Face value is important to a company. It is generally used to calculate interest on shares and bonds. Understanding the FV of shares is essential for making hassle-free investments or trades in the stock market.
Regarding stocks, it is crucial to understand that face value has no connection to market value. FV has the biggest impact on bond pricing.
Face Value = Equity Share Capital / Total Number of Outstanding Shares
The market value of a share is the rate at which it is traded on a publicly listed stock exchange. It represents a publicly listed company’s market capitalization.
For instance, if a stock trades at Rs 300 per share, that company’s market value per share is Rs 300. Due to its sensitivity to market fluctuations, it is quite volatile.
It can be calculated using the formula,
Market Value = Total Number of Outstanding Shares * Current Market Price Per Share.
Book value is the amount recorded for a share in the company’s records. It represents the amount per share that shareholders can get if the company is dissolved and its assets are sold to settle the liabilities.
It can be calculated using the formula,
Book Value = Company’s Total Assets – Company’s Total Liabilities.