# How to Calculate Share Average Price: Steps & Formula

Updated On: September 29, 2024

Share average price calculation is beneficial to find out the weighted value of shares on the average scale. It represents the value that is obtained by the contribution of each number and price of shares of a particular company. It is calculated by multiplying each share with its purchase price, followed by summing all those prices and then dividing the obtained sum value by total number of shares.

It is also called as mean or weighted value. It is useful in stock market when an investor buys various number of shares in various time interval with various rates. Here we will discuss the different methods of calculating it, using different cases and formulas.

## Share Average Formula

Before calculating average, lets discuss about the formula and various components (terms) involved in it.

The general formula is given by:

**Average Share Price** = Total Cost of Shares/ Total Shares Bought

This formula applies to both investors and students for performing stock mean calculation.

## How To Calculate Share Average Price: Step By Step

Let’s simplify the formula as numerator and denominator terms and understand each terms using real life problem.

**Numerator Term:**

The term in the numerator represents the Total cost of shares. It can be simplified using the following example.

__Example 1__

Let suppose you have purchased TATA’s 40 share at ₹982.50 each, likewise 30 at ₹972.50 each and 20 at ₹962.50 each.

Now the cost for each lot can be calculated by multiplying the quantity (ni) with its purchased price (pi). Note: the price is per unit.

In first Lot: (n1 x p1) = 40 x 982.50 = ₹39,300

In second Lot: (n2 x p2) = 30 x 972.50 = ₹29,175

In third Lot: (n3 x p3) = 20 x 962.50 = ₹19,250

Total Cost = (n1 x p1) + (n2 x p2) + (n3 x p3)

= ₹39,300 + ₹29,175 + ₹19,250

= ₹87,725

Or, it can be mathematically written as ∑ ni x pi

__Denominator Term__

The term in the denominator represents the sum of stocks. It can be simplified using the above example. In above case, there are total 3 purchase case.

In first Lot: Quantity (n1) = 40

In second Lot: n2 = 30

In third Lot: n3 = 20

Therefore: Total Shares Bought = n1 + n2 + n3

= 40 + 30 + 20

= 90

Thus, using above formula,

Average Share Price= Total Cost of Shares/ Total Shares Bought= 87,725 /90

= ₹974.72 (per share)

__Example 2__

Karthik purchased 100 shares of Infosys Ltd. at ₹1620. When the price drops down, he additionally bought 50 at ₹1500 and 20 more at ₹1480. Calculate the average price.

__Solution__

Total Cost = (100 x 1620) + (50 x 1500) + (20 x 1480)

= 162,000 + 75,000 + 29,600

= ₹2,66,600

Also,

Total Shares Bought = 100 + 50 + 20

= 170

Now using formula,

Average Share Price = ₹2,66,600 / 170

= ₹1,568.23

The mean rate will be ₹1,568.23.

You can use build in share average calculator for higher degree of accuracy along with faster, easier calculation.

## Various Cases of Share Average Calculation

**Case I**

__Share Average Price After Selling__

When certain quantity of stocks are sold and re-calculated the new average price, it is known as share average price after selling.

**Example Case**

Shayam bought 100 shares at ₹10 each and 200 at ₹12. After certain time he sold 50 shares at ₹15. What’ll be the average price after selling.

__Initial Calculation__

Total Cost = (100 × 10) + (200 × 12)

= ₹1000 + ₹2400

= ₹3400

Similarly, Total quantity = 100 + 200 = 300

Average Share Price = ₹3400 / 300

= ₹11.33

Now, as 50 shares are sold at ₹15 each.

Sold Quantity: 50

Total cost from sale: 50 × 15 = ₹750

New Total cost after selling: ₹3400 − ₹750 = ₹2650

Also, Total shares after sale: 300 – 50 = 250

New Average Price = ₹2650 / 250

= ₹10.60

Therefore, after selling 50 shares at 15, the new average price per share is ₹10.60.

**Case II**

__Share Average Price Including Tax__

When there is a transaction, there is usually the tax amount applied on it. To get the exact calculation including tax, add the tax amount on the total cost of stocks to get the more accurate value.

**Case III**

__Share Average Price After Commission and Charges__

The certain commission and charges are applied during transaction, similar to as tax case. It is calculated by adding the amounts applied as charges and commission in the total cost and then dividing it with total shares.

**Case IV**

__Share Average Price Based on Opening and Closing of Stocks__

The average can also be calculated based on opening and closing of stock. Here, the number of stocks are neglected or omitted during calculation.

Based on opening and closing, Average Cost of share= (Opening price + Closing Price) / 2.