The Stock Holding Period Formula
The stock holding period formula is an important investment tool for comparing investments over several time periods. This formula helps investors determine the total return on an investment based on a period of time. This is especially helpful when comparing investments held for different lengths of time. Let’s examine a few of its benefits:
The holding period for a stock starts the day it is acquired and ends the day it is sold, determining the tax implications. Let’s say Sarah purchased 100 shares of stock on Jan. 2, 2016. She starts counting on Jan. 3, 2016. Since the third day of every month counts as the start of a new month, her holding period will end on Jan. 1, 2023. That means that she has held the stock for a year and a half.
The holding period return is a measure of total return, including income and capital gain. This metric is useful for comparing the performance of different assets, as it takes into account the appreciation of the asset and the income distributions. It is therefore an important metric for investors and financial analysts. While the holding period of two different stocks may be the same, their holding periods might differ. A stock holding period of less than one day could result in a higher return than one day.
The stock holding period for a work-in-progress is measured by dividing the opening balance of raw materials by its closing stock. This calculation reflects the amount of time required to procure raw materials and the quantity required to ensure uninterrupted production. Similarly, the stock holding period for a work-in-progress is equal to the opening balance of work-in-process minus the closing balance of WIP. The formula for calculating the average stock is simple but can be tricky.