A tool designed to determine the mean acquisition cost of a specific stock or asset. This computation is performed by summing the total expenditure on a particular asset and dividing that sum by the total quantity of assets acquired. For example, if an investor purchases 100 shares at $10 and later buys another 100 shares at $12, the average purchase price is calculated as the total cost ($1000 + $1200 = $2200) divided by the total shares (200), resulting in an average cost of $11 per share.
Accurate portfolio valuation and informed decision-making are greatly enhanced by utilizing this calculation. It provides a clearer picture of investment performance, facilitating more precise profit and loss assessments. Previously, investors manually computed this figure, a process prone to errors and time-consuming, especially with numerous transactions. The introduction of automated systems streamlines this calculation, providing investors with readily available and precise data.