# Quiz question K249J-7BW4G: What is the appropiate combined equity formula for marging account?

Long margin accts is LMV - Debit = Equity
Short Margin accts is Credit - SMV= Equity

So you could say LMV - Debit = Credit - SMV
Which is either LMV - Debit - Credit + SMV OR Credit - SMV - LMV + Debit

However apparently the right answer has LMV & Credit Poisitve and SMV & Debit negative, how do you get there?

Hi @Alanbrotz! Thanks for reaching out.

As much as it might seem some simple algebra might work for this question, I think thatâ€™s whatâ€™s throwing you off. Youâ€™re right with the first part:

Long margin accts is LMV - Debit = Equity
Short Margin accts is Credit - SMV= Equity

However, avoid making the two equivalent. Meaning:

LMV - Debit â‰  Credit - SMV

Many times, we segregate the long equity formula (LMV - Debit = Equity) from the short equity formula (Credit - SMV = Equity). Test questions tend to focus on one or the other, when in the real world investors can utilize both long and short positions in the same margin account.

Letâ€™s work with an example using these numbers:

• LMV = \$20,000
• Debit = \$10,000
• Credit = \$15,000
• SMV = \$10,000

In this scenario, this would be our equity formula:

\$20,000 LMV - \$10,000 Debit + \$15,000 credit - \$10,000 SMV = \$15,000 Equity

Itâ€™s quite possible an investor could have a \$20,000 LMV and a \$10,000 SMV simultaneously. Letâ€™s put these numbers back in the original formula you quoted:

LMV - Debit = Credit - SMV (your formula)

\$20,000 LMV - \$10,000 Debit = \$15,000 Credit - \$10,000 SMV
\$10,000 = \$5,000 ??

Do you see how it doesnâ€™t work that way? Instead, combine the two â€śnon-equityâ€ť sides together like this:

LMV - Debit = Equity
Credit - SMV = Equity

LMV - Debit + Credit - SMV = Equity

The simplest way to approach it is by ensuring the positive figures stay positive, and the negative figures stay negative. Meaning:

Positive (+) figures = LMV and Credit
Negative (-) figures = Debit and SMV

There are numerous ways to rewrite the equity formula, and theyâ€™re all correct as long as the LMV and Credit are positive, while the Debit and SMV are negative, including:

LMV - Debit - SMV + Credit = Equity
-Debit - SMV + Credit + LMV = Equity
-SMV + Credit + LMV - Debit = Equity
Credit + LMV - SMV - Debit = Equity

All are correct because they maintain the right figures as positive (LMV and Credit) and negative (Debit and SMV).

I hope this helps!

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