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Face Value

Meaning: 

Face value, also referred to as par value, is defined as the original value assigned to a share or bond by the issuing company at the time of its issuance. This value is printed on the share certificate and remains unchanged unless the company undergoes a stock split or consolidation of shares.


Example:
For instance, if a company issues a share with a face value of ₹10, this amount serves as the fundamental value for accounting and corporate decisions, including dividend calculations and share capital assessment.


How to understand Face Value:

Face value acts as the base for calculating dividends and is crucial for bond interest (coupon) calculations, where interest payments are based on the face value.
It plays an important role in corporate actions such as stock splits, bonus issues, and buybacks, influencing how shares are valued.

Importance of Face Value:   

Face value helps determine the share capital listed on the balance sheet and is significant during the pricing structure of initial public (IPOs).
It is useful for understanding stock denomination and valuation, allowing investors to compare pricing differences between companies in the same sector.



Types of Face Value Applications:
Shares:
Standard face values are typically ₹1, ₹2, ₹5, or ₹10, used in dividend and bonus calculations.
Bonds / Debentures: 
Face value is usually ₹1,000 or ₹10,000, with interest (coupon) paid based on this value.
Mutual Fund Units:
The face value is usually ₹10 for net asset value (NAV) calculations during the fund's launch.


How Face Value Is Evolving: 
Modern markets focus more on market price, but face value remains important for corporate actions.
Many companies reduce face value through stock splits to enhance liquidity and make shares more affordable.
Digital platforms now highlight face value clearly for better investor understanding. 
Despite fluctuations in market prices, face value remains constant unless formally changed by the company.
Regulatory bodies ensure transparency regarding face value in IPOs and corporate filings, maintaining investor confidence. 



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