Par Value - The Nominal or Face Value of a Bond or Stock

Par Value is the nominal or face value of a bond, or stock, or coupon as indicated on a bond or stock certificate. It is a static value. ParValueNominalorfacevalueofabondorstockHome›Resources›Knowledge›Accounting›ParValueWhatisParValue?Parvalueisthenominalorfacevalueofabond,shareofstock,orcouponasindicatedonabondorstockcertificate.Thecertificateisissuedbythelenderandgiventoaborrowerorbyacorporateissuerandgiventoaninvestor.Itisastaticvaluedeterminedatthetimeofissuanceand,unlikemarketvalue,itdoesn’tfluctuate.Abond’sparvalueisthedollaramountindicatedonthecertificate,whereinthecalculationofinterestandtheactualamounttobepaidtolendersatmaturitydateisset. Ashareofstock’sparvalueistheminimumcontributionamountmadebyinvestorstopurchaseoneshareatthetimeofissue.  ParValueExampleAssumethatClintonCompanyissuesabondtothepublicworth$10M.Eachoneofthe10,000bondsissuedhasa$1,000parvalue.Wheneachbondmaturesataspecifieddate,thecompanywillpaybackthevalueof$1,000perbondtothelender.Inthecaseofsharesofstocks,ClintonCompanyannouncesthatitwilloffer3000sharesofcommonstockandeachstockwillhaveaparvalueof$1.Thatistheminimumpriceatwhichanyshareswillbesold. HowtoDeterminetheParValueofaShareofStockThereareanumberoffactorsbywhichacompanysetsaparvalueforeachcommonstockshareoffered.InaninitialpublicofferingInitialPublicOffering(IPO)AnInitialPublicOffering(IPO)isthefirstsaleofstocksissuedbyacompanytothepublic.PriortoanIPO,acompanyisconsideredaprivatecompany,usuallywithasmallnumberofinvestors(founders,friends,family,andbusinessinvestorssuchasventurecapitalistsorangelinvestors).LearnwhatanIPOis,theagreedvaluewillhavetomeettheobjectivesofthecompanyinthesethreeareas:InitialcapitalizationtargetNumberofpublicsharestobeoffered,aswellastheownershippositionoftheinitialownersPredictionofsharepricechangesaftersharesareofferedinthemarketTheobjectiveoffocusingontheseareasistoachievearobust,firstdayoftrading,whichdoesnotdisappointthemarketplayers,analysts,and,mostimportantly,thenewinvestorswhoarehopingthattherewillbeacontinuousincreaseinmarketvalue. WhatistheImportanceofParValue?Foracompanyissuingabond,theparvalueservesasabenchmarkforpricing.Whenthebondistraded,themarketpriceofthebondmaybeaboveorbelowparvalue,dependingonfactorssuchasthelevelofinterestratesInterestRateAninterestratereferstotheamountchargedbyalendertoaborrowerforanyformofdebtgiven,generallyexpressedasapercentageoftheprincipal.andthebond’screditstatus.Abondthatistradingaboveparisbeingsoldatapremiumandoffersacouponratehigherthantheprevailinginterestrates.Investorswillpaymore,astheyieldorreturnisexpectedtobehigher.Ontheotherhand,abondthatistradingbelowparisonadiscounttrade,hasalowerinterestratethanthecurrentmarketanditissoldatalowerprice.Parvalueislikewiseimportanttoaspiringentrepreneurs,whoarestartingtoformacorporation.Thecapitalizationtargetisreadilyconfiguredifthecompanywillsetavalueforeachstockoffered.Sharesofstocksoldatapriceabovetheparvaluewouldresultinadditionalpaid-incapital,reflectedinthebooksofthecompany.AlthoughthefluctuatingmarketpriceMarketPriceThetermmarketpricereferstotheamountofmoneyforwhatanassetcanbesoldinamarket.Themarketpriceofagivengoodisapointofconvergenceofstockshasnoeffectonthebooks,parvaluehasalegalbindonpartofthecompanytoitsinvestors–noshareswillbesoldbelowthatprice.  RelatedReadingsCFIistheofficialprovideroftheglobalFinancialModeling&ValuationAnalyst(FMVA)BecomeaCertifiedFinancialModeling&ValuationAnalyst(FMVA)®CFI'sFinancialModelingandValuationAnalyst(FMVA)®certificationwillhelpyougaintheconfidenceyouneedinyourfinancecareer.Enrolltoday!®BecomeaCertifiedFinancialModeling&ValuationAnalyst(FMVA)®CFI'sFinancialModelingandValuationAnalyst(FMVA)®certificationwillhelpyougaintheconfidenceyouneedinyourfinancecareer.Enrolltoday! certificationprogram,designedtohelpanyonebecomeaworld-classfinancialanalyst.Tokeepadvancingyourcareer,theadditionalCFIresourcesbelowwillbeuseful:ContributedsurplusContributedSurplusContributedsurplusisanaccountintheshareholders’equitysectionofthebalancesheetthatreflectsexcessamountscollectedfromtheAdditionalpaidincapitalAdditionalPaidInCapitalAdditionalPaidIn Capital(APIC)isthevalueofsharecapitalaboveitsstatedpar valueandislistedunderShareholders'Equityonthebalancesheet.EquityvalueEquityValueEquityvaluecanbedefinedasthetotalvalueofthecompanythatisattributabletoshareholders.Tocalculateequityvalue,followthisguidefromCFI.Whatisfinancialmodeling?WhatisFinancialModelingFinancialmodelingisperformedinExceltoforecastacompany'sfinancialperformance.Overviewofwhatisfinancialmodeling,how&whytobuildamodel.FreeAccountingCoursesLearnaccountingfundamentalsandhowtoreadfinancialstatementswithCFI’sfreeonlineaccountingclassesAccountingAccountingisatermthatdescribestheprocessofconsolidatingfinancialinformationtomakeitclearandunderstandableforall.Thesecourseswillgivetheconfidenceyouneedtoperformworld-classfinancialanalystwork.Startnow! BuildingconfidenceinyouraccountingskillsiseasywithCFIcourses! EnrollnowforFREEAccountingAccountingisatermthatdescribestheprocessofconsolidatingfinancialinformationtomakeitclearandunderstandableforalltostartadvancingyourcareer!CorporateFinanceInstituteBacktoWebsite0searchresultsf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