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 Book Value Of Equity Per Share (BVPS) ratio indicates a buy signal?

    Find out more about book value of equity per share, what BVPS measures and how to determine what level of BVPS indicates ...
  2. What does an unfavorable variance indicate to management?

    Learn what an unfavorable variance indicates to management, such as problems with meeting expense and revenue targets or ...
  3. Is there a way to include intangible assets in book-to-market ratio calculations?

    Find out more about the book-to-market ratio and how to calculate a public company's book-to-market ratio including its intangible ...
  4. When is market to market accounting performed?

    Discover when mark to market accounting is performed, to what assets it is applied, and how frequently it must be applied ...
RELATED TERMS
  1. Clowngrade

    An upgrade or downgrade of a security for reasons considered ...
  2. Valium Picnic

    A market holiday or a slow trading day.
  3. Piker

    A broker or investor who makes small size trades.
  4. Blocked Period

    A period of time in which an investor’s securities are prevented ...
  5. Borrowing Power Of Securities

    The value associated with being able to invest in securities ...
  6. At The Lowest Possible Price

    A type of security trading designation that instructs a brokerage ...

You May Also Like

Related Articles
  1. Trading Strategies

    Why There's No Such Thing As A Stock ...

  2. Professionals

    Top Strategies on How to Become a Stock ...

  3. Brokers

    Can Tradier's Brokerage API Replace ...

  4. Professionals

    How to Choose a Robo-advisor? Follow ...

  5. Trading Strategies

    Not All Online Trading Brokers Are Created ...

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!