Book Value vs Face Value vs Market Value

Face Value (Par Value)

The nominal value printed on a stock certificate — set by the company at IPO. In India, common face values are ₹1, ₹2, ₹5, or ₹10.

• Used to calculate dividends (a "100% dividend" means 100% of face value, not 100% of market price).
• Used for stock splits and corporate actions.
• Has no relation to a stock's real worth.

Example

Reliance Industries has a face value of ₹10. When it declared a 900% dividend, it paid ₹90 per share (900% × ₹10).

Book Value

The accounting value of a share = (Total Assets − Total Liabilities) ÷ Outstanding Shares.

Represents what shareholders would theoretically receive if the company liquidated and paid off all debts.

• Grows over time via retained earnings.
• Used in the Price-to-Book (P/B) ratio.
• Doesn't reflect intangible assets (brand, IP) well.

Example

If a company has ₹500 crore in assets, ₹200 crore in liabilities, and 10 crore shares outstanding:

Book Value = (500 − 200) / 10 = ₹30 per share

Market Value (Market Price)

The current trading price on the exchange — determined by supply and demand.

• Can be much higher or lower than book value.
• Reflects future expectations, sentiment, and macro conditions.
• Changes every second during market hours.

Quick Comparison

Why It Matters

• Face value is mostly clerical, but crucial for dividend calculations.
• Book value helps assess if a stock is trading cheap relative to its net worth.
• Market value is what you actually pay — but understanding the gap between it and book value reveals investor expectations.