Suppose you want to buy 10,000 shares of Ultra Universe Company at a price of 4.00. You put up P10,000 and borrow the rest. This is the balance sheet and margin: Balance Sheet: Asset Amount (P) Liabilities Amount (P) Investments in Ultra Universe Company 40,000 Margin Loan 30,000 Account Equity 10,000 Total Assets 40,000 Total Liabilities & Equities 40,000 Margin = (Equity / Total Assets) = (10,000 / 40,000) = 25% QUESTION: Supposed that you shorted 10,000 shares instead of buying. The initial margin is 60 percent. What would the account balance sheet look like instead?

Suppose you want to buy 10,000 shares of Ultra Universe Company at a price of 4.00. You put up P10,000 and borrow the rest. This is the balance sheet and margin: Balance Sheet: Asset Amount (P) Liabilities Amount (P) Investments in Ultra Universe Company 40,000 Margin Loan 30,000 Account Equity 10,000 Total Assets 40,000 Total Liabilities & Equities 40,000 Margin = (Equity / Total Assets) = (10,000 / 40,000) = 25% QUESTION: Supposed that you shorted 10,000 shares instead of buying. The initial margin is 60 percent. What would the account balance sheet look like instead?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter12: Balanced Scorecard And Other Performance Measures

Section: Chapter Questions

Problem 7EA: Assume Skyler Industries has debt of $4,500,000 with a cost of capital of 7.5% and equity of...

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Asset	Amount (P)	Liabilities	Amount (P)
Investments in Ultra Universe Company	40,000	Margin Loan	30,000
		Account Equity	10,000
Total Assets	40,000	Total Liabilities & Equities	40,000