MARGIN Definition

Bookmark and Share

MARGIN is a. in accounting see GROSS MARGIN; or, b. in securities, it is the process whereby investors are allowed to buy securities on credit. By buying on margin, the investor significantly increases the leverage, or risk/return potential, of the investment. For example, a purchase of $100 worth of stock with cash of $50 means a four to one increase in value if the stock doubles (versus a two to one increase if the purchase is all cash). On the other hand, if the stock declines, the investor would be forced either to put up more cash or sell the stock at a loss to meet margin requirements established by the Federal Reserve Bank. The margin rules currently stipulate that an investor must maintain 50% of the total market value of the securities in the account in cash. 

Learn new Accounting Terms

BOOK COST, normally, is the cost at the time an asset is purchased or realized, i.e. the total amount paid to acquire an asset.

ALLOWANCE FOR DOUBTFUL DEBTS see ALLOWANCE FOR BAD DEBTS.

Suggest a Term

Enter Search Term

Enter a term, then click the entry you would like to view.