Mind numbing and utterly pointless football finance discussion thread

[Steve P]

For the love of god use this rather than fill up the other footy thread any further.

[eFestivals]

For the love of god use this rather than fill up the other footy thread any further.

what's mind numbing is people's "forgetfulness".

[The Nal]

So, how much debt are Utd in? Theyre within a day of going bust and closing the doors I hear.....

[Langdale Wolf]

Nice work, Steve.

[Alcatraz]

So, how much debt are Utd in? Theyre within a day of going bust and closing the doors I hear.....

[ralph250]

yet they've miraculously been talking about the same number I've mentioned - and I read no footie forums. The number came from somewhere else - and that somewhere else is newspaper reports. As I say, they exist.

Edited August 3, 2010 by ralph250

[eFestivals]

Can't believe your using 4 posts (of which one is a complete guess, so 3 really) of proving credibility on this. It could've just easily come from my mates uncles taxidriver. The sparcity of references doesn't give confidence to anything accurate.

I've used those posts to show your claim as the bollocks that it so often is - your regular claim that I've made that £880M debt number out of nothing.

Those posters obviously read the same newspaper reports as I did, and which you have too - because you've commented on them previously. Your convenient forgetfulness is to my mind just that.

you now have Utds debt as £880m

No, not me. The Guardian, The Times, the BBC, and plenty of others. As I keep saying, it was widely reported, and reported from public non-Utd sources (such as the debt-holders), who of course don't have the same interest in fiddling the accounts as Utd do.

As for all your "in-depth" analysis () I gave up bothering to read anything you present with that when you started your claims of the mysterious man paying twenties into Utd's bank account to cover player depreciation.

[ralph250]

I've used those posts to show your claim as the bollocks that it so often is - your regular claim that I've made that £880M debt number out of nothing.

Edited August 3, 2010 by ralph250

[eFestivals]

Neil, 3 posts on the whole internet. The sparcity could easily be they're made up out of anything. Certainly no accuracy.

ahhh, I see you're back to your "I've not seen it, therefore it cannot exist" bollox again.

Here's a lesson for you: things go on that might pass you by, yet others might notice. Just because you don't know doesn't automatically make that other a liar.

Find it.

I've no need to. I've read it, I know the summary of what it said (I've forgotten the exact detail, but I'm allowed to).

You don't understand. You have a cashflow, if you have enough free money in hand, you buy a player for say £10m. You've paid for the amortisation (depreciation) there and then. You're not getting that money back.

The asset is set as a capital asset. The player helps generate turnover. From that turnover, money is deducted from the reported yearly profits to account for amortisation. This money does not leave the club! what leaves the club is amortised asset value on the balance sheet. The money instead going into cashflow. After 4 years when his contract expires, you've saved £10m to buy a replacement, but it's taken you 4 years to save that. The four yearly accounting periods will show £2.5m deduction for amortisation to reflect the cost to the business (as on purchase cost is £0 as asset value will equal purchase price).

The cost is still £10m.

Exactly (the bit in bold). So there's no cash that mysteriously comes back. The not understanding is you.

Your understanding of it is cocked cos you're including money (for the £2.5M a year that gets saved) made elsewhere within the business as tho it's free money when it's not. It has to be profit - not turnover, profit!! - made (or borrowed cos of further trading losses) elsewhere within the business.

You're not looking at things on a "everything else being equal" basis, you're throwing in £2.5M extra each year from somewhere.

[ampersand]

thank f**k for this thread! well played steve!

[ralph250]

I only ask for one reputable source Neil.

Anyways...

Exactly (the bit in bold). So there's no cash that mysteriously comes back. The not understanding is you.

Your understanding of it is cocked cos you're including money (for the £2.5M a year that gets saved) made elsewhere within the business as tho it's free money when it's not. It has to be profit - not turnover, profit!! - made (or borrowed cos of further trading losses) elsewhere within the business.

You're not looking at things on a "everything else being equal" basis, you're throwing in £2.5M extra each year from somewhere.

[ralph250]

haha, just found this aswell. Still haven't found my supposed post discussing £880m though.

So Utd's parent company debts are - or more correctly, were last summer - £716M.

Here's betting that there's around another £100M of debts, hived off from the parent company accounts with some accounting fiddle or other.

[eFestivals]

As I've done from the start of the whole conversation, I'm treating each asset individually.

but not treating things on an equal basis.

Because you're not, your whole understanding of the situation is skewed. You're throwing in profit made elsewhere within a separate part of the business and considering it to be free money.

On an "everything else is equal basis" (the standard way to view such things - because it's the only one that's meaningful), they end the contract period of any player with a loss to the value of the price paid for that player. There is no money that comes back.

[ralph250]

but not treating things on an equal basis.

Because you're not, your whole understanding of the situation is skewed. You're throwing in profit made elsewhere within a separate part of the business and considering it to be free money.

On an "everything else is equal basis" (the standard way to view such things - because it's the only one that's meaningful), they end the contract period of any player with a loss to the value of the price paid for that player. There is no money that comes back.

Edited August 4, 2010 by ralph250

[eFestivals]

It's the same as any other capital asset Neil. Once a sewing machine has extinguished, they'd end with a loss to the value they purchased it for, but if that sewing machine had helped make jumpers to sell as a business, over time you'd recoup that expenditure for your cashflow to be able to replace it.

Only if you made a profit. If there's no profit from other trading activities, then there's no way to recoup the money laid out.

The idea of capital assets is to generate revenue.

No, the idea of capital assets is generate profit. But it doesn't always happen - as is the situation at Utd.

You can have £10Bn in turnover, but if your expenses in generating that turnover are greater than the turnover, then there's no profit, and any capital expenditure will have been pointless.

your computer server allows your business to operate and bring in revenue

your sewing machine allows you to makes clothes to sell to bring in revenue

your van allows you to make deliveries to get revenue

your player increases merchandise sales, club profile, ticket sales, reward money, on field success which entices sponsorship, progress into tournaments generating further matchdays, possibly fanbase depending on country of origin (eg. Park), likelihood for games to be televised etc etc. It's not money from elsewhere, it's money they have contributed to bringing in, same as the server,sewing machine, delivery van. There is no turnover without the players.

The player is exactly the same. It's allowing your business to function and bring in revenue.

But in the way you're looking at it, you are not treating things on an equal basis.

You're creating a further £10M out of nothing but it doesn't come out of nothing it comes ONLY from any profit a business might make.

If everything is considered on an equal basis - and that is the ONLY way to properly consider things - then it's not the scenario you're imagining.

If you want to include the mystery £10M that you "save", then you have to include within all of the financial consideration all of the financial goings on which generates that £10M profit which you can then save.

And in Utd's case, when taking into account all of their financial dealings there is no £10M profit which can be saved, because there's no profit at all. And so if you want to include that "saved" £10M, you have to add £10M onto their debts (what they've borrowed), because that's the only place they're able to get that £10M from.

The proper way to consider things is not how you're doing it, but like this:-

- You start with £10M in the bank (and nothing else [in this hypothetical]).

- you buy a player for £10M. You then have zero cash, but an asset worth £10M.

- a year later you still have no cash, but the asset is now worth £7.5M.

- a year later you still have no cash, but the asset is now worth £5M.

- a year later you still have no cash, but the asset is now worth £2.5M.

- a year later you still have no cash, but the asset is now worth nothing. The business has devalued by £10M.

That's it. There is nothing further, there is no £10M that comes back to them in cash.

[ralph250]

Only if you made a profit. If there's no profit from other trading activities, then there's no way to recoup the money laid out.

[eFestivals]

Not fully, you'd mitigate.

the only scope to mitigate the loss for a company that's trading at a loss is via the tax regime - and that would only cover around 20(ish)% of it.

You walk away with £40k, you've lost 10k and 4 years.

completely and utterly wrong.

You'd mitigate your loss. Would need profit to fully cover the £10m, a deficit and you'd mitigate from your turnover, so you might make £5m or £6m back for example.

completely and utterly wrong.

Can I ask how many sets of Ltd company accounts have you submitted to HMRC over the years?

As I keep saying, your understanding of all this is utterly incorrect. You're robbing Peter to pay Paul, while pretending that Peter hasn't actually lost what he's been robbed of.

[ralph250]

Can I ask how many sets of Ltd company accounts have you submitted to HMRC over the years?

Edited August 4, 2010 by ralph250

[eFestivals]

I'm not confident you have or at least done them correctly, if didn't know how capital assets were treated.

I know what they are thanks, and I know how they're treated by accounts.

AND I also know that spending on them doesn't make your bank account fat as you're imagining.

When you're spending £10M *every* year on players (which is how it happens, on average, across a squad), then regardless of how anyone might choose to skewly view the books, all you see at the sharp end is that £10M disappearing from your bank account each year - cos that's what happens, and nothing is coming back back marked "solely the result of spending X amount on Y thing". At the end of the day it's just another necessary cost of doing business from that businesses' point of view, no different to paying the leccy bill.

[ralph250]

I know what they are thanks, and I know how they're treated by accounts.

AND I also know that spending on them doesn't make your bank account fat as you're imagining.

When you're spending £10M *every* year on players (which is how it happens, on average, across a squad), then regardless of how anyone might choose to skewly view the books, all you see at the sharp end is that £10M disappearing from your bank account each year - cos that's what happens, and nothing is coming back back marked "solely the result of spending X amount on Y thing". At the end of the day it's just another necessary cost of doing business from that businesses' point of view, no different to paying the leccy bill.

Edited August 4, 2010 by ralph250

[oafc0000]

Sheldon told the court that it was only the intervention of Premier League chief Richard Scudamore that saved the club.

The other clubs wanted "to boot Pompey out there and then", Sheldon said.

He added: "The clubs wanted Portsmouth to go to the wall and divide all the TV money among themselves."

That prospect was avoided, however, when Scudamore persuaded the clubs to give Pompey an early parachute payment, allowing them to complete the season.

[eFestivals]

You'd treat players individually as opposed to pooled.

There's no need to, no one but the accountant would do. It's totally meaningless for anything but selling up, and for tax returns.

Your leccy bill isn't an asset, nothing goes back onto the balance sheet. Buying a player does. You have an asset. Your leccy bill is an operating expense for that year, depreciation is an operating expense for that year, though you don't pay anything out until you replace said asset.

You're really just not getting the difference between the meaningless bollox on a balance sheet and the real world.

You need leccy to operate the business no more or less than you need players - if you're deficient in either, your ability to carry on normal business is impaired. Both are something you have to spend real hard cash on, which leaves your bank account never to be seen again.

There's also almost no businesses (only the very tiny) who make no capital expenditure each and every year, and most are making that spend at around the same amount each year - so you do a trading budget which says "ten grand for leccy, and ten mil for players", and it doesn't really ever change. It's money going out, never to be seen again.

The value of assets on the books is meaningless in any day-to-day trading sense - it means nothing to the normal business manager. It only means anything when selling (tho the book difference it makes would be so small it's irrelevant, given that one out needs one in) or selling up, or borrowing against it, and to the owners ego.

I buy computers at some number most years. All I see of that as the one both running and owning the business is a chunk of money going out of my account. Sure, I have assets to the value of what I've spent, but they've been bought to be used for nothing more than than to enable to the business to carry on doing what it's doing, and so ultimately they're simply just another business expense.

I'm not looking at my books when my bank account is bare thinking "it's OK, I have these assets", because I can't simply sell them - if I do, then I can't carry on my business anyway, I won't have the necessary tools. They're a cost, and outside of the necessity of them for the business to operate they bring no other benefit - they don't allow me to earn more, they only allow me to earn.

That "they don't allow me to earn more, they only allow me to earn" thing is equally applicable to players for footie clubs, outside of the super-odd deals at not-already-exploited-to-the-max clubs.

For example, James to Bristol City is likely to see them do extra business (more season tickets, more walk-ups, more shirts, perhaps extra TV), but Messi to Utd wouldn't guarantee earning them an extra penny. Anyone wanting a Utd shirt would already have one, so huge Messi sales would see (say) fewer Rooney sales; the stadium is already full; the ticket prices are already maxed out; the TV coverage is maxed out; Utd already win the league on average (say) every other year - which is probably the best that any team in any league can expect.

Outside of getting a little further in the Chumps than Utd's average - which, given how far they tend to get and the strength of other top teams would be a nothing better than a roll of the dice so not the basis for a hard-nosed business decision - there's no extra profit that can be gained by signing him. So he'd be a (say) £100M capital expenditure which brought the club no financial benefit.

And that remains the case for any player they might sign from Messi's level downwards, when those players are being used to maintain the strength of the squad. They simply enable the business to continue, they don't earn it extra.

(this even pretty much applies at clubs where the commercials aren't already maxed out - cos in those cases, their customer base is maxed out [outside of the super-odd deals mentioned above])

Put simply: any value that an accountant might put in a book for an asset is completely meaningless to the day-to-day trading of any business.

[TheGayTent]

I want the whole of football to go to the wall... Everyone involved is a c**t... The club, the fans and the authorities...

[Langdale Wolf]

I want the whole of football to go to the wall... Everyone involved is a c**t... The club, the fans and the authorities...

[eFestivals]

You do come out with some really odd things sometimes buddy. Sometimes, I think it's to get some sort of reaction. No more so than the above nonsense. How to insult many members of this forum in one easy sentence.

From one angle I agree entirely with the sentiment he's expressed.

Going by what he's quoted as accurate, it shows just how stupidly greedy clubs (some, of not all) have become.

While they might have welcomed a few quid into their coffers, if it got shared round then it gives no club any extra advantage over any other, and so becomes worthless for those clubs - tho not to greedy directors who might have been imagining it in their pockets!

And it shows that their focus is now as businesses, and not as clubs in a competition. They celebrate a club going to the wall like a wannabee monopolist celebrating the demise of a competitor, and are forgetting that it's impossible to win any competition if you don't have anyone to compete with.

Whatever might have been before, it's certain that the Prem has made that attitude far more prevalent. In fact, it was the whole basis behind the formation of the Prem in the first place, robbing the grass roots - the future of football - for immediate financial gain.