Revenue and Costs
October 3rd, 2008 . by ClivetThe results demonstrates the problems the company faces in an industry where demand is cyclical. The majority of the company’s costs are fixed (more so in the short term) and have greatly increased due to the conditions created by the Big Bang.
Its revenue, however, does not remain constant and fluctuates between the extremes of the Big Bang period and the present inactivity caused by the October crash.
The large fixed salaries and the expenditure, which occurred when trading revenues were sufficient, diminish only slightly when revenue is low. Thus, it would appear that the company has not taken due account of this fact and through its vast expenditure has created a situation where at present; only a substantial turnover will allow the company to be financially viable.
Where as before the company was concerned primarily with attracting new, mainly corporate investors in the present situation, in order to build up its revenue, the company needs its present investors to return to the stock market. Of course, this will not occur whilst a bear market is the prevailing economic force.
Building Society receipts rose soon after the crash suggesting that for many, the present stock market conditions are characterised only by a high risk - low return potential. It is hoped on the part of the stock broking industry that this period will not last for much longer.
Financial services range.
The range of financial services of the company expanded as a result of the merger. Whilst perhaps the dealing operations are at present in a state of docility, it may be likely that the banking and insurance operations are receiving steady revenues.
Perhaps the incomes generated from these activities are actually increasing due to the increases in investor’s deposable income (the income which would usually be invested in the stock market). If this was the case then the whole of the company’s operation would be a completely different scenario.