1. Face Value (FV)
Face Value = Nominal Value of Share
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. For 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).
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). For 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.
How to Analyse:
Whenever you look at stock price of a company – always make sure you also look at its face value as well. So please stop being under a myth that – lower stocks price doesn’t necessary mean their they are small companies – as their face value may be lower & higher chances of it being split, while higher stock price also doesn’t necessarily mean they are big companies – as their face value may be still retained at 10.
