Money Bazar

Price in economics and business is the result of an exchange and from that trade we assign a numerical monetary worth to a good, service or benefit. Price is only part of the information we obtain from observing an exchange. Determining the prices of stock is not an easy job and is calculated via a number of different calculations. The first determining factor is the EPS i.e. Earnings per Share and indicates how profitable a company or organization is. This number is calculated by subtracting the dividends of a certain stock from the company's net earnings and then dividing that number by the number of excellent shares. This is most likely the most important factor in determining the price of a share of stock.
One of the other factors in determining the EPS is preferred dividends. This is the distribution of a segment of the company's earnings, and the numeral shown is generally the dollar amount that each share receives once it is sold or traded. Some other important factors in determining how to calculate stock prices are the P/E Ratio (Price to Earnings Ratio) which signifies the market value of the stock. It is calculated by dividing the stock's closing price by its annual earnings per share. So formula is:

P/E (Price to Earnings) Ratio = Price per share/Annual Earnings per Share

Another useful figure is the P/S (Price to Sales ratio) also written as PSR and is figured by dividing the closing stock price by the revenues per share. So can be shown by following formula:

P/S (Price to Sales) ratio = Share Price/Revenue per Share
Or can also be written as….
PSR = Market cap (shares outstanding * market price per share)/Total sales

Calculating stock prices is done at the close and open of the market every day. It is important to note that this price is not always similar to the company's closing price the night before; after-hours trading as well as the time company news is released can influence the opening price of the stock the next day. Through mathematical equations and a large amount of research and study of companies and their profitability, stock prices are calculated and published for shareholder, stockbroker and the public.