How is the common capital stock valued?

The common capital stock is valued at par value, which represents the nominal or face value assigned to each share of stock at the time it is issued. Par value is significant because it serves as a legal measure of the minimum amount an investor must pay for a share of stock. It is often a small amount, such as $1 or even $0.01, and does not necessarily reflect the actual market price or perceived value of the stock.

Par value has historical importance, as it was initially used to protect creditors by ensuring that corporations had some minimum amount of capital invested. While the market price of the stock can fluctuate significantly based on supply and demand, investor sentiment, and other market factors, par value remains a constant figure defined by the corporation at the time of issuance. This method of valuation does not take into account the financial performance or market conditions, which distinguishes it from other valuation methods like book value or intrinsic value, which analyze the overall worth of the company or stock based on different financial metrics.