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What is Par Value?

Otherwise known as the stated value per share, the par value of a share is the minimum share value at which a company issues shares to the public. It is the nominal share amount that a company has stated on its stock certificate at the time issued. Par value bears no relation to the market value of shares.

Typically, a company issues common shares in excess of their par value. However, companies issue bonds and preference shares close to par value.

Additional paid-in capital is the value an investor pays in excess of the nominal value of the share when a company issues shares.

Depending on geographical location, companies are not required by law to issue shares at par value. Those companies issue no par value stock.

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Example

Company A sells 1,000 shares at $100 with a par value of $1. Entries in the balance sheet would be as follows:

Assets Liabilities & Equity
Cash ($100 x 1,000) $100,000.0  
Common stock ($1 x 1,000)

$1,000.0

Additional paid-in capital ($100-$1) x 1,000

$99,000.0

If company A had to sell 1,000 shares at $100 with no par value, entries in the balance sheet would be as follows:

Assets Liabilities & Equity
Cash ($100 x 1,000)

$100,000.0

Common stock ($100 x 1,000)

$100,000.0

Below is an extract from the Consolidated Balance Sheet of Hershey Company for the year ended December 31, 2019:

Points To Note

  • Hershey issued 160,939,248 shares in 2019.
  • Investors paid an additional of $1,142,210 for the shares.

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