Here’s a concise comparison between face value and book value of a company:
🧾 Face Value (Par Value)
Definition: The nominal value of each share or bond as assigned by the issuing company at the time of issuance
Bonds: It’s the amount the issuer will repay at maturity (commonly ₹1,000 or ₹100)
Shares: A fixed, often trivial, amount per share set at issuance (like ₹10/share); it can change only via corporate actions like splits or consolidations
Uses:
- Determines share capital (face value × number of shares)
- Serves as the basis for calculating dividend payouts, often quoted as a percentage of face value . But now dividends are declaring in the form of rupees rather percentage of face value.
- For bonds, represents the redemption amount at maturity (principal)
Accounting Role: Appears in the company’s financial records for regulatory and book keeping purposes—not necessarily tied to actual value.
💼 Book Value
Definition: The net worth of a company according to its balance sheet—total assets minus total liabilities (sometimes excluding intangible assets)
Per Share Basis: Often expressed as Book Value Per Share = (Shareholders’ Equity) / (Outstanding Shares)
Variable: This value fluctuates over time as the company acquires assets, incurs liabilities, pays dividends, or issues new shares .
Investor Usefulness:
- Helps investors gauge the company’s intrinsic value.
- When compared to market value via the Price-to-Book (P/B) ratio, it can signal whether a stock is undervalued (P/B < 1) or overvalued (P/B > 1)
- Especially relevant for asset-heavy companies; less so for firms rich in intangible assets .
📊 Quick Comparison
| Feature | Face Value | Book Value |
|---|---|---|
| What it means | Issued nominal value per share/bond | True net worth on paper |
| Fixed or changing? | Fixed (unless split/reverse split) | Changes as assets/liabilities change |
| Purpose | Determines share capital, dividend basis | Reflects company’s solvency and intrinsic value |
| Investor relevance | Minimal—mostly accounting/legal used | High—used to assess undervaluation via P/B |
| Example | ₹10 per share face value | ₹75 per share book value if equity ₹15 L yield over 2 L shares |
Face Value vs Book Value
- Face value is just a nominal starting point—it doesn’t show what the company is truly worth.
- Book value gives actual financial worth based on tangible records.
For example (₹):
- Face value might be ₹10/share.
- Book value per share could be ₹75 if the company’s assets exceed liabilities by that amoun
🎯 Quick Rule of Thumb
Face value = what it says on the certificate
Book value = what the books say the company is worth
Why It Matters for Investors
Face value governs legal dividends and bond repayments—but doesn’t reflect real value.
Book value is key for valuation analysis—e.g. if the market price < book value, it might signal an undervalued stock
🧠 Final Summary
- Face value is a static accounting label—useful for legal, dividend, and corporate action purposes, but not reflective of the company’s market value.
- Book value is the evolving accounting worth of the company, used to assess whether the stock is trading above or below its “floor value.”
