Debit Balance

DEFINITION of 'Debit Balance'

In a margin account, money owed by the customer to the broker for funds advanced to purchase securities. The debit balance is the amount of funds the customer must put into his or her margin account, following the successful execution of a security purchase order, in order to properly settle the transaction.

BREAKING DOWN 'Debit Balance'

When buying on margin, investors borrow funds from their brokerage and then combine those funds with their own to purchase a greater number of shares than they would have been able to purchase with their own funds. The debit amount recorded by the brokerage in an investor's account represents the cash cost of the transaction to the investor.

RELATED TERMS
  1. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
  2. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  3. Minimum Margin

    The initial amount required to be deposited in a margin account ...
  4. Mark To Market - MTM

    1. A measure of the fair value of accounts that can change over ...
  5. Margin Account

    A brokerage account in which the broker lends the customer cash ...
  6. Margin Call

    A broker's demand on an investor using margin to deposit additional ...
Related Articles
  1. Options & Futures

    Margin Trading

    Find out what margin is, how margin calls work, the advantages of leverage and why using margin can be risky.
  2. Investing News

    Today's Sell-off: Are We in a Margin Liquidation?

    If we're in market liquidation, is it good news or bad news? That party depends on your timeframe.
  3. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  4. Stock Analysis

    Analyzing Boeing’s Return on Equity (ROE) (BA)

    Learn about Boeing's return on equity and find out how the company's ROE compares to its own historical performance and aerospace industry peers.
  5. Stock Analysis

    Analyzing Verizon's Return on Equity (ROE) (VZ)

    Learn about Verizon's return on equity and find out how ROE is influenced by net profit margin, asset turnover ratio and financial leverage.
  6. Wealth Management

    How to Invest Like a Millionaire in 2016

    Discover how to start 2016 strong by learning how to imitate the investing strategies that distinguish millionaire investors from most average investors.
  7. Stock Analysis

    Analyzing AT&T's Return on Equity (ROE) (T)

    Learn about AT&T's return on equity. Find out how its recent ROE compares to historical results and those of peers in the telecommunications industry.
  8. Stock Analysis

    Analyzing Oracle's Return on Equity (ROE) (ORCL)

    Learn about Oracle's ROE. How have net profit margin, asset turnover and financial leverage influenced ROE relative to peers and historical performance?
  9. Stock Analysis

    Analyzing Cisco's Return on Equity (ROE) (CSCO)

    Learn about Cisco's ROE and see how the company's most recent results compare to historical results and large-cap networking and communications equipment peers.
  10. Economics

    Financial Leverage In Corporate Capital Structure

    Corporate management uses financial leverage to increase earnings per share and return-on-equity.
RELATED FAQS
  1. My broker just sold securities out of my account without my permission. Is this legal?

    Your broker's actions are not legal unless he or she sold the securities under certain conditions. Let's look at the two ... Read Full Answer >>
  2. What is a margin account?

    A margin account is an account offered by brokerages that allows investors to borrow money to buy securities. An investor ... Read Full Answer >>
  3. Does the party loaning shares in a short sale transaction benefit in any way other ...

    To answer this question, we first need to clarify who is doing the lending in a short sale transaction. Many individual investors ... Read Full Answer >>
  4. Can mutual funds use leverage?

    Traditionally, mutual funds have not been considered leveraged financial products. However, a number of new products have ... Read Full Answer >>
  5. How do hedge funds use leverage?

    Hedge funds use several forms of leverage to chase large returns. They purchase securities on margin, meaning they leverage ... Read Full Answer >>
  6. Do nonprofit organizations have working capital?

    Nonprofit organizations continuously face debate over how much money they bring in that is kept in reserve. These financial ... Read Full Answer >>
Hot Definitions
  1. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  2. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  3. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  4. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  5. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
Trading Center