A:

When looking at some online brokerage accounts, there are a few figures that may be confusing, including account value, cash value and purchasing power.

The first figure, account value or total equity, is the total dollar value you have in your trading account. This number is calculated by adding the total amount of cash you have within your account and the current market value of all securities, and then subtracting the market value of any stocks that are shorted. It is essentially the worth of all your positions if they were to be liquidated at the point in time the number is calculated.

The second figure, cash balance value, is the total amount of cash you have available to use. This is the amount that you are able to immediately withdraw or the total amount available to purchase securities in a cash account.

The final figure, buying power, is the total amount available to purchase securities. This amount includes both the available cash on hand along with any available margin. The buying power figure is a better representation of how much money is available for trading, and its amount will depend on the type of account you have. If you have a margin account, then your purchasing power almost always will be greater than your cash value.

To learn more about margins, see the Margin Trading tutorial or read The Advantages of SPAN Margin.

RELATED FAQS
  1. What's the difference between a cash account and a margin account?

    Compare and contrast margin and cash accounts. Margin accounts offer short-term loans, leverage on existing portfolios, and ... Read Answer >>
  2. How exactly does buying on margin work and why is it controversial?

    Learn how purchasing stock on margin works, and understand the risk associated with margin accounts that make the strategy ... Read Answer >>
  3. Where do companies keep their cash?

    If you have ever looked over a company's balance sheet, you have no doubt noticed the first account under the current asset ... Read Answer >>
  4. What are the minimum margin requirements for a short sale account?

    In a short sale transaction, the investor borrows shares and sells them on the market in the hope that the share price will ... Read Answer >>
Related Articles
  1. Trading

    Pick the Right Brokerage Account for Options Trading

    Follow these steps to pick the right options brokerage account depending on your trading needs and style of trading.
  2. Investing

    Cheap Stocks Or Value Traps?

    The value of stocks that trade at less than cash per share can be deceiving.
  3. Investing

    What Is A Trading Account?

    A trading account enables an investor to buy and sell securities.
  4. Investing

    Buying on Margin

    When an investor buys on margin, he or she pays a portion of the stock price – called the margin -- and borrows the rest from a stockbroker. The purchased stocks then serve as collateral for ...
  5. Investing

    A Guide to Bank Accounts

    Find out which type of bank account suits your specific needs.
  6. Investing

    The Best Investment Accounts for Young Investors

    What are the best investment accounts for young investors? A few types to consider.
  7. Investing

    Cash Flow Statement and Financial Health

    A cash flow statement records the amounts of cash and cash equivalents entering and leaving a company.
RELATED TERMS
  1. Buying Power

    The money an investor has available to buy securities. In a margin ...
  2. Margin Loan Availability

    1. The dollar amount in an existing margin account that is currently ...
  3. Long Market Value

    The aggregate worth, in dollars, of a group of securities held ...
  4. Trading Account

    1. An account similar to a traditional bank account, holding ...
  5. Account Balance

    1. The amount of money in a financial repository, such as a checking ...
  6. Margin Call

    A broker's demand on an investor using margin to deposit additional ...
Hot Definitions
  1. Majority Shareholder

    A person or entity that owns more than 50% of a company's outstanding shares. The majority shareholder is often the founder ...
  2. Competitive Advantage

    An advantage that a firm has over its competitors, allowing it to generate greater sales or margins and/or retain more customers ...
  3. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities ...
  4. Wash-Sale Rule

    An Internal Revenue Service (IRS) rule that prohibits a taxpayer from claiming a loss on the sale or trade of a security ...
  5. Porter Diamond

    A model that attempts to explain the competitive advantage some nations or groups have due to certain factors available to ...
  6. Oligopoly

    A market structure in which a small number of firms has the large majority of market share. An oligopoly is similar to a ...
Trading Center