Business Glossary

equal to the nominal or face value of a security. A bond selling at par, for instance, is worth the same dollar amount it was issued for or at which it will be redeemed at maturity-typically, $1,000 per bond.

With common stock , par value is set by the company issuing the stock. At one time, par value represented the original investment behind each share of stock in goods, cash, and services, but today this is rarely the case. Instead, it is an assigned amount (such as $1 a share) used to compute the dollar accounting value of the common shares on a company's balance sheet. Par value has no relation to market value , which is determined by such considerations as Net Asset Value , yield , and investors' expectations of future earnings. Some companies issue no-par-value stock . See also stated value .

Par value has more importance for bonds and preferred stock . The interest paid on bonds is based on a percentage of a bond's par value-a 10% bond pays 10% of the bond's par value annually. Preferred dividends are normally stated as a percentage of the par value of the preferred stock issue.

present value of a continuity customer over the active life of the customer. It is calculated by estimating the total revenue to be expected from the customer, less the total expenses expected to be incurred earning the revenue, discounted to arrive at the value that net revenue would have if received in a lump sum payment today. The par value is used as a basis for evaluating various sources of new customers.

equal to the established value; face amount or stated value of a negotiable instrument, stock, or bond, and not the actual value it would receive on the open market. Bills of exchange, stocks, and the like are at par when they sell for their stated value.