What it is:
How it works (Example):
Over the course of a day as securities are traded, a stock's price will rise and fall based on any number of factors. When the stock exchange closes, the stock's final price is reported. The next day, that price will be shown as the previous close price.
For example, let's say when the market closed yesterday, Stock ABC's price was $100.52. Today, when I look up Stock ABC, I'll see its previous close was $100.52.
Why it Matters:
By comparing a stock's previous close price to its current price, an investor can tell if that stock's price has increased or decreased.