The Account Balance Sheet

You want to buy 1,000 shares of Pfizer (PFE) at a price of $24 per share. You put up $18,000 and borrow the rest. What does your account balance sheet look like? What is your margin?

The 1,000 shares of Pfizer cost $24,000. You supply $18,000, so you must borrow $6,000. The account balance sheet looks like this:

Assets

 

Liabilities and Account Equity

 

1,000 shares of Pfizer

$24,000

Margin loan

$6,000

   

Account equity

18,000

Total

$24,000

Total

$24,000

Your margin is the account equity divided by the value of the stock owned:

Margin = $18,000 / $24,000 = .75 or 75 percent