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What is Nominal Value of Shares?
The term “share nominal value” refers to the book value of the share, which is the arbitrary value allotted to the shares at the time of its issuance. It reflects the value carried in the balance sheet, while the market value of the share reflects what the market is willing to pay the same share.
The formula for nominal share value is quite simple and it is derived by dividing the paid up share capital by the outstanding number of shares of the company.
Steps to Calculate the Nominal Value of Shares
The formula can be derived by using the following steps:
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- Step 1: Firstly, determine the total paid-up share capital, which is easily available as a line item in the balance sheet.
- Step 2: Next, determine the number of outstanding shares of the company. Please keep in mind, not the authorized shares but the paid-up shares are to be used.
- Step 3: Finally, the formula is derived by dividing the total paid-up share capital (step 1) by the outstanding number of shares of the company (step 2) as shown below.
Nominal Value of Shares Formula = Paid-up Share Capital / Number of Outstanding Shares
Nominal Value of Shares Examples (with Excel Template)
Example #1
Let us take the example of a company named ABC Ltd to calculate the stock nominal value. ABC Ltd is an ice cream manufacturing company and it started its operation last year. So, this financial year was its first reporting year and as per its balance sheet for the year ended on March 31, 2019, the paid up share capital stood at $60,000 and retained earnings of $120,000. The company currently has 2,500 authorized shares and 2,000 outstanding shares in the market.
Given,
- Paid up share capital = $60,000
- Retained earnings = $120,000 (redundant)
- Number of authorized shares = 2,500 (redundant)
- Number of outstanding shares = 2,000
Based on the information, determine the following.
Therefore, it can be calculated as,
= $60,000 / 2,000
= $30.00 per share
Example #2
Let us take the example of Apple Inc.’s balance sheet for the period ended on September 29, 2018. The following financial information is available in the public domain.
Based on the information, determine the following.
Therefore, the calculation can be done as below
= $98,812 / (4,754,986,000 + 5,126,201,000)
= $0.00001 per share
Therefore, the nominal value of Apple Inc. as on September 29, 2018 stood at $0.00001 per share although the market value currently hovers around $200 per share.
Calculator
You can use this calculator
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Relevance and Uses
Although the concept is most commonly used for stocks or shares, it is equally useful in the case of bonds and preferred stock investors. The nominal value of shares is also known as face value and it can any value from the range of $0.00001 per share to $10 per share.
You can download the Excel Template from here – Excel Template
Recommended Articles
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