What Is Meant by the Market Price of a Stock?

As an investor, the most basic piece of information you need to know about when buying or selling a stock is its market price, which will give you an indication of how much you can buy or sell a stock for and can be used to analyze the value of a company and historic stock trends. Use the market price to make an informed decision when you invest your money in stocks.

Definition

The market price of a stock is the price that it sells for on the open market at a given point in time. The market price will usually fluctuate throughout the trading day as investors buy and sell stocks. The market price will rise if more people want to buy it and fall as people begin selling more of the stock. Be aware, however, that the market price isn't necessarily an accurate indicator of a stock's value. As the authors of "Fundamentals of Financial Management" put it, market price is "based on perceived, but possibly incorrect, information as seen by the marginal investor."

Market Cap

If you know the market price of a stock, you can calculate the market capitalization -- or market cap -- of the company. The market cap is the total market value of all the company's publicly traded shares. Find the market cap by multiplying the number of shares outstanding in the company by the market price of its stock. For example, if you have a company with 20,000 shares outstanding and a market price of $10, the company's market cap would be $200,000.

Finding Market Price

The market price is the value of a stock that is presented in stock quotes. These are usually printed in the financial section of a newspaper, and for larger companies, they might be quoted in TV newscasts. Using the Internet, you can quickly access the present market price, as well as historic market prices. You can search for this information on websites such as Google Finance, Yahoo Finance and Bloomberg.

Importance

If you are buying or selling a stock, the market value is of obvious importance because it indicates how much you can sell it for or how many shares you can buy with what you have to invest. You can use historic market prices to find trends in a stock. For instance, you might find that the stock has been steadily climbing or that it is dropping in value over the long term.

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About the Author

M. Scilly is a writer and editor who writes for various online publications, specializing in business and management. He has a fondness for travel and photography. In his free time he enjoys marathon training.

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