Stoke show RFC how to run a Real Football Club

[Vision]

I would certainly hope that that wage bill is significantly lower now.

"Black hole,"deficit","shortfall" call it what you want but only the extremely blinkered would see an £18m wage bill on Championship revenue as sustainable without significant player sales or substantial investment. Where's the money gone.....????. I wonder.

[mr_number]

They're the sort of players who are internationals and everyone inside football rates as great prospects, so journalists also know about them.

Similar to the way Sidwell was the only one any journos had ever heard of at the start of the 106 season.

I do actually quite rate them as prospects, but I would say people surely aren't willing to pay more than £1m at the moment? But I agree with your point generally... it's like when Sky cover a championship game and big up one or two players beyond all justification because they've been heard of outside of the league.

[Wycombe Royal]

Player valuations are pointless anyway. They are only worth what someone pays for them, so if they are never sold then any valuation on them is totally pointless.

We might value Church and HRK at £5m each. It means nothing.

[rhroyal]

Having looked at our accounts, that is the biggest area where we seem to lack ambition. The year before we sold Gylfi, we valued our entire squad at about £3m I believe. Since then, 3 players alone have been worth around £15m between them. Whilst we may not have seen that coming, it's obvious that our squad is worth more than £3m or so. If we were to get into serious trouble, we could recoup more than £3.3m by holding a fire sale.

Overstating the value of your squad on your balance sheet is obviously foolish and a big risk, but I would like to see how these values are reached. Are they assessed by an external 3rd party, or is it the club's word?

[mr_number]

But as someone above said - values on the balance sheet are essentially meaningless - valuing them up is just an accounting trick. It doesn't really make any difference.

[Royal Rother]

It is based on how much a player cost and the length remaining on his contract.

If a player cost £2m and he signed a 4 year contract, that cost would effectively be written off over those 4 years. So £500k each year.

Therefore his value in the accounts would be at end of year 1, £1.5m, Yr 2 £1m etc. You get the picture.

The £3m valuation you saw in the accounts would have been the accumulated calculations of the book value of all the squad members using the above "formula".

Only in exceptional circumstances (I believe) would a revaluation of a player be made in the accounts (I've not seen it done). However it is (probably) standard practice to refer to any such discrepancy in real / book (Balance Sheet) value in the Disclosures in the company's accounts, where it is considered large enough to be significantly misleading if NOT noted in the accounts.

i.e. if Simon Church and Adam Le Fondre were believed to have a combined value of some £30m at the end of this season although there would be no revaluation of their worth in the actual accounts, it would probably be considered prudent by the Directors / Auditors to refer to this fact / belief in the notes to the accounts. Otherwise anyone reading the company's accounts might be somewhat misled.

[rhroyal]

But as someone above said - values on the balance sheet are essentially meaningless - valuing them up is just an accounting trick. It doesn't really make any difference.

That's not entirely true. Profit and loss figures at the end of the year feed directly into the balance sheet. If the balance sheet is under valued, it will lead to lead to sales of players and subsequent profit being stocked up as cash and capital, as opposed to being reinvested in the playing squad.

It's a difficult game valuing players though; how will they perform over the next 12 months? Are they happy at the club? How injury prone are they? Even Ronaldo drops to £0 if he has a horrific leg break. How much has Tevez's intangible fallen now? So I guess, as already stated by somebody else, an objective is to look at initial cost and depreciate it in relation to time remaining on contract and age. Some sort of indiscriminate algorithm. This does overlook our exceptional recent record of developing players though.

[Royal Rother]

Hellooooo! Did you not read my post?

[rhroyal]

Did you not read mine? Sorry for referencing you properly; I instead went for "As already stated by somebody else". Was referring to you though, supporting your argument.

[Royal Rother]

Actually I don't think I did read the last paragraph!!

The 1st couple just looked like you'd missed my point. Basically they don't do revaluations. But I don't really understand what you are thinking when you say...

If the balance sheet is under valued, it will lead to lead to sales of players and subsequent profit being stocked up as cash and capital, as opposed to being reinvested in the playing squad.

With respect, that doesn't really make sense to me.

[rhroyal]

Actually I don't think I did read the last paragraph!!

The 1st couple just looked like you'd missed my point. Basically they don't do revaluations. But I don't really understand what you are thinking when you say...

If the balance sheet is under valued, it will lead to lead to sales of players and subsequent profit being stocked up as cash and capital, as opposed to being reinvested in the playing squad.

With respect, that doesn't really make sense to me.

Players appear on the balance sheet as "intangible assets". If our intangible assets have a lower value, we are more likely to retain profits and cash for the sake of our solvency, and less likely to reinvest.

[Royal Rother]

Why?

[rhroyal]

Why?

Cash is also an asset, a very liquid one. So keeping a healthy bank balance helps offset our debts and liabilities, keeping us solvent. That's where many of our profits are currently going. If players were valued higher, we could spend some of that cash on wages/transfers instead. Not all of it, because this would overlook how much more liquid cash is when compared to players, who can prove very difficult to convert into cash when a club is facing financial trouble.

[Bandini]

Wouldn't the decision on how much to spend on new players/wages be almost entirely influenced by how much money was actually coming in rather than the notional value given to players on the balance sheet.

[rhroyal]

Wouldn't the decision on how much to spend on new players/wages be almost entirely influenced by how much money was actually coming in rather than the notional value given to players on the balance sheet.

In the long run, obviously yes. Short run, we could gamble for a couple of seasons with a seriously healthy balance sheet before cutting cloth if necessary, like we did when we lost parachute payments.

[Bandini]

Wouldn't the decision on how much to spend on new players/wages be almost entirely influenced by how much money was actually coming in rather than the notional value given to players on the balance sheet.

In the long run, obviously yes. Short run, we could gamble for a couple of seasons with a seriously healthy balance sheet before cutting cloth if necessary, like we did when we lost parachute payments.

Yes, we could gamble, but whether we do or not isn't really related to the value we give to the players in the accounts.

[Royal Rother]

Sorry rhroyal, and I mean this with no disrespect, but I think you are taking textbook accounting coupled with some degree of practical knowledge and placing far too much importance on the state of the Balance Sheet.

A strong Balance Sheet is good of course but revalued Intangible Assets would not make any difference to the scenario you suggest. Cash is king, revalued intangible assets are almost worthless / irrelevant as a funding / security proposition these days.

[SouthDownsRoyal]

i SEE STOKe winning in EUROPE yesterday oh how we are poles apart look at us now look at them

[Wycombe Royal]

Why?

Cash is also an asset, a very liquid one. So keeping a healthy bank balance helps offset our debts and liabilities, keeping us solvent. That's where many of our profits are currently going. If players were valued higher, we could spend some of that cash on wages/transfers instead. Not all of it, because this would overlook how much more liquid cash is when compared to players, who can prove very difficult to convert into cash when a club is facing financial trouble.

So you don't care about the cash flow statement at all then? That is where the majority of businesses fail - they run out of cash and the scenario you are painting would be leading towards that.

A football club has to take it's cash situation very seriously as their inward cash flows are not regular (season tickets and TV revenue veing the main two are not spread across the year), yet it has to pay player wages and all its other overheads throughout the year. So they obviously have to manage their cash flow very tightly to ensure that they can keep paying their bills. Nearly all the clubs that have gone into administration have run out of cash.

[mr_number]

Oh god, it's a full blown accountancy thread.