Tip of the day – Market Capitalisation

Market capitalisation refers to the total pound market value of a company’s outstanding shares. Commonly referred to as “market cap,” it is calculated by multiplying a company’s shares outstanding by the current market price of one share. The investment community uses this figure to determine a company’s size, as opposed to using sales or total asset figures.

Using market capitalisation to show the size of a company is important because company size is a basic determinant of various characteristics in which investors are interested, including risk. It is also easy to calculate. A company with 20 million shares selling at £100 a share would have a market cap of £2 billion.

Tip of the day – Profit Margin

What is a ‘Profit Margin’

Profit margin is a profitability ratio calculated as net income divided by revenue, or net profits divided by sales. Net income or net profit may be determined by subtracting all of a company’s expenses, including operating costs, material costs (including raw materials) and tax costs, from its total revenue. Profit margins are expressed as a percentage and, in effect, measure how much out of every pound of sales a company actually keeps in earnings. A 20% profit margin, then, means the company has a net income of £0.20 for each pound of total revenue earned.

While there are a few different kinds of profit margins – including “gross profit margin,” “operating margin,” (or “operating profit margin”) “pre-tax profit margin,” and “net margin” (or “net profit margin”) – the term “profit margin” is also often used simply to refer to net margin. The method of calculating profit margin when the term is used in this way can be represented with the following formula:

Profit Margin = Net Income / Net Sales (revenue)

Other types of profit margins have different ways of calculating net income so as to break down a company’s earnings in different ways and for different purposes.

Profit margin is similar but distinct from the term “profit percentage,” which divides net profit on sales by the cost of goods sold to help determine the amount of profit a company makes on selling its goods, rather than the amount of profit a company is making relative to its total expenditures.

WARNING: Is GDPR the next PPI?

A very real question in our opinion. Look at the GDPR and you will see that not only are the fines devastating but the compensation claimable is borderline insane.

Don’t get me wrong, we are all sick of spam email, stolen identities, misappropriated funds and so on. But spare a thought for the victim of the crime. In this example, a small company. It gets hacked and its data is stolen. For being the victim, it gets fined after having to voluntarily report itself. Then to add a final blow, those whose data is stolen are entitled to compensation even if there is no utilisation of the data or loss.

How businesses will survive after such an onslaught is beyond us. Not only the fines and the compensation but you also have to deal with the costs and reputational damage.

There is not one cloud hoster or software provider that will guarantee 100% security and the ethical hackers we know would laugh if they did.

The result of all of this is that the timing could not be better for the claims management companies. PPI comes to an end in 2019. By then there will be an explosion of new vultures circling. We are going to be hearing “have you had your data stolen, you could be entitled to compensation blah blah blah…” a lot.

As to whether hackers will commit their crimes and then sell the fact of the hack to individual claims management companies (to be first on the list to market claims) is not as far fetched as it sounds…watch this space.

A well presented business plan…

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