Which of the following is true of par value of a common stock?
A) It is determined on the basis of the stock's market value.
B) It is an arbitrary value established for legal purposes in a firm's corporate charter.
C) It indicates the market value at which the stock was originally sold.
D) It allows stockholders to purchase additional shares at a price below the market price.

Question

Quizplus · Accepted Answer

Par value of a common stock is an arbitrary value established for legal purposes in a firm's corporate charter. It has no relation to the stock's market value and does not indicate the market value at which the stock was originally sold. It also does not allow stockholders to purchase additional shares at a price below the market price.

Which of the Following Is True of Par Value of a Common