# How to Figure Out Par Value on a Balance Sheet

When a company incorporates, its articles of incorporation specify the par value of each share. The par value of a stock has no relation to the actual market value, and is often significantly lower than the actual market value because the par value is the lowest value at which the company can sell the stock. Par value is particularly important for preferred stock because it determines the dividends due and call price of the stock if another value isn't specified.

Find the amount of stock currently outstanding and the listed total par value of all the stock in the shareholder's equity section of the balance sheet.

Multiply the listed par value of all of the stock by the multiplier. For example, if the total values are listed in thousands, and the total par value is listed as \$500, multiply \$500 by 1,000 to find the total par value equals \$500,000.

Divide the total par value by the number of shares outstanding to find the par value per share. Finishing the example, if the company has 100,000 shares outstanding, divide \$500,000 by 100,000 to find the par value is \$5 per share.

#### Warning

• Don't confuse the number of shares authorized with the number of shares outstanding. Many companies have not issued all of the shares authorized by their articles of incorporation. For example, a company might be holding extra shares to use for paying stock options for employees.