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What is Face Value?

When you start investing in stocks,

the first thing to comprehend is the
share’s face value in the stock
market. It is also referred to as the par
value, and it’s determined at the time
the stock is issued.

In the stock market, Face Value is a

financial term used to describe the
nominal value of a security. In the
case of stocks, Face Value is a jargon
standing for the stock's original cost,
as listed in the certificate.

The face value of stocks and bonds is

a fundamental stock market concept.
The face value is fixed when publicly
traded firms offer stock through
Initial Public Offerings (IPOs). It
refers to the price at which a
company’s stock can be bought.

Similarly, a firm can raise capital or

funds by issuing bonds. Face value is
also called the par value, referring to
its value as recorded in its
book/digital records and share
certificates. The Face Value is set up
when a firm initiates issuing shares
and bonds.

Share or Bond Certificate

Companies issue shares and bonds

with a defined value known as face
value. Various factors determine the
face value of a company’s shares. In
most cases, the corporation assigns it.

Share certificates; are the documents

issued by companies that sell shares
in the share market. The share or
bond certificate contains the Face
value, class of shares, issue dates, and
more on the shares of a company.

From the firm's standpoint, assigning

face value is essential, allowing the
organization to compute the
accounting value of its shares. This
number is further utilized in the
company’s balance sheet.

The face value of the shares and

bonds is clearly stated on the
share/bond certificate. Furthermore,
for an investor to begin trading
stocks, it is necessary to determine
the face value of the shares.

Importance of Face Value

Face value stands as a focal point in

the stock market. The Face Value
withholds a high significance around
investing, the stock exchanges,
shares, and bonds.

A share's face value is significant

because it is used to determine
financial ratios and measures like
earnings per share (EPS), price-to-
earnings (P/E) ratio, and return on
equity (ROE). It also determines the
company's initial capital raised by
issuing shares.
 However, the face value of a share
does not always correspond to its
market value. A share's market value
is governed by market forces like
supply and demand, corporate
performance, and investor outlook,
and it can change dramatically over
time.

The following factors portray the

importance of Face Value in the share
market.

 Face Value determines the stock’s

current market value.
 It assists in the process of calculating
a premium.
 It plays a vital role in calculating
profits.
 It is essential to calculate interest
rates.

Formula of Face Value

The formula for the face value of a

stock, also known as the "nominal
value" or "par value," can be given
as-
 Face Value of a Share = Equity
Share Capital / Outstanding Share
Numbers

Difference Between the Face value

and Market value

As elaborated in the table below, face

Value and Market Value have
significant differences in the stock
market.

Particulars Face Value Market

Value

Meaning It is the stock’s nominal value at It is the

the time of issuance. current
stock
market
price as
quoted on
the stock
exchange.

Price Determination The corporation determines the Market

pricing of share and bond face value
value. changes
due to the
 prices of
the equities
purchased
in stock
exchanges.

Price Fluctuations Market conditions do not affect Depending

Face Value. on market
conditions,
the market
value can
fluctuate.
Price
fluctuation
s can occur
due to
changes in
macroecon
omic data,
governmen
t policies,
and global
events.

Calculations Face value equals the equity Market

share capital divided by the value is
number of outstanding shares. calculated
by
 multiplying
the current
stock price
by the
number of
outstanding
shares.

Book Value: Book value is a similar

stock market terminology closely

related to Face Value and Market

Value. It refers to the value of the

company’s shares on its books. Book

Value is calculated when the

company’s net value, or the

difference between its assets and

liabilities, is divided by the number

of issued shares.

Modifying the Face Value of Stocks

Corporate actions, such as stock

splits, can modify the face value of
shares. When a firm splits its stock, it
divides the current shares into smaller
units with lower face values.
Example: If a corporation with a face

value of Rs 20 per share announces a

1:1 stock split, one current stock will

be split into two units, each with a

face value of Rs 10.

FAQs
How is a share’s face value
determined?
What is the face value of an initial
public offering (IPO) share?
Is it possible for Face’s value to start
to rise?
What is the minimum face value of a
share?
How can the share’s face value be
reduced?
What is a bond’s par value?

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