Face Value

Finance

Quick Definition

Face Value is the original value of a financial instrument (like a share or bond) as stated by the issuer, also known as nominal or par value.

Detailed Explanation

Face Value represents the fixed value assigned to a share or bond at the time of issuance. It is not affected by market fluctuations and remains constant unless changed by corporate actions like stock splits.

Key Points About Face Value

  • Also called Par Value or Nominal Value
  • Used to calculate dividends (in some cases)
  • Different from market value, which changes daily
  • Important in accounting and corporate actions

Where Face Value is Used

  • Equity Shares: Commonly ₹1, ₹2, ₹5, or ₹10 in India
  • Bonds/Debentures: Amount repaid at maturity
  • Dividend Calculation: Some companies declare dividends as a % of face value

Face Value vs Market Value

  • Face Value: Fixed and assigned at issuance
  • Market Value: Current trading price in the market

Face value helps investors understand the base value of securities, but investment decisions are usually based on market value and company performance.

Example

"A share has a face value of ₹10 but is trading at ₹150 in the stock market. ₹10 is the nominal value, while ₹150 is its market value."

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