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Margin of safety
Margin of safetyThe difference between price and value for a common stock. RELATED TERMS-------------------------------------- Price The cost of a good or service to the consumer. Value The worth or desirability of something expressed as an amount of money. Stock US equivalent of the British word "share", a block of shares with a nominal value of 100, or various kinds of fixed-interest securities; in Britain, goods stored ready for sale, raw materials, work in progress and finished but unsold products. SIMILAR TERMS-------------------------------------- Margin 1) Borrowed money that is used to purchase securities, practice referred to as 'buying on margin'. 2) The amount of equity contributed by a customer as a percentage of the current market value of the securities held in a margin account. 3) In a general business context, the difference between a product's (or service's) selling price and the cost of production. 4) The portion of the interest rate on an adjustable-rate mortgage that is over and above the adjustment-index rate. Margin account (stocks) A brokerage account in which the broker lends the customer cash to purchase securities. Margin agreement The agreement governing customers' margin accounts. Margin call A demand for additional funds because of adverse price movement. Maintenance margin requirement, security deposit maintenance. Margin department The department in a brokerage firm that monitors customers' margin accounts, ensuring that all short sales, stock purchases, and other positions are covered by the margin account balance. Margin of profit Gross profit divided by net sales. Used to measure a firm's operating efficiency and pricing policies in order to determine how competitive the firm is within the industry. Margin requirement A performance bond paid upon purchase of a futures contract that protects the exchange clearinghouse from loss. Margin requirement (options) The amount of cash an uncovered (naked) option writer is required to deposit and maintain to cover his daily position valuation and reasonably foreseeable intraday price changes. Margin security A security that may be bought or sold in a margin account as defined in Regulation T. Margin stock Any stock listed on a national securities exchange, any over-the-counter security approved by the SEC for trading in the national market system, or appearing on the Board's list of over-the-counter margin stock and most mutual funds. Margin trading Buying securities, in part, with borrowed money. Marginal The margin is the range between the sale and purchase price or the range between debit and credit interest rate or with an Arbitrage, the price difference at the different trading places. Marginal cost The additional cost incurred by producing one more unit of a product. Marginal efficiency of capital The percentage yield earned on an additional unit of capital. Marginal product The increase in output resulting from the use of an additional unit of an input or factor of production. Marginal propensity to consume The proportion of additional disposable income that is spent on additional consumption. Marginal propensity to save The proportion of additional disposable income that people choose to save. Marginal revenue The change in total revenue resulting from increasing sales by one unit. Marginal tax rate The amount of tax paid on an additional dollar of income. As income rises, so does the tax rate. Marginal utility The additional satisfaction derived from consuming a further unit of a commodity. PREVIOUS AND NEXT TERMS-------------------------------------- Margin account (stocks) A brokerage account in which the broker lends the customer cash to purchase securities. Margin agreement The agreement governing customers' margin accounts. Margin call A demand for additional funds because of adverse price movement. Maintenance margin requirement, security deposit maintenance. Margin department The department in a brokerage firm that monitors customers' margin accounts, ensuring that all short sales, stock purchases, and other positions are covered by the margin account balance. Margin of profit Gross profit divided by net sales. Used to measure a firm's operating efficiency and pricing policies in order to determine how competitive the firm is within the industry. Margin of safety Margin requirement A performance bond paid upon purchase of a futures contract that protects the exchange clearinghouse from loss. Margin requirement (options) The amount of cash an uncovered (naked) option writer is required to deposit and maintain to cover his daily position valuation and reasonably foreseeable intraday price changes. Margin security A security that may be bought or sold in a margin account as defined in Regulation T. Margin stock Any stock listed on a national securities exchange, any over-the-counter security approved by the SEC for trading in the national market system, or appearing on the Board's list of over-the-counter margin stock and most mutual funds. Margin trading Buying securities, in part, with borrowed money. 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