Face Value Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Face Value, written in plain English, along with examples of how it is used.
What is Face Value?
n. Original cost of a share of stock which is shown on the certificate. Also referred to as “par value.”
History and Meaning of Face Value
Face value is a term that is commonly used in the stock market and refers to the original cost of a share of stock, or the amount of money that a bond or note promises to repay at maturity. It is also known as "par value." The face value is typically printed on the stock certificate or bond, and it is different from the actual market value.
Historically, the face value was an important indicator of the value of a company's stock, and it represented the minimum amount that an investor would receive in the event of bankruptcy or liquidation. However, in modern times, the market value of a stock is much more relevant and reflects the current state of the company and its perceived worth.
Examples of Face Value
If a company issues a stock certificate with a face value of $10, it means that the shareholder paid that amount to purchase the stock.
A bond with a face value of $1,000 will repay the investor that amount when it matures.
In accounting, the face value of a liability is the amount of money that is owed on a loan or debt.
Legal Terms Related to Face Value
Market Value: The current price of a stock or bond in the stock market, which is influenced by various factors such as supply and demand, company earnings, and economic conditions.
Principal: The amount of money borrowed or invested, which is typically repaid with interest.
Par Value: See face value.