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Stated Value

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Deciphering Stated Value in Corporate Finance

Understanding Stated Value

In the realm of corporate finance, a stated value serves as an internal accounting metric assigned to a corporation's stock when it lacks a par value. While par value denotes the face value of a stock as stated in the corporate charter, stated value is a nominal figure, typically ranging between $0.01 and $1.00. It's crucial to note that stated value holds no correlation with market price, acting solely as a reference point for internal accounting purposes.

Key Insights into Stated Value

  1. Legal Capital Requirements: Companies opting to issue no par value stock must assign a stated value to fulfill the minimum legal capital requirement in the state of incorporation. For instance, if a company sets the stated value at $0.01 per share and issues 1 million shares, the total stated value of its stock would amount to $10,000.

  2. Shareholder Protection: Stated value plays a pivotal role in safeguarding shareholders' interests, as it prevents companies from paying dividends or repurchasing shares in a manner that jeopardizes legal capital. Despite its nominal nature, stated value serves as a fundamental aspect of corporate governance, ensuring compliance with legal regulations.

Illustrative Example

Analyzing Apple Inc.'s fiscal year 2019 balance sheet provides valuable insights into the practical application of stated value. With an authorization of 12.6 billion no par value shares and 9.2 billion shares issued and outstanding, Apple's common stock amounted to $45.2 billion in the shareholders' equity account. While specific breakdowns between stated value and additional paid-in capital are unavailable, it's presumed that the majority of the figure represents the latter.