Glossary - Par Value
Par value, in finance, refers to the nominal or face value of a bond, stock, or other financial instrument. For stocks, it is a nominal value assigned to the shares by the company upon issuance, which may bear no relation to their market value. For bonds, it is the amount that the issuer agrees to pay the bondholder at maturity.
Also known as
- Face Value
- Nominal Value
Use cases examples
- Corporate charter: The par value of each share of common stock is set at $0.01.
- Bond Certificate: This certificate represents $1,000 par value of the corporate bond issued by XYZ Corp.
Considerations for investors
- Investors in bonds should understand that the par value represents the amount that will be returned at maturity, affecting investment return.
- In equity, investors should be aware that par value has little significance to the market value of shares but can impact the legal structure of equity issuance.
Considerations for founders
- Setting a par value too high can result in significant legal capital obligations.
- A low, nominal par value (e.g., $0.01) for shares can minimize the initial capital contribution requirements.
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