For a person deciding to improve their financial literacy and start investing in the securities market, it is important to understand the types of stocks and how to determine their price and value. Securities trading can be quite exciting and profitable, but only if you have sufficient knowledge of economics and pricing mechanisms in the relevant market.
Instructions
Step 1
Understand the concept of the par value of a share. This term means the initial price at which the joint stock company realizes its shares at its foundation. Thus, the par value of a share is the value that is indicated on the shares issued by the joint-stock company for circulation. Keep in mind that in some economies (for example, Japan, the USA and some other countries) it is possible to issue shares without specifying their par value. In these cases, only the series, the number of the share, and also its class are indicated on the security.
Step 2
When deciding whether to purchase shares at their par value, keep in mind that this value may change. To increase the par value, a joint-stock company must register an issue of shares with a different par value and withdraw from circulation previous shares (if there was a cash form of issue) or share certificates (if they were issued in a non-cash form). After that, shareholders receive new shares or certificates.
Step 3
Learn to distinguish the par value of a share from its price. The share price is the price at which a security is bought and sold in the market. Shares listed on the stock exchange are traded at the exchange rate quoted in US dollars. The prices of shares, depending on the quotation, can change upward or downward, which allows you to profit from the operations of buying and selling shares.
Step 4
When determining the par value of shares, keep in mind that, as a rule, companies issue both common and preferred shares. According to Russian law, the par value of preferred shares must not exceed 25% of the company's authorized capital. As for the par value of ordinary shares, they, in fact, represent the ratio of the authorized capital of the joint-stock company to the number of issued shares.
Step 5
To obtain information about the par value of shares of a particular enterprise, refer to the official information resources of these enterprises. Such information can also be obtained from the press and other open sources, since the issue of shares usually does not go unnoticed.
