Stock Market Terminology

Bid Price-A price that a buyer is willing to pay for a security is called its Bid Price.

Ask/Offer Price-A price that a seller is willing to take for a security is called its Ask/Offer Price.

Bid-Ask Spread-The difference between bid and ask prices is called Bid-Ask Spread.

VWAP(Volume Weighted Average Price)-The volume weighted average price is calculated as the formula given below-

VWAP =No of stocks bought at diffrent time × stock price)/Total number of stocks bought

P/E Ratio- It stands for Price to Earning ratio of a stock. It is calculated as follows-

P/E Ratio = Market value of a stock/Earning per stock

Take an example- If the current value of a stock is $100 & the Earning per stock is $5 in the last year. Then, the P/E Ratio will be 100/5 = $20.

The higher P/E Ratio indicates that the investors are positive about the future of a stock. The low P/E ratio indicates the good performance of a company. But, the P/E ratio may be negative when the company incur loss. In such a case the P/E ratio is remarked with N/A.

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