When looking at my online broker account, I see an account value, cash value and purchase power number. How are these calculated?

By Matt Lee AAA
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 accrued expenses and provisions?

    Read about the differences between accrued expenses and provisions, and why a company might record one over the other in ...
  2. What is the difference between current assets and non-current assets?

    Learn how to differentiate between current assets and non-current assets and their uses, which are listed on a company's ...
  3. How are cash purchases recorded on a company's income statement?

    Take a deeper look at the treatment of cash payments on a company's financial statements, including how specific purchases ...
  4. How are retained earnings related to a company's income statement?

    Understand what a company's statement of retained earnings represents and how it is related to a company's other financial ...
RELATED TERMS
  1. Earned Premium

    The amount of total premiums collected by an insurance company ...
  2. Insurance Regulatory Information System (IRIS)

    A collection of databases and tools used to analyze the financial ...
  3. Book Value Reduction

    Reducing the value at which an asset is carried on the books ...
  4. Discretionary Investment Management

    A form of investment management in which buy and sell decisions ...
  5. Execution Only

    A trading service that is restricted to execution of trades only, ...
  6. Deferred Tax Asset

    A deferred tax asset is an asset on a company's balance sheet ...

You May Also Like

Related Articles
  1. Professionals

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

  2. Trading Strategies

    Not All Online Trading Brokers Are Created ...

  3. Investing Basics

    How To Calculate Goodwill

  4. Brokers

    How long does it take a broker to confirm ...

  5. Fundamental Analysis

    Reviewing Liabilities On The Balance ...

Trading Center