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Balance Sheet Analysis

Balance Sheet Analysis

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Published by: kishorepatil8887 on Mar 31, 2010
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07/22/2013

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The Board of Governors of the Federal Reserve System regulations, as well as other regulatory
bodies, apply restrictions on margin lending practices. You may not borrow the full amount of your
portfolio. The Federal Reserve Board (FRB) regulates the amount of credit brokers can extend to
its customers. Currently, you can borrow up to 50% of the value of your marginable stocks to
make a new purchase. In the past, it has varied between 40 and 100 percent.

The "New York Stock Exchange minimum initial equity requirement" holds that your equity be at
least $2,000 whenever you enter into a new margin account transaction.

The "NYSE Minimum Maintenance Rule" requires that the equity in your account must be at least
25% of the current market value of margined securities.

All of these requirements are minimums and can be increased at any time by your brokerage firm
and/or by the regulatory agencies of the securities industry.

Not all securities are fully marginable. Your brokerage firm may have its own requirements and
your broker can tell you which ones would not apply.

Your broker will charge interest on the margin loan as long as it is not repaid. The rates vary but
generally will go down as the amount you borrow increases.

You cannot have shares registered in your name and sent out to you when you have purchased
these shares on margin. They must remain in the margin account in "the street name." You will
receive credit into your account for any dividends they pay. You may remove the shares from the
margin account only after you have repaid the amount you borrowed on margin to purchase these
shares.

If the value of your collateral rises, you can withdraw the amount over your minimum requirement
or use it for additional investments.

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