Par Value of Stock & Shares - Definition, Examples, Importance

In this video, we have discuss the definition, importance of par value of stock and no par value of share with practical example.

𝐖𝐡𝐚𝐭 𝐢𝐬 𝐏𝐚𝐫 𝐕𝐚𝐥𝐮𝐞 𝐨𝐟 𝐒𝐭𝐨𝐜𝐤?
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Par Value of stock (share) is the legal per share value that appears on the share certificates.

𝐍𝐨 𝐏𝐚𝐫 𝐕𝐚𝐥𝐮𝐞 𝐨𝐟 𝐒𝐡𝐚𝐫𝐞 𝐄𝐱𝐚𝐦𝐩𝐥𝐞
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let’s say that Company A has issued no par value share at $200 each share. Now the following would be the entries –

Cash account A/C…. Dr $200 –

To Common Stock A/C – $200

𝐄𝐟𝐟𝐞𝐜𝐭 𝐨𝐟 𝐒𝐭𝐨𝐜𝐤 𝐒𝐩𝐥𝐢𝐭 𝐨𝐧 𝐏𝐚𝐫 𝐕𝐚𝐥𝐮𝐞 𝐨𝐟 𝐒𝐡𝐚𝐫𝐞
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#1 - Stock splits are usually done to low the stock market value.

#2 - The stock splits increases the number of shares/stocks and significantly reduces the par value of the stock.

𝐈𝐦𝐩𝐨𝐫𝐭𝐚𝐧𝐜𝐞 𝐨𝐟 𝐏𝐚𝐫 𝐕𝐚𝐥𝐮𝐞 𝐨𝐟 𝐒𝐭𝐨𝐜𝐤
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#1 - It is important to know concept of par value share and how much capital of a firm is legal capital.

#2 - Par value of the common shares rarely affects your stock holding or how the stock is going to be on the market.

To know more about the 𝐏𝐚𝐫 𝐕𝐚𝐥𝐮𝐞 𝐨𝐟 𝐒𝐭𝐨𝐜𝐤, you can go to this 𝐥𝐢𝐧𝐤 𝐡𝐞𝐫𝐞:- https://www.wallstreetmojo.com/par-va...

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