What does the "par value" of common stock represent?

The par value of common stock represents the face value of the stock as stated in the corporate charter. This amount is often set at a nominal value and is largely a historical concept. When a company issues stock, the par value serves as a minimum price at which shares can be issued. This value does not necessarily reflect the market value or the book value of the stock, as those figures can fluctuate based on company performance and market conditions.

While book value pertains to the value of the company's equity as recorded on the balance sheet, and market value reflects the current trading price of the shares on the stock exchange, par value remains fixed as determined at the time of issuance. Additionally, par value does not relate to dividend payments, which are determined by the company's board of directors based on profitability and cash availability.