COMMON STOCK (Corporate Finance)
(Unit of Ownership)
Concept of Common stock

A security that represents ownership in a corporation. While in UK they are known as “Ordinary Shares” 1. Par value Vs No Par Value

* Minimum price of a share below which the share cannot be issued.(Articles of incorporation) * Most shares issued today are classified as no-par or low-par value stock. * No-par value stock prices are determined by what investors are willing to pay for them in the market. * Companies find it beneficial to issue no-par value stock as they have flexibility in setting higher prices for future public offerings * Have less liability to shareholders in the case that their stock falls dramatically. * In general, par value (also known as par, nominal value or face value) refers to the amount at which a security is issued

* For example, a bond with a par value of $1,000 can be redeemed at maturity for $1,000. This is also important for fixed-income securities such as bonds or preferred shares because interest payments are based on a percentage of par. So, an 8% bond with a par value of $1,000 would pay $80 of interest in a year.

It used to be that the par value of common stock was equal to the amount invested (as with fixed-income securities). However, today most stocks are issued with either a very low par value (such as $0.01 per share) or no par value at all.

You might be asking yourself why a company would issue shares with no par value. Corporations do this because it helps them avoid a liability to stockholders should the stock price take a turn for the worse. For example, if a stock was trading at $5 per share and the par value on the stock was $10, theoretically, the company would have a $5-per-share liability.

Par value has no relation to the market value of a stock. A no par value