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(^52) Financial Management
Unit of equity ownership in a company or in a mutual fund. This ownership is represented
by a share certificate, which names the company and the shareholder.
Face Value/ Par Value
The value of one share as given on the share certificate of the company. The face
value today can be either Rs.10 or below that number (but in multiples of Rs. 1) as
specified by the Securities Law governing public limited companies. You will find many
companies with a face value of less than Rs. 10, for example Rs. 5 (E.g Infosys
Technologies, Maruti Udyog), Rs. 4 (iGate Global Solutions), Rs.2 (Satyam Computers)
and even Rs.1 (e.g. Tata Consultancy Services, Hindustan Lever). Earlier Rs 100 and
Rs 50 were the typical face values and you will still find shares with these face values,
e.g. Dawn Mills has Rs 50 face value and Shri Dinesh Mills has Rs 100 face value per
share.
The face value is the amount on which the dividend is calculated. Thus, a 15 per cent
dividend on a share with a face value of Rs.10 will pay the share holder Rs.1.5 per
share. This means that any dividend percentage has different meaning in Rupee terms
as the face value changes. For example 100% dividend on 1 share of Rs 100 face value
will get you Rs 100 but the same dividend percentage on 1 share of Rs 1 face value
would get you only Rs 1.
Authorised and Paid-up Share Capital
Number of shares of stock provided for in the Articles of Association of a company is
the authorized share capital. This figure is usually indicated in the Share Capital section
of the Balance Sheet.
Paid-up share capital is the capital that has been issued and subscribed by the
shareholders. Authorised capital is usually well in excess of the paid-up capital and a
company cannot legally issue more shares than authorized. The number of authorized
shares can be changed only by amendment to the Articles of Association for which a
special resolution needs to be passed in the Annual General Meeting.
Figure 2.1 shows the Schedule 'A' of the Cosco India balance sheet, which gives us
details on the authorized and paid-up capital of the company.
Figure 2.1: Authorised and Paid-up Share Capital