Final answer:
No par value stock helps prevent confusion between the stock's arbitrary assigned value and its actual market price, which is influenced by various factors.
Step-by-step explanation:
No par value stock prevents any misconception on the part of inexperienced stockholders as to the market price of the stock. Par value is a nominal dollar amount assigned to shares of stock and has little relation to the actual market price of a stock. Removal of par value from a stock's classification helps avoid confusion between this arbitrary value and the price at which the market values the stock.
Stocks represent ownership in a company, and stockholders, or shareholders, invest in hopes of receiving a return, either through dividends or capital gains. The market price of a stock is influenced by a variety of factors, such as the company's performance, investor demand, and overall market conditions. Investors must recognize that owning stock in a corporation means they have a portion of the company's equity, but this does not directly determine the stock's price on the open market.