Bombay Stock Exchange’s website for checking the particular stock’s FV.
The face value is the actual value of the share, which is derived by dividing the total number of shares of the company in its initial capital.
An investor buys the Share from the STOCK MARKET, at the market price, which is determined by the demand and supply for that particular share.
Usually, the market price of any stock is much higher than its face value, and the value of the face value is important from the accounting PURPOSE and it has nothing to do with the market price as an investor we should focus on the market price.
As the Trading takes place by using the market price of that particular stock which keeps on fluctuating and face value and does not fluctuate except when a stock splits.