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.
NET MARGIN see NET PROFIT MARGIN (NPM After Tax).
POOLING-OF-INTERESTS, in the US, is the method of accounting used in a business combination in which the acquiring company has issued voting common stock in exchange for voting common stock of the acquired company. The features of the method are that the acquired companys net assets are brought forward at book value, retained earnings and paid-in capital are brought forward, the net income is recognized for the full financial year regardless of the date of acquisition, and the expenses of pooling are immediately charged against earnings. In order to use the method there are a number of criteria to be met concerning the prior independence of the companies and the nature and timing of the acquisition. See POOLING OF INTEREST METHOD.
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