Knowledge Base

These three terms are used often when discussing stocks, but they mean very different things.

Face Value

Face value (also called par value) is the original value of a share as stated by the company at the time of issue. It is a fixed number usually ₹1, ₹2, ₹5, or ₹10 and does not change with market movements.

Face value is used mainly for accounting and to calculate dividends. If a company declares a 50% dividend on a face value of ₹10, you receive ₹5 per share not 50% of the market price.

Book Value

Book value is the net worth of the company divided by the total number of shares. It represents what shareholders would theoretically receive per share if the company were to liquidate all assets and pay off all liabilities.

Book Value per Share = (Total Assets − Total Liabilities) ÷ Total Shares Outstanding

Investors use the Price-to-Book (P/B) ratio to compare the market price against the book value to assess if a stock is trading above or below its underlying value.

Market Value

Market value is the current price at which the stock is trading on the exchange. It is determined by supply and demand and changes every second during trading hours.

In short, face value is fixed, book value is based on company financials, and market value is the real-time price on the exchange.