EDUCBA

EDUCBA

MENUMENU
  • Free Tutorials
  • Certification Courses
  • 250+ Courses All in One Bundle
  • Login

Bid Price vs Offer Price

By Madhuri ThakurMadhuri Thakur

Home » Finance » Blog » Accounting Fundamentals » Bid Price vs Offer Price

Bid Price vs Offer Price

Difference between Bid Price vs Offer Price

The bid price is simply called a Bid which is the highest price at which a buyer is willing to pay for a security. Offer or Ask Price is simply called Ask which is the lowest price at which a seller is willing to get for selling a security. These terms are used in Auction. The Difference amount between Bid and Ask is known as Bid-Ask Spread or simply spread. When a Buyer and Seller agree on some particular price only then transactions or trade happen start between them.

Scenario 1:

Start Your Free Investment Banking Course

Download Corporate Valuation, Investment Banking, Accounting, CFA Calculator & others

Market place where trading happens between buyer and seller

For Example: If the offer price for a T-shirt in a street vendor shop is $10 and the Bid price what the customer starts bidding at is $6 then the Spread value is $4. Rarely these two have the same values. In reality, the Bid amount is not the same and it incrementally changes. If you take the above example, when a buyer gets to know the amount is 10$, he/she would have felt the price could be a little cheaper. Say $6. But they do not go the value $6 directly. Rather, they ask for very little price say $3. Then increase the amount gradually as $4, $5, etc. and when the amount arrives the middle-value $6 what they felt in the first place, they end bid there. If the seller also agrees with the Bid price, the transaction begins. If a buyer is more than one person, then a Bid fight happens between Buyers.

Scenario 2:

Scenario 2

In other words, to get a better profit, Investor buys a commodity with a lower Bid Price with respect to the market rate and sells the commodity with the higher Offer price with respect to the current Market Rate. For Example, X gets land for $3000(Market rate) and sells it after 3 years for $4000(Current Market Rate). Hence $1000 is the Market Profit A gets out of it.

Head to Head Comparison between Bid Price vs Offer Price (Infographics)

Below is the top 8 difference between Bid Price vs Offer PriceBid Price vs Offer Price Infography

Key Differences between Bid Price vs Offer Price

Let us discuss some of the major differences between Bid Price vs Offer Price:

  1. Bid Price is the maximum price at which a buyer is ready to buy a security. Whereas Offer Price is the minimum price at which a seller is ready to sell a security.
  2. The Bid Price is the lower price and the Ask price is the higher price.
  3. If you want to buy a stock, a broker will set a higher price than that of the offer price. If you want to sell a stock, the broker will set a lower price than that of the offer price, the bid. The profited person is purely relying on the market makers. Whoever is an intermediate person for business trade, they get profited.
  4. The difference between bid price vs offer price is a unique identifier for the liquidity. Liquidity is nothing but how easily an asset can be sold or bought at the same time. A smaller difference amount indicates good liquidity.
  5. Both these are two-way Quotations. That is, it is a common term that refers to the highest bid price for a good or service and the lowest offer price for the same asset.
  6. Offer Prices cannot be changed and it’s constant whereas Bid Prices incrementally change.
  7. Sometimes the Offer Price is the discount price when buyers get a bulk order of goods. In that case. Offer Prices are made in favor of Buyers (Customer). Bid Price is also made in favor of Buyers.
  8. There is no limit for setting the Bid Price but while setting the Offer Price is purely based on the current market rate and it has certain limits.
  9. Bid Price is called Auction Price and The Offer Price is called as Impact Price or Ask Price sometimes.
  10. When the Seller agrees with Buyer’s Bid Price, the trade begins between both of them which is also called as Quoted price.

Bid Price vs Offer Price Comparison Table

Let’s look at the topmost Comparison Between Bid Price vs Offer Price

The Basis of Comparison Between Bid Price vs Offer Price

Bid Price

Offer Price

Descriptional Difference The Maximum possible price at which a buyer is willing to buy a particular stock or security or commodity. The minimum possible price at which a seller is ready to sell a commodity.
Trade Difference If you want to sell a stock, the broker will set a lower price than that of the offer price, the bid. If you want to buy a stock, the broker will set a higher price than that of the offer price.
Weightage The bid Price is lower price than Offer. The offer Price is always higher than the Bid Price.
Colloquial Terms Simply called a Bid or Auction Price. Simply called as Offer or Ask or Impact Price.
Stability This is always fluctuating and changing incrementally. Offer Price cannot be changed hence a Constant.
Liquidity For good Liquidity, the bid price should not have much difference from Offer Price. Same as Bid Price.
Favor Of The bid Price is in favor of Buyers. Sometimes the Offer Price is the discount price when buyers get a bulk order of goods. In that case. Offer Prices are made in favor of Buyers (Customer).
Limitations There is no limit for setting the Bid price. The Offer Price is purely based on the current market rate and quality of the product hence it has certain limits.

Conclusion

It is important to know about the Bid Price vs Offer Price to result from the transaction into the profitable amount. Bidder plays the main role in an auction. It is the bidder’s responsibility for the risk assessment part. It is must evaluate the quality of the product to set the correct bid price to get the profit or loss out of the auction or market trade.

Recommended Articles

This has been a guide to the top difference between Bid Price vs Offer Price. Here we also discuss the Bid Price and Offer Price key differences with infographics and comparison table. You may also have a look at the following articles to learn more-

  1. Joint Venture vs Strategic Alliance
  2. Difference between Bidding vs Auction
  3. Bid Price vs Ask Price
  4. Cost vs Price – Top Comparisons

All in One Financial Analyst Bundle (250+ Courses, 40+ Projects)

Popular Course in this category
All in One Financial Analyst Bundle (250+ Courses, 40+ Projects)250+ Online Courses | 1000+ Hours | Verifiable Certificates | Lifetime Access
4.9 (3,296 ratings)
Course Price

View Course

Related Courses
Finance for Non Finance Managers Course (7 Courses)Cost Accounting Course (5 Courses)US GAAP Course (29 Courses with 2020 Updated)

250+ Online Courses

1000+ Hours

Verifiable Certificates

Lifetime Access

Learn More

1 Shares
Share
Tweet
Share
Primary Sidebar
Finance Blog
  • Accounting fundamentals
    • Asset Account
    • Estate Tax
    • Excise Tax
    • Finance Lease
    • Financial Assets Examples
    • Flat Tax
    • Accounts Receivable - Debit or Credit
    • Anti Dilutive Securities
    • Quality of Earning
    • Utilities Expenses
    • Audit Report Contents
    • Budgetary Control
    • Callable Preferred Stock
    • Capital Expenditure
    • Capital Lease Criteria
    • Carrying Amount
    • Cash Flow Analysis
    • Deferred Tax Liabilities
    • Completed Contract Method
    • Earned Income
    • Explicit Cost
    • External Audit
    • Accrued Expense
    • Allowance for Doubtful Accounts
    • Depreciation Tax Shield
    • Accounts Receivable Financing
    • Audit Report Qualified Opinion
    • Audit Report
    • Audit Report Examples
    • Marginal Tax Rate
    • Marginal Tax Rate
    • Direct vs Indirect Cash Flow Methods
    • Salvage Value
    • Balance Sheet Analysis
    • Current Liabilities Examples
    • Debtor
    • Other Comprehensive Income
    • Period Costs
    • Inventories List
    • Marketable Securities in Balance Sheet
    • Gross Sales
    • Tax Haven
    • Interim Reporting
    • Date of Record of Dividends
    • Short Term Assets
    • Revenue Streams
    • Tax Planning
    • Accounts Receivable Journal Entry
    • Book Profit
    • Capital Budgeting Importance
    • Accounts Payable Cycle
    • Inventory Audit
    • Estimated Tax
    • Dividend Declared
    • SG & A Expenses
    • Tax Lien
    • Excise Tax Examples
    • Accelerated Share Repurchase
    • Accounting Ethics
    • Accounts Payable Credit or Debit
    • Accounting for Fair Value Hedges
    • Long Term Debt in Balance Sheet
    • Assets Example
    • Audit Assertions
    • Accounts Receivable Process
    • List of Operating Expenses
    • Income Tax Accounting
    • Non-Operating Expenses
    • Unrealized Gains and Loses
    • Warranty Expense
    • What is Budgeting?
    • WIP Inventory
    • Current Liabilities
    • Zero Based Budgeting
    • Types of Liabilities on Balance Sheet
    • Marginal Costing vs Absorption Costing
    • Non-Current Liabilities Examples
    • Cash Equivalents
    • Types of Assets
    • Assets List
    • Deferred Income Tax
    • Working Capital Management Importance
    • Extraordinary Items
    • Deferred Tax
    • Long Term Liabilities
    • Perpetual Inventory System
    • Intangible Assets Examples
    • Goodwill
    • Working Capital Loan
    • Consolidated Financial Statement
    • Contingent Asset
    • Cash and Cash Equivalents
    • Fixed Assets
    • Current Asset
    • Financial Assets Types
    • Financial Assets
    • Wasting Asset
    • Write off
    • Objectives of Financial Statement Analysis
    • Earnout
    • Hire Purchase
    • Sublease
    • Off Balance Sheet
    • Liabilities Example
    • Leasehold
    • Off Balance Sheet Financing
    • Revolving Credit Facility
    • General Reserve
    • Accounting Information System
    • Accounting Transaction
    • Limitations of Financial Statement Analysis
    • 3 Types of Inventory
    • Cook the Books
    • Non Performing Assets
    • Revenue Reserve
    • Commitments and Contingencies
    • Conservatism Principle of Accounting
    • Money Measurement Concept
    • Materiality Concept
    • Types of Accounting
    • Types of Financial Statements
    • Balance Sheet Items
    • Components of Financial Statements
    • Cost Method
    • Related Party Transactions
    • Relevance in Accounting
    • Responsibility Accounting
    • Tragedy of the Commons
    • Accounts Receivable Aging
    • Accounting Scandals
    • Cost Benefit Principle
    • Accrual Accounting Examples
    • Fiscal Year
    • Financial Statement Limitations
    • Grey List
    • Objectives of Financial Statements
    • What are Accounting Principles?
    • Accounting Controls
    • Users of Financial Statements
    • Accounting Cycle
    • Accounting Estimates
    • Window Dressing in Accounting
    • What are Accounting Policies?
    • Fringe Benefits
    • Full Disclosure Principle
    • Financial Statement Examples
    • Sunk Cost
    • Accounts Receivable Turnover Ratio
    • Days in Inventory
    • Current Ratio vs Quick Ratio
    • Investment Banking vs Private Equity
    • Private Equity vs Hedge Fund
    • Accounting Ratios
    • Shell Corporation
    • Cost Accounting Career
    • Funds from Operations
    • Accounting Career
    • Actuaries Career
    • General Ledger Accounting
    • Forensic Accounting Career
    • Auditing Career
    • Budgeting Career
    • Gross Profit Ratio
    • Management Accounting Career
    • Cycle Counting
    • Going Concern Concept
    • Debit Note vs Credit Note
    • EBIT vs Net Income
    • EBIT vs Operating Income
    • EBITDA vs Net Income
    • EBITDA vs Operating Income
    • GAPP vs Non-GAAP
    • Finance vs Lease
    • Gross sales vs Net sales
    • Income Tax vs Payroll Tax
    • Mortgage Banker vs Broker
    • Revenue vs Net Income
    • Shareholder vs Stakeholder
    • Stock Option vs RSU
    • Full Form of FYI
    • Return on Invested Capital
    • Transaction Exposure
    • LLC vs Partnership
    • Replacement Cost
    • Unit Contribution Margin
    • Accounts Payable vs Notes Payable
    • CA vs CS
    • Capitalizing vs Expensing
    • CPA vs CA
    • Trial Balance vs Balance Sheet
    • CA vs MBA
    • Merger Accounting
    • Cash Management
    • Sole Proprietorship vs LLC
    • Manufacturing Overhead
    • Asset Retirement Obligation
    • Temporary Account
    • Leveraged Lease
    • Predetermined Overhead Rate
    • Drag-Along Rights
    • Special Journal
    • Interest vs Dividend
    • Direct Materials
    • Accounting Method
    • Return on Sales
    • Calendar Year vs Fiscal Year
    • Contribution Margin Income Statement
    • Activity Based Budgeting
    • Common Size Income Statement
    • Capital Lease vs Operating Lease
    • Insolvency vs Bankruptcy
    • Vertical Analysis of Income Statement
    • Debt vs Equity Financing
    • Adjusted EBITDA
    • LLC vs Inc
    • Return on Average Capital Employed
    • Stocks vs Real Estate
    • Return on Equity
    • Return on Capital Employed
    • Diluted Earnings Per Share
    • Limited Partner vs General Partner
    • Basic EPS
    • Cash Flow Return on Investment
    • Fixed vs Variable
    • Public Company vs Private Company
    • Market Order vs Limit Order
    • Return on Total Assets
    • Hard Cost vs Soft Cost
    • Return on Average Assets
    • Ethereum vs Ethereum Classic
    • Capital Employed
    • Gross Profit Percentage
    • OIBDA
    • Average Collection Period
    • Profit Margin
    • EBITDA Margin
    • Working Capital Turnover Ratio
    • Marginal vs Effective Tax Rate
    • CFO vs Controller
    • Accounting Interview Questions
    • EBITDA
    • Asymmetric Information
    • Days Payable Outstanding
    • Journal Examples
    • Debit vs Credit
    • Lease vs Rent
    • Buying vs Leasing
    • Finance Job From Engineering
    • Days Inventory Outstanding
    • Horizontal Integration Example
    • Revenue Expenditure
    • Accounts Payable Turnover Ratio
    • Statement of Cash Flows
    • Days Sales Uncollected
    • Days Sales Outstanding
    • Statement of Income Example
    • Unadjusted Trial Balance
    • Red Herring Example
    • Revenue vs Turnover
    • Functions of Financial Market
    • Cost of Goods Sold Example
    • Operating Ratio
    • Stock Turnover Ratio
    • Bill of Sale Examples
    • Break Even Analysis Example
    • Financial Analysis Example
    • Statement of Retained Earnings Example
    • Equity Ratio
    • Long Term Liabilities Example
    • Defensive Interval Ratio
    • Operating Expense Example
    • Solvency Ratio
    • Capital Adequacy Ratio
    • Cash Flow From Operations Ratio
    • Working Capital Example
    • Cash Reserve Ratio
    • Quick Ratio
    • Loan Sharks
    • Fixed Asset Examples
    • Partnership Example
    • Standard Deviation Examples
    • Accounting vs CPA
    • Period Cost vs Product Cost
    • Cash Ratio
    • Investment vs Speculation
    • Annuity vs Lump Sum
    • Bank Draft vs Certified Cheque
    • Bidding vs Auction
    • Better in Business and Finance
    • Direct Tax vs Indirect Tax
    • Financial Ratio Analysis Technique
    • EPS and Diluted EPS
    • Stocks vs Bonds
    • IFRS Vs US GAAP
    • Finance Degree Career Options
    • Tax Slabs & Rates
    • Lease vs Buy
    • Interest Rate vs Annual Percentage Rate
    • Long Term vs Short Term Capital Gains
    • Memorandum of Association vs Article of Association
    • Large Cap vs Small Cap
    • CPA vs CMA
    • Assets vs Liabilities
    • Revenue vs Income
    • Bookkeeping vs Accounting
    • Financial Lease vs Operating Lease
    • EBIT vs EBITDA
    • Revenue vs Sales
    • Common stock vs Preferred stock
    • US GAAP vs IFRS
    • Current Account vs Capital Account
    • IFRS in India
    • Finance vs Economics
    • ACCA vs CIMA
    • Current Assets vs Non Current Assets
    • Economic Examples
    • Investment vs savings
    • Active vs Passive Investing
    • Financial Accounting vs Management Accounting
    • Revenue vs Earnings
    • Trade Discount vs Cash Discount
    • Limited Liability Company
    • Finance for Non Finance Professionals
    • Costs vs Expenses
    • Chapter 11 vs Chapter 13
    • Why Financial Analytics
    • Accounting vs Financial Management
    • ACA vs ACCA
    • ACCA vs CPA
    • Budget vs Forecast
    • Positive Economics vs Normative Economics
    • CA vs ACCA
    • Stakeholders Example
    • Stock vs Options
    • Liquidity vs Solvency
    • Stock vs Equities
    • Franchising vs Licensing
    • GDP vs GNP
    • Inflation vs Deflation
    • Economic Growth vs Economic Development
    • Direct cost vs Indirect Cost
    • Accrual Accounting vs Cash Accounting
    • FCFF vs FCFE
    • Public vs Private Accounting
    • Capex vs Opex
    • BSE vs NSE
    • Loans vs Advances
    • Discount Rate vs Interest Rate
    • ROIC vs ROCE
    • Percentage Of Completion Method
    • 10K vs 10Q
    • Shares Outstanding vs Float
    • Contribution Margin vs Gross Margin
    • Short Term vs Long Term Capital Gains
    • General Journal vs General Ledger
    • Outsourcing vs Offshoring
    • Depreciation vs Amortization
    • Liability vs Debt
    • Asset Purchase vs Stock Purchase
    • Accrual vs Provision
    • Actuary vs Accountant
    • Stock vs Inventory
    • Liability vs Expense
    • Dividends EX-Date vs Record Date
    • Bid Price vs Ask Price
    • Dividend vs Growth
    • Time vs Money
    • IRA vs 401 (k)
    • Corporation vs LLC
    • CEO vs President
    • Margin vs Markup
    • Leasehold vs Freehold
    • Lending vs Borrowing
    • Non-Profit vs Not For Profit
    • Corporation vs Incorporation
    • CFO vs CEO
    • Purchase vs Procurement
    • Deficit vs Debt
    • Internal Audit Vs External Audit
    • C Corp vs S Corp
    • Absolute Advantage vs Comparative Advantage
    • Tangible vs Intangible
    • Executive Director vs Managing Director
    • Company vs Firm
    • Insurance vs Assurance
    • Expense vs Expenditure
    • Hard Money vs Soft Money
    • Entrepreneurship vs Management
    • Loan vs Mortgage
    • Fair Value vs Market Value
    • Chief Executive Officer vs Managing Director
    • Manufacturing vs Production
    • Random Error vs Systematic Error
    • 401(K) vs Roth IRA
    • 403(b) vs 457
    • Adjusting Entries
    • Equity vs Commodity
    • Turnover vs Profit
    • Effective Interest Rate
    • Working Capital Ratio
    • Margin vs Profit
    • Loan vs Lease
    • Shares vs Debentures
    • Equity vs Fixed Income
    • Market Equilibrium
    • Economics vs Business
    • Secured vs Unsecured Credit Card
    • Profitability vs Liquidity
    • Z score vs T score
    • Equity vs Asset
    • Geometric Mean vs Arithmetic Mean
    • Cost vs Price
    • Industry vs Sector
    • ShortSale vs Foreclosure
    • Revenue vs Profit
    • Real Interest Rate
    • Account Payable vs Accrued Expense
    • Day Trading vs Swing Trading
    • Indirect Costs
    • Graphs vs Charts
    • Issued Shares vs Outstanding Shares
    • Creditor vs Debtor
    • Annuity vs IRA
    • Pension vs Annuity
    • Debt Consolidation vs Bankruptcy
    • Equity vs Shares
    • Economic Utility
    • Average vs Weighted Average
    • Operating Profit vs Net Profit
    • Purpose of Income Statement
    • NASDAQ vs Dow Jones
    • Direct Method of Cash Flow Statement
    • Real GDP
    • Derivatives Example
    • Nominal GDP
    • Generally Accepted Accounting Principles
    • Cost of Sales vs Cost of Goods Sold
    • Historical Value vs Fair Value
    • General Ledger vs Trial Balance
    • Actual Cash Value vs Replacement Cost
    • Job Costing vs Process Costing
    • Standard Cost vs Actual Cost
    • 401k vs Annuity
    • FIFO vs LIFO
    • Bid Price vs Offer Price
    • Sole Proprietorship vs Partnership
    • Equity Shares vs Preference Shares
    • Debt vs Equity
    • Cost Accounting vs Financial Accounting
    • Coupon vs Yield
    • Career in Finance
    • Gross Salary vs Net Salary
    • Tax Credit vs Tax Deduction
    • Variance vs Standard Deviation
    • What is Disposable Income
    • Liabilities in Accounting
    • Chapter 7 vs Chapter 11
    • Budgeting Examples
    • Fixed Costs Example
    • Joint Venture Example
    • Quantitative Research Example
    • Bootstrapping Examples
    • Monopoly Examples
    • Monopolistic Competition Examples
    • Risk Assessment Example
    • Inflation Accounting
    • Defined Benefit Plan
    • Variable Costing Example
    • Acquisition Examples
    • Cognitive Dissonance Example
    • Opportunity Costs Examples
    • Globalization Example
    • Histogram Examples
    • Mean Example
    • Trial Balance Example
    • Command Economy Examples
    • Sunk Cost Examples
    • Compounding Example
    • Compound Interest Example
    • Profit vs Income
    • Joint Venture vs Partnership
    • Comparative Advantage Example
    • Bank Reconciliation Example
    • Competitive Advantage Example
    • Accrual vs Deferral
  • Asset Management Tutorial (140+)
  • Banking (43+)
  • Corporate Finance Basics (126+)
  • Credit Research Fundamentals (6+)
  • Economics (44+)
  • Finance Formula (372+)
  • Financial Modeling in Excel (13+)
  • Investment Banking Basics (60+)
  • Investment Banking Careers (26+)
  • Trading for dummies (66+)
  • valuation basics (25+)
Finance Blog Courses
  • Finance for Non Finance Managers Certification
  • Cost Accounting Course
  • US GAAP Course
Footer
About Us
  • Blog
  • Who is EDUCBA?
  • Sign Up
  • Corporate Training
  • Certificate from Top Institutions
  • Contact Us
  • Verifiable Certificate
  • Reviews
  • Terms and Conditions
  • Privacy Policy
  •  
Apps
  • iPhone & iPad
  • Android
Resources
  • Free Courses
  • Investment Banking Jobs Offer
  • Finance Formula
  • All Tutorials
Certification Courses
  • All Courses
  • Financial Analyst All in One Bundle
  • Investment Banking Training
  • Financial Modeling Course
  • Equity Research Course
  • Private Equity Training Course
  • Business Valuation Course
  • Mergers and Acquisitions Course

© 2020 - EDUCBA. ALL RIGHTS RESERVED. THE CERTIFICATION NAMES ARE THE TRADEMARKS OF THEIR RESPECTIVE OWNERS.

EDUCBA Login

Forgot Password?

EDUCBA
Free Investment Banking Course

Corporate Valuation, Investment Banking, Accounting, CFA Calculator & others

*Please provide your correct email id. Login details for this Free course will be emailed to you
Book Your One Instructor : One Learner Free Class

Let’s Get Started

This website or its third-party tools use cookies, which are necessary to its functioning and required to achieve the purposes illustrated in the cookie policy. By closing this banner, scrolling this page, clicking a link or continuing to browse otherwise, you agree to our Privacy Policy

EDUCBA

*Please provide your correct email id. Login details for this Free course will be emailed to you
EDUCBA
Free Investment Banking Course

Corporate Valuation, Investment Banking, Accounting, CFA Calculator & others

*Please provide your correct email id. Login details for this Free course will be emailed to you

Special Offer - All in One Financial Analyst Bundle (250+ Courses, 40+ Projects) Learn More