Chapter 3

 Face Value (FV): The nominal price of a share is known as

its face value. The equity capital of the company is
calculated by multiplying the number of shares issued by
its face value
EXAMPLE: - In case a company has issued 1 Lakh shares with
Face Value Rs. 10, then the equity capital of the company would
be Rs. 10 Lakh (1 Lakh * 10).
 Shares may be issued to the investors at the face value, or a
price higher (premium) than the face value, or a price lower
(discount) than the face value.
 The face value of a company’s share does not usually
change unless the company decides to split or consolidate
its shares. In such cases, the face value of company’s shares
would reduce (in case of split) or increase (in case of
consolidation).
Example: - if an investor holds 1 share of Rs. 10 FV and the
company decides to split its one share into five, then the new
face value of its shares would be Rs. 2 and the investor would
hold 5 such shares.
 The face value of share is important for calculating the
dividend payable on a share. When dividends are
mentioned as a percentage, that percentage is reckoned
with regard to the face value.
Example: - if a company with Face value of Rs. 10 declares 30%
dividend, it means dividend of Rs. 3 per share. However, if a
company with Face value of Rs. 2 declares 30% dividend, it
means dividend of Rs. 0.60 per share.
Book Value
 Book Value of a company is the net-worth of the company.
To compute book value per share, net-worth of the
company is divided by the number of outstanding shares.
 In simple terms, book value per share means the
theoretical amount of money each share would get in case
the company was to wind up.
Market value
 This is the market price of a share. The market value of the
entire equity of a company is termed as market
capitalization and is computed as market price per share
multiplied by total number of outstanding shares.
 The market value of a share depends upon host of factors

like the expected performance of the company, market

sentiments and liquidity, among others.