Par Value Stocks Definition

Par value is the face value or named value of a stock or bond.

Par value stocks definition. Instead of par value some u s. What does par value stock mean. Par value stock. Companies sell stock as a means of generating equity capital so the par value multiplied by the total number of shares issued is the minimum amount of capital that will be.

There is a theoretical liability by a company to its shareholders if the market price of its stock falls below the par value for the difference between the market price of the stock and the. For example if a shareholder pays 5 for 1000 shares with a par value of 1 4 000 would be credited to the corporation s paid in capital account and 1 000 to the common stock account. However par value is now usually set at a minimal amount such as 0 01 per share since some state laws still require that a company cannot. The intent behind the par value concept was that prospective investors could be assured that an issuing company would not issue shares at a price below the par value.

Par value is important for a bond or fixed income instrument because it determines its maturity value as well as the dollar value of coupon payments. States allow no par stocks to have a stated value set by the board of directors of the corporation which serves the same purpose as par value in setting the minimum legal capital that the corporation must have after paying any dividends or buying back its stock. With stocks the par value which is frequently set at 1 is used as an accounting device but has no relationship to the actual market value of the stock. Par value refers to the value written on the face of the common stock certificate or.

When shares have a par value the amount shareholders pay for them in excess of par is accounted for as paid in capital on the corporation s balance sheet. Par value stock is one class of stock issued by a corporation that has a par value set in the corporate charter or articles of incorporation. What is par value of share. The par value is a minimum selling value given to each share of stock.

In other words it is the share nominal amount 1 0 1 or 0 001 mentioned on the stock certificate at the time. No par value stock is shares that have been issued without a par value listed on the face of the stock certificate historically par value used to be the price at which a company initially sold its shares. Par value definition par value is also referred to as face value par or nominal value of common stock. Par value is the face value of a bond.

Par value is the stock price stated in a corporation s charter.