What Is a Share? Face Value, Market Value & Book Value Explained
When
you buy a stock, you often hear terms like face value, market value,
and book value.
But what do they really mean?
To invest smartly, you must understand what a share is and how its different values affect your money.
What Is a Share?
A share represents ownership in a company.
When
you buy one share, you become a part-owner of that business.
You get:
· A claim on profits
· Voting rights (in many cases)
· A share in the company’s growth
If a company has 10 lakh shares and you own 1,000 shares, you own 0.1% of the company.
Face Value – The Original Value
Face value is the value of a share written on the share certificate when the company is created.
It is usually:
· ₹10
· ₹5
· ₹2
· or ₹1
Why Face Value Exists
It is used for:
· Accounting
· Dividend calculation
· Share splits
Face value does not change with market price.
Market Value – The Real Trading Price
Market value is the price at which a share trades on the stock exchange.
This value changes every second based on:
· Demand and supply
· Company performance
· News
· Global markets
Example:
If Reliance trades at ₹2,800, that is its market value.
This is the price you pay or receive when buying or selling.
Book Value – The Company’s Net Worth
Book value shows what the company is worth on paper.
It is calculated as:
Book Value = Total Assets – Total Liabilities
Book value per share tells how much money would be left if the company sold everything and paid all debts.
 |
| What Is a Share? Face Value, Market Value & Book Value Explained for Smart Investors |
Why These Three Values Matter
|
Value |
Meaning |
Importance |
|
Face Value |
Original value |
Used for dividends |
|
Market Value |
Trading price |
Shows what investors think |
|
Book Value |
Company worth |
Shows financial strength |
How Smart Investors Use These Values
· If market value > book value → Stock is in demand
· If market value < book value → Stock may be undervalued
· Face value helps in bonus shares & splits
FAQs – Real Market Questions
Q1. Can a ₹10 face value share trade at ₹1,000?
Yes. Face value has nothing to do with market price.
Q2. Is a low face value stock cheaper?
No. Price depends on market value, not face value.
Q3. What is more important – book value or market value?
Market value shows what investors think. Book value shows financial strength. Both matter.
Q4. Why do companies split face value?
To make shares affordable and increase liquidity.
Q5. Can market value be below book value?
Yes. It often happens during market crashes or when a company is undervalued.
Final Thought
A
share is not just a number — it is ownership in a real business.
Understanding face
value, market value, and book value helps you separate good stocks from overhyped ones.
