Understanding Finance

Understanding Finance

In theory, the definitions of an investment or an expense seem quite clear cut. An investment, so the theory goes, is spending which creates an asset which will help produce profits over a number of…

Understanding Finance

Conceptually we have a reasonable understanding of inflation. As an economic term, inflation represents the general price rise of goods and services over a predetermined time.

Understanding Finance

Usually, your bank would pay interest on your savings accounts. Negative interest rates turn this around and mean customers have to pay banks to hold their savings.

Understanding Finance

You probably sort of know how index linked gilts, or “linkers,” work. The redemption value is linked to the change in the retail price index, or RPI, that takes place over the life of the gilt. 

Understanding Finance

Another word for duration could be the average life of a bond. Most bonds pay annual or semi-annual coupons and have a redemption date. So whilst a bond maturing in three years and with a £5 annual…

Understanding Finance

There are many models to choose from when valuing a company and your choice depends on the company as well as what your aims are.

Understanding Finance

Younger and more socially conscious investors have increased demand for Environmental, Social and Governance (ESG) compliant portfolios. This in turn has driven demand for a new class of ESG compliant…

Understanding Finance

The accounting industry hasn’t always had the best reputation for providing financial transparency, but its origins are based on providing consistency to company reporting. Given the millions of…

Understanding Finance

Businesses that benefit from the network effect are said to see the value of their product or service increase with the number of users. This may sound simple, but it is actually quite uncommon and is…

Understanding Finance

There are three things that this piece will look to address; what is the yield curve, what do we mean by a yield curve inversion and what is the economic consequence of a yield curve inversion?Imagine…

Understanding Finance

The first of his McKinsey Awards was for "How Competitive Forces Shape Strategy" in which he highlights his five forces that identify how competitive and potentially attractive an industry is. Once…

Understanding Finance

Maintenance capex can be considered the cost of sustaining current revenue and profits for a business. This type of outlay is equivalent to a normal operating expense; such an example would be the…

Understanding Finance

Contemporary corporate finance theory says that the value of something is (a) the future expected cash flows discounted back to (b) their net present value.

Understanding Finance

The balance sheet is a list of (a) what a company owns less (b) what it owes with the balance being (c) the value that is attributable to shareholders.