Question

In a new margin account, a customer sells short 1,000 shares of xyz at $30 per share and deposits the required margin. if the stock subsequently falls to $25 per share, the equity in the account is?

Answer 1

The equity in the account is 20000.

Equity isn't taken into consideration as an asset or a liability on an enterprise's monetary statements. fairness is what you get when you subtract liabilities from assets. equity is meditated on an agency's stability sheet.

Fairness profits refer to income that is acquired through inventory dividends. A dividend is basically a reward paid to shareholders for or their investment in an organization, that is commonly paid from the corporation's internet income.

Equity is also referred to as internet really worth or capital and shareholders fairness. This fairness will become an asset as it's far something that a homeowner can borrow in opposition to if need be. you can calculate it by way of deducting all liabilities from the entire fee of an asset: (equity = assets – Liabilities).

The beginning equity is $15,000 (CR − SMV = EQ, or $45,000 − $30,000 = $15,000). If the market value falls to $25,000, equity is determined as $45,000 minus $25,000 equals $20,000.

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