Market price definition
/What is Market Price?
Market price is the price at which an asset can be bought or sold. There are several variations on the concept, depending upon the context in which it is used. The alternative definitions are noted below.
Market Price of Securities Traded on an Exchange
If debt securities or equity securities are traded on an exchange, their market price is considered to be the last price at which they were sold. When the securities are heavily traded, this is likely to be the last trade of the trading day. If the securities are lightly traded, the last price at which they were sold may have been several days or weeks ago.
Market Price of Securities Traded Over the Counter
If debt or equity securities are traded in the over-the-counter market, their market price is considered to be a range, which is bounded by their current bid and ask prices.
Market Price of Tangible Goods
The market price of tangible goods is considered to be the price at which goods can be sold in arm's-length transactions between unrelated parties in an active market. A market price is not considered to have resulted from a forced sale, where the seller does not have sufficient time to contact all possible bidders or obtain a full range of bids. Forced sales typically occur when the seller needs cash to pay for an immediate obligation.
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Accounting for Market Prices
Market price is of considerable interest from an accounting perspective, because it can be used to record the cost of certain transactions. It is also used as a comparison tool; if the recorded cost of an asset is higher than its market price, accounting rules may require that the recorded cost of the asset be reduced to its market price, or an adjusted version of the market price.
Terms Similar to Market Price
Market price is also known as market value.