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Bid-Ask Spread – Meaning, Formula, Calculation & Interpretations [Video]

Bid-Ask Spread – Meaning, Formula, Calculation & Interpretations

In this tutorial, you will learn how to analyze an organization’s Bid-Ask Spread and why it’s an important indicator for identifying how stock purchases and sales affect stock prices. We will go through its definition, formula, calculations, and interpretation, as well as how to calculate Colgate-Palmolive’s Bid-Ask Spread in Excel.
You can download the Colgate Bid-Ask Spread template from this link – https://www.wallstreetmojo.com/ratio-analysis-template/

What is Bid-Ask Spread?
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The bid-ask spread refers to the difference between the Ask and Bid prices. The “Ask Price” is the lowest price at which a prospective seller of stock is willing to sell the security they hold, while the “Bid Price” is the highest price a prospective buyer is willing to pay for the security.

Formula
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Bid-Ask Spread Formula = (Ask Price – Bid Price)

Interpretation
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– If the Bid-Ask spread is low, investors can buy and sell assets with minimal price fluctuations.
– For investors, external market liquidity is a significant source of risk.
For more details, you can refer to our article – https://www.wallstreetmojo.com/bid-ask-spread/

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