Author: Helen Barklam

A prepayment is commonly defined as an expense which has been paid in advance of its due date. As cash has been paid up front, this represents an asset on the balance sheet. It is an asset because a benefit is expected to be received in respect of this in a later period. This concept only exists under the accruals basis of accounting (i.e. where revenue and expenses are aligned to the period to which they relate). Under cash accounting, expenses are fully recorded in the period where the cash payment is made and thus prepayments are never recorded. In…

The FTSE 100, FTSE 250, FTSE 350 and FTSE Small Cap stock market indices are wholly owned by the London Stock Exchange (‘LSE’). The acronym ‘FTSE’ actually stands for ‘Financial Times Stock Exchange’ as the indices were a joint venture between the Financial Times news publication and the London Stock Exchange when they launched in 1984. The LSE operates two markets in the UK, the main market and the AIM market. Companies listed on the main market can have a ‘premium’ or ‘standard’ listing, with different rules applicable to each. The FTSE indices only list companies which have a ‘premium’…

Fractional share investment is simply where you acquire a fraction of a security (e.g. a share, or index tracker fund). Whilst fractional share ownership is possible for UK shares, it is most popular when acquiring US shares where certain shares can cost thousands of dollars per share. For example, Berkshire Hathaway, Alphabet (Google parent company) or Amazon shares. Without fractional share ownership, many smaller investors would be priced out of these opportunities. How does fractional share ownership work? Fractional shares do not trade on the open market. Therefore in order to acquire fractional shares, you must sign up with select…

Revenue is simply the amount that a company makes from selling its products and/or services to its customers. Within the profit and loss, revenue is the ‘top line’. Revenue is also known as ‘sales’ or ‘income’, so don’t get confused by the different terms used. Revenue recognition Revenue should not be confused with cash receipts from sales. Under the ‘accruals basis of accounting’, revenue represents the amount earned or delivered in a specific period and is recognised in accordance with the applicable accounting standard. As a simple example of this, if a retailer sells you a television in December, but…

The opening and closing times for the worlds stock exchanges vary, though they generally close in the evening (in local time). Stock exchanges are simply marketplaces where shares and other financial instruments are traded during opening hours. In order to trade a share or financial instrument on a particular stock exchange, that security must be listed there. Each stock market is subject to its own government regulations and rules. Whilst historically the majority of trading at the stock exchange was done in person (picture scenes of traders screaming buy or sell), the vast majority of trading is now done digitally…

A CFD is a ‘contract for difference’. It is a leveraged derivative product which allows you to speculate on the price movements of securities (e.g. shares, indexes, forex, commodities) without ever owning the underlying asset. Using CFDs, it is possible to generate a profit not only when securities rise in value, but also when they fall. If you think a security will increase in value, you ‘buy’ (also known as ‘going long’). If you think the security will decrease in value, you ‘sell’ (also known as ‘going short’). The buy price exceeds the current market value, whereas the sell price…

Kuflink is a UK-based peer to peer lender, which exclusively offers bridging/development loans secured against UK property (first or second charges). Prior to entering the peer to peer lending market in 2017, Kuflink’s sister company operated as a specialist bridging loan provider since 2011. Over £100m has been invested on the platform since launch, with Kuflink boasting on its homepage that no lender has lost capital to date. However, as with all investments, historical success is no guarantee of future performance. Be sure to read our full Kuflink review to understand more about the type of underlying loans Kuflink offers…

The Pension Lifetime Allowance is the maximum pension pot you can build before an additional tax charge will apply on lump sum withdrawals or income drawdowns. The Pension Lifetime Allowance must be an important consideration for any pension saver in the UK who believes that they are likely to reach this level by retirement. Why? Because significant tax charges apply where this limit is exceeded. How big is the Pension Lifetime Allowance? The Pension Lifetime Allowance peaked in 2010-11 at £1.8m but has gradually been reduced by successive governments in a bid to increase tax receipts for the treasury. In…

The Enterprise Value to Equity Value bridge is the most important concept in transaction purchase price calculations. The key point to understand is that transactions take place on a cash-free debt-free basis and with a normal level of working capital. This means that the headline price agreed for the business is: Uplifted pound for pound by cash and cash-like items held by the business Reduced pound for pound by debt and debt-like items held by the businessAdjusted for the difference between reported working capital and ‘normal’ working capital Enterprise value The enterprise value (‘EV’) is the headline price agreed for…