Which of the following signifies the difference between par value and an issue price below par?
Which of the following signifies the difference between par value and an issue price below par?
The correct option is B Discount on issue of shares
Equity
shares are issued in three ways:
At
Par
Above
Par (Premium)
Below
Par (Discount)
When
shares are issued at par it means that they are issued at the face value
decided by the company. When
shares are issued below par it means that they are issued at a value less than
the face value of shares decided by the company. This refers to the issue of
shares at a discounted price. For example, the face value of share is Rs 100 and if it issues at par that means that market value of share is Rs 100 but if it issued below pat at Rs 80 then the discount on shares is Rs 100-Rs800 =Rs20. Thus the difference between the par value Rs100 and below par value Rs80 is discount on shares Rs20
Hence,
the difference between the two is the discount on issue of shares.
Equity shares are issued in three ways:
At Par
Above Par (Premium)
Below Par (Discount)
When shares are issued at par it means that they are issued at the face value decided by the company. When shares are issued below par it means that they are issued at a value less than the face value of shares decided by the company. This refers to the issue of shares at a discounted price. For example, the face value of share is Rs 100 and if it issues at par that means that market value of share is Rs 100 but if it issued below pat at Rs 80 then the discount on shares is Rs 100-Rs800 =Rs20. Thus the difference between the par value Rs100 and below par value Rs80 is discount on shares Rs20
Hence, the difference between the two is the discount on issue of shares.
