Adjusted Closing Price
Candlefocus EditorBefore the Adjusted Closing Price is calculated, the Closing Price is taken into account. The Closing Price is the raw price, or the unadjusted amount of money a stock was being transacted for when the stock market closed. This can have an enormous influence on the market when analyzed, making the Adjusted Closing Price much more accurate in ascertaining a stock’s actual worth.
The Adjusted Closing Price is calculated with the corporate actions taken into account, such as stock splits and additional offerings. A stock split is a corporate action where a company decides to increase their number of outstanding shares by dividing each existing share into multiple ones, thus reducing their value - although the investor manages to end up with more shares overall. This can have a tremendous effect on the market, making the Adjusted Closing Price a more effective representation of the stock market’s true worth.
Similarly, additional offerings, such as rights offerings, can also have a large effect on the Closing Price. Rights offerings are shares offered by a company to current shareholders, giving them the chance to acquire additional shares at a lower cost. This can also heavily influence the market, and has the potential to significantly distort the true worth of the market.
The Adjusted Closing Price is important to understand when it comes to effectively analyzing stock market trends, as it shows the true worth of a certain stock market at a given time. If a well-known stock has recently been reduced through stock splits, the Adjusted Closing Price would reflect this and give investors an accurate value as to where they should allocate their investments.
In short, the Adjusted Closing Price is a tool used to ascertain the actual worth of a certain stock or stock market. It is used to reflect the corporate actions of a given company, such as stock splits and additional offerings, which have the potential to obscure the true market value in the short term. The Adjusted Closing Price is therefore an invaluable tool in calculating the actual worth of a particular stock, giving investors an accurate representation of the market at any given moment.