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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investing in Stocks (NISM XXI-A)

In the context of equity shares, what does the term 'face value' of a share represent?

Face value is the nominal or par value of a share as stated by the company. Share capital and dividend percentages are computed on this amount, whereas the market price is set by trading and book value comes from net worth.

  1. AThe nominal value stated in the company's books and used for computing share capital and dividend percentageCorrect
  2. BThe price at which the share currently trades on the exchange
  3. CThe book value per share after deducting all liabilities
  4. DThe price at which the company first listed on the exchange

Explanation

Face value (par value) is the nominal value of a share printed on it. Share capital is computed on it and dividend declared as a percentage is applied to it. Market price is determined by trading and is a different concept; book value per share comes from net worth.

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