Average share price is a calculation that tells you, on average, your cost of acquiring a particular stock. Since you often purchase the same stock at different times at different prices, the average share price calculation is an important figure that you can use to evaluate if and when you should sell a particular stock. In addition, the calculation is often used for tax purposes and in determining the break-even point for a stock.
- Skill level:
Calculate the total acquisition cost of all shares of a particular stock purchased. It is important to consider that you may have purchased the stock at different prices. For example, if you purchased 2,000 shares at £9, 3,000 shares at £10 and 1,000 shares at £13, you would calculate the total cost of all shares as follows [(200014)+(300016)+(1000*20)] = (28,000+48,000+20,000) = £62,400.
Calculate the total number of shares purchased. Continuing the same example, you would add (2000+3000+1000)= 6,000 shares.
Divide the total acquisition cost divided by the total quantity of stock purchased. Continuing the same example, you'd divide £62,400 by 6,000. This calculation results in an average share price of £10 per share.
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