But if the widget making machine cost £1,000 and lasts for ten years then the accountants knock Depreciation of 10% of the value of the machine (£100) off your profit each year, reducing the profit to £80.
If you buy a bit of metal for £90, turn it into widgets and sell them for £270 then you have made a cash profit of £180….
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.
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.
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.
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