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KPI of the Day – Investment: % Final bid against published offering

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Definition

Measures the final bid as a percentage of the published offering.

Purpose

This KPI indicates a company’s position in terms of its bid and ask prices as compared to the public street offerings.

Recommendations

A clear differentiation between the sub-components of this KPI is essential for its adequate employment. These constituents are a security’s bid, ask, current and public offering price on the market.

The current price represents the price agreed upon within the last transaction. As a historical price, it possesses comparative value and can thus be useful as a point of reference, but there is no guarantee that it will maintain its value in the future.

Bid and ask price refer to two opposed notions: the bid price is the maximum amount buyers are prepared to spend on a financial instrument while, on the other side of the spectrum, the ask price refers to the minimum sum sellers are willing to receive for a particular offering.

Taking this into consideration, the ask price is always higher than the bid price and a transaction takes place if one of the parts accepts the price of the other, or if an intermediary price can be reached.

The $ Public offering price (POP) refers to the monetary value at which securities are publicly made available. It is carefully assessed in order to raise as much capital as possible on the one hand, while at the same time keeping the security price low enough in order to attract investors, on the other.

By comparing the $ POP to the final bid and ask price the issuing company’s evolution can be assessed: if the $ POP is lower than the bid price, the company is regarded to having performed well, if the $ POP is higher, it is an indicator that investors have gradually lost confidence in the company’s capacity on the market.

A high level of this KPI points out that the company is willing to pay more for a financial asset than the market believes it’s worth. This KPI should be tracked on a daily, monthly, quarterly, and annual basis.

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KPI of the Day – Investment: % Modified Sharpe ratio
KPI of the Day: % Administrative expense per gross premium
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