Business, Legal & Accounting Glossary
The percentage of the selling price that will be profit, generally calculated as percentages. It helps measure how much the company keeps in earnings. For example, a 30% profit margin means the company has a net income of £0.30 for each pound of total revenue earned.
Margin is money borrowed from a broker for trading purposes. Brokers generally require additional disclosures for opening margin accounts, and charge interest when the margin is used. Margin is commonly expressed as a percentage; an account 150% on margin, for example, holds $150 worth of positions for every $100 of actual cash in the account. Maintenance margin, the amount of margin required to hold an existing position, is regulated by the exchange where the asset is listed and may differ from the initial margin mandated by the Federal Reserve. Margin requirements for holding positions overnight may be greater than margin requirements for opening and closing intraday positions.
Margin calls occur when an account falls below the minimum maintenance level of 25% (or higher if so stated in the broker’s margin agreement). Brokers will generally give the account holder a short period of time to reduce the margin in a manner of their own choosing. If the margin has not been sufficiently reduced, the broker will automatically liquidate positions at its own discretion.
This year’s gross profit margin isn’t very high due to excessive maintenance costs associated with the production line.
The company’s operating margin was so narrow that they couldn’t go through with the renovations required by the new environmental regulations, and they had to close.
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This glossary post was last updated: 15th February, 2020