Going price
Going price is the current general price (value expressed in money) used to value goods or services. It is also determined by the current market price. It is used in sales transactions. To set the current price, prices from the given month or year are usually used. To get the most current price, compare products / services with similar characteristics. These prices may be different, as each seller and buyer has the law to negotiate the price. Inflation and a change in demand and supply for a given good or service have an impact on the going price[1].
Going price of securities
The current share price is determined on the stock exchanges. Supply and demand have a great impact on the course. If more people are interested in buying the shares, their price will be higher.
Shares are most often issued when a company needs to increase its equity. The current share price shows the situation of the company. This is important information for potential investors[2]. The going share price shows us the current situation of the company, but it also shows us the company's future[3].
Current price of a foreign currency expressed in national currency
The price of one currency expressed in another currency is called the exchange rate. The currency market brings together sellers and buyers of currencies. Changes in demand and supply have a huge impact on the going price of the currency[4].
The central bank is the institution responsible for determining the going value of a given currency. Exchange rates are determined based on:
- inflation
- interest rates
- state of the economy
Going price in the valuation of fixed assets
The sale of a fixed asset involves its valuation. We can use a fixed asset valuation:
- purchase price
- manufacturing costs
- current value
The current value can be balance sheet or market. To calculate the current balance sheet value of a fixed asset, subtract current depreciation from the initial value. If a fixed asset is fully depreciated, we can use the market price to determine its going price. By comparing similar items, we are able to negotiate a higher sale price.
Examples of Going price use
- Real estate: The going price for a 3 bedroom 2 bath house in a desirable neighborhood can be determined by looking at the current market prices for similar houses in the same area.
- Automobiles: The going price for a pre-owned vehicle of the same make and model can be determined by looking at the prices of similar vehicles at dealerships or online.
- Groceries: The going price for a gallon of milk can be determined by looking at the prices of milk at local grocery stores or supermarkets.
- Clothing: The going price for a pair of jeans can be determined by looking at the prices of similar jeans at department stores or online.
Advantages of Going price
Going price has many advantages, including:
- It reflects current market conditions and prices, allowing buyers and sellers to make informed decisions.
- It provides a clear and objective measure of the value of a product or service, making it easier to negotiate a price.
- It can help reduce price volatility and market fluctuations, as prices tend to remain relatively stable when they are determined by going prices.
- It also helps to ensure fairness in the market, as all buyers and sellers have access to the same prices.
- It is a reliable indicator of the true value of a product or service, as it has been determined by the market.
Limitations of Going price
- Going price does not guarantee that the goods or services are of good quality. It may be a high price for low-quality goods or services.
- Going price is based on market conditions and can be affected by external factors such as supply and demand, economic conditions, and current events.
- Going price does not take into account the cost of production or the cost of materials used in the production process.
- Going price is an average, and may not reflect the true value of a product or service. It may not accurately reflect the cost of goods or services when there are variations in quality or availability.
- Going price can be subject to manipulation and may not always be a reliable estimate of market value.
Introduction: There are several approaches to determine the going price.
- Cost-plus pricing: This approach takes into account the cost of production, plus a markup for the seller's profit.
- Competition pricing: This approach takes into account the prices set by other businesses in the same industry.
- Demand and supply pricing: This approach takes into account the supply and demand of the product being sold.
- Supplier pricing: This approach takes into account the prices set by the supplier.
- Market conditions pricing: This approach takes into account the general economic conditions and the market trends.
In summary, the going price can be determined by considering cost-plus, competition, demand and supply, supplier, and market conditions pricing.
Footnotes
| Going price — recommended articles |
| Real value — Going-concern value — Closing stock — Inventory value — Flexible pricing — Economic obsolescence — Gold-silver ratio — Global demand — Factors affecting pricing |
References
- Fabozzi F.J. (2008)., Handbook of Finance. Financial Markets and Instruments, John Wiley&Sons Inc., Hoboken, New Jersey.
- Lusztig P. Schwab B. (2014)., Managerial Finance in a Canadian Setting Fourth Edition, Butterworths.
- Steinhardt G. (2019)., Market-Value Pricing: Definitions, Concepts and Processes for Market-Value Centric Pricing, Springer.
- Vause B. (2009)., Guide to Analysing Companies, Bloomberg Press New York.
Author: Klaudia Broś
