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Cgb09146 t1_ixhy4h5 wrote

As much as this is interesting data, it's really lacking in any meaningful detail. For example, this is a one year view of the club. Nobody should be buying a business based on a single year of operation. The club is also spending a fortune on dividends to the Glazers and on Interest payments.

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xelabagus t1_ixj274i wrote

Also player transfers is such a volatile number and utterly useless in helping understand the financial vialbility of the club. This year they have spent 240m euro and taken in 13m, but you can't just plug those numbers into this chart.

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burnshimself t1_ixjv68i wrote

The way this is accounted for in the profit and loss statements (which this maps out) smoothes our those year to year fluctuations. Acquiring contracts / transfers are treated as asset acquisitions and so the full cost is not booked to the P&L but to the balance sheet as an asset. Then that cost is booked as expense in the P&L statements over the life of the contract. So if you buy a 5 year contract for 100m, then you don’t book 100m immediately as expense but you amortize 20m per year over 5 years. That is the bulk of that depreciation and amortization line in this mapping of expenses. They buy players year over year consistently so it isn’t a one-time event but a recurring cost of operating a top tier football club.

They have it in their financial statements. They have 115m of player acquisitions netted against 30m of player sales this year for a net outflow of 85m in FY22. 138m netted against 46m for a new outflow of 113m in FY21. They do this every year, it’s effectively an operating expense which is what that amort line is meant to represent. But people with amateur understanding of accounting think that amort is a tax aberration - it isn’t, it represents the expensing methodology for real material cash outflows the business has very recently spent cash on.

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BoringAccountNG t1_ixlil8s wrote

And most payments for player transfers are spread out over many years.

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tewas t1_ixl14ey wrote

There is 165M depreciation. Thats a paper expense, great for taxes, but no real money leaving hands. Im sure they structured depreciation of prior capital investments over period of time to maximize tax subsidies

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scrchngwsl t1_ixl4gwe wrote

That's how they account for player purchases (and sales) - it's amortised over the length of the contract.

The player purchases are often themselves paid in instalments, the structure of which differs from how it's amortised, but it's not typically all paid in one lump sum either.

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Tsupernami t1_ixle9bw wrote

You cannot claim depreciation in the UK for tax purposes. You have to use capital allowances

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wellknownname t1_ixleboh wrote

On the contrary, for tax purposes you would prefer to expense the whole thing immediately rather than have to amortise over several years. Actually I suspect that is what happened for tax purposes - the UK is unusual in that tax treatment of assets does not follow the accounting treatment but uses a system of 'capital allowances' instead, and the HMRC manuals do not seem to suggest there are capital allowances on football players.

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Diligent-Road-6171 t1_ixnarpm wrote

>There is 165M depreciation. Thats a paper expense, great for taxes, but no real money leaving hands.

Depreciation and amortization are real expenses that cost real assets to make up for them.

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burnshimself t1_ixj9x79 wrote

The other years look like this.

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maverick4002 t1_ixk3xbk wrote

No they don't. I believe this is the first year without a profit.

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burnshimself t1_ixktil0 wrote

No, the last 3 years in a row have all been loss making

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MeteorMan2020 t1_ixl0kaf wrote

This year was 87.4m in operational losses

What were the last two years

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Michael90_Denmark t1_ixjikdp wrote

Future dividends is what will attract investors to buy United. If United is not producing enough profit to pay dividends it doesn’t become an attraction, and vice versa.

But completely agree with your points

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323464 t1_ixk8itg wrote

This is actually one QUARTER. Not even a year. And yeah, agreed with the last statement. These are probs just 'paper losses'. That or the team may lose money to act as a tax shelter for the owner. That's pretty much how auto and horse racing work for the rich owners. They get to have their fun etc and lose some money to mitigate other gains.

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Bill_Lumbergh_VP t1_ixko7es wrote

The image says it's for the 12 months ending June 30, so not one quarter. Unless you're saying it's mislabeled?

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PowerhousePlayer t1_ixkwkcl wrote

He probably saw the "Source: Manchester United Q4 2022 earnings release" at the bottom (which just tells us when the information was released) and not the subtitle at the top

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Diligent-Road-6171 t1_ixn99bw wrote

> The club is also spending a fortune on dividends to the Glazers and on Interest payments.

Dividend payments don't show up on earnings, if it did, it would make these numbers worse not better.

And interest payments are real expenses.

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KevinFromRadioShack t1_ixhtmz2 wrote

They are more than likely making money, the amortization and depreciation is used to decrease tax liability. The assets they are depreciating against (stadium?) will be around longer than the set depreciation schedule

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KanedSonAreYouDumb t1_ixhvgex wrote

Only £15m of the amount is depreciation, £150m is primarily player registration amortisation.

When they buy a player, they are really buying their registration, then that registration is amortised over the life of their contract.

What it doesn’t account for is when players increase in value, until they are sold.

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burnshimself t1_ixjvb7a wrote

It does account for that because their sale of contracts is netted against acquired contract costs in that amort figure

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KanedSonAreYouDumb t1_ixlghyh wrote

That’s what I meant by “until they are sold”, Garnacho might have appreciated by £30m for example but that’s not reflected in the accounts

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burnshimself t1_ixmarwm wrote

They have historically acquired contracts at a far higher rate than selling any. It is a net cash outflow every year for the past 5 years.

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Majestic_Food_4190 t1_ixhuw7z wrote

Yeah, I feel there must be something missing here. It's unclear to me how long an organization could run sinking 87m a year.

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johnniewelker t1_ixiidtq wrote

You are looking for a cash flow statement.

The company takes on debt or raise new equity to cover the short fall in cash. I don’t know what Man U does. Also they had £165M in depreciation. That’s not real cash spent. It’s possible they had positive cash flow even before accounting for cash raising activities

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AccuracyVsPrecision t1_ixjrn8b wrote

They pay the Glazers money in the books in the form of a loan instead of paying taxes as a dividend.

Most of the capital used by Glazer to purchase Manchester United came in the form of loans, the majority of which were secured against the club's assets, incurring interest payments of over £60 million per annum

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KanedSonAreYouDumb t1_ixhwb3s wrote

Yes there are things that can’t be accounted for, e.g. increase in brand value, that would increase the company’s market value even though its equity is decreasing every year.

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phyrros t1_ixj675r wrote

Because the majority of football Clubs are not for Profit. Actually most Fans sneer at the idea of a for profit club. Or buying a club

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Aardark235 t1_ixku8v2 wrote

ManU has had a 15% annual growth rate from 2005. Compare that to 9% for the S&P 500 over the same time period. Better deal than Twitter according to my maths.

Could the value go from 7B pounds to 100B pounds in the next 20 years? Absolutely.

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phyrros t1_ixm0tit wrote

Yeah, or ManU drops down to the second league and is worth little if anything.

Using sports Clubs as an investment vehicle is imho both everything that is bad about modern football and rather risky

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Aardark235 t1_ixm24sf wrote

That, my friend, is why you are poor. Check out the comparison between sports teams vs stock market over the last three decades:

https://mercercapital.com/article/investors-view-major-league-sports/

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phyrros t1_ixm4v4x wrote

No, that,my friend, is why i'm happy with my life and i can enjoy football.

I don't invest in Clubs just as i don't buy slaves :)

I've got a job, a house and have financial security for about 12 months - why should i chase after more money?

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Aardark235 t1_ixn4m30 wrote

You have a job so you obviously are chasing after more money. If you only had 10B pounds, you could enjoy your football and get paid to own a team.

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phyrros t1_ixncorz wrote

Actually no, i do i job in a company where i earn a lot less than in other companies because i really like my job :)

With 10b i would simply do nothing at all which i unhealthy

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Aardark235 t1_ixnihz5 wrote

With 10b, you can pay other people to be healthy for you.

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phyrros t1_ixqhcmz wrote

that you can do with 4 mill. There is absolutely no sensible reason to ever have more than a few million dollars.

And, just accept it, some people don't want to enrich themself on the work of other people. I believe in the value of work, and thus I deem getting rich off stock options as asocial.

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strangemanornot t1_ixhzcpj wrote

Just like any real estate. Homes can last for 100+ years but the amortization schedule is 27.5 years

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eliminating_coasts t1_ixi8gsg wrote

Wouldn't that normally refer to the amortization of the mortgage, rather than the house itself?

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_mister_pink_ t1_ixidbfj wrote

Depends but in the UK it’s generally based on the ‘useful economic life’ of the asset (minus the land portion which doesn’t suffer depreciation).

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Manumitany t1_ixiqrhl wrote

You still amortize expenses if you pay cash for them.

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Happytallperson t1_ixix4z7 wrote

I imagine its the value of a players contract. If you bought in a player for a transfer fee of £10 million and they signed a 3 years contract, you would write it down 3.3 Million a year.

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belanaria t1_ixks0jj wrote

Amortisation is of player contracts. It’s what they pay for the players divided by the number of years on the contract. So if a player cost 100m on a 5 year contract, then they will amortise 20m a season. If he renews then the remaining will be split over the new contract. So no they aren’t quite making money here. Big contracts, missing out on champions league (poor performances in the league for the last 10 years really) and constant dividends to the owners (uncommon in the industry) weigh down their finances.

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burnshimself t1_ixj9vdb wrote

No they’re not. If you swap D&A (which is an accounting concept and non-cash expense) for their Capex and acquisition of intangible assets (which is the annual cash outflow) they’re still running at a loss. That D&A line primarily consists of the amortized value of acquired contracts, which is to say there were recent cash outflows tied to that and it isn’t just an accounting / tax avoidance concept.

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caveyh96 t1_ixhxemb wrote

Chelsea were just sold for £4.25 billion. That sets the price for their similar clubs in the league. Id imagine they are worth north of £5 billion now. Current owners have made millions from the club since their leveraged buyout years ago.

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dugmartsch t1_ixitdpv wrote

Yeah the income statement is almost irrelevant for valuing an asset like this. Like trying to figure out the value of a house by looking at the rent table and expenses. It isn’t totally irrelevant but comps are much more informative.

These are luxury goods for billionaires.

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DrTonyTiger t1_ixietbn wrote

Ronaldo seems to think that the Glazers have been bleeding equity into their pockets the whole time.

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xelabagus t1_ixj2gh7 wrote

It is not a secret that the Glazers have been taking money out of MU for years, we don't need Ronaldo to do our forensic accounting for us.

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Thetford34 t1_ixlmp9k wrote

Maybe this could be another case for Wagatha Christie.

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saintjimmy43 t1_iximyo3 wrote

"Exceptional Items"

Come on

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Happytallperson t1_ixiy972 wrote

Generally used to show one offs that don't effect the underlying profitability of the company. Often settling legal disputes would fall under that.

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belanaria t1_ixksgfs wrote

I’m pretty sure it the dividends they pay to the shareholders.

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Legal-Software t1_ixif54r wrote

The fact that the amortisation and depreciation are double the operating loss suggests more that this has been engineered in such a way to put a loss on paper and reduce the tax liability. This is why things like EBITDA are important, so you can get a general overall sense of their totals before they've had the opportunity to "optimise" the balance sheet.

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wanted_to_upvote t1_ixitmjv wrote

They are likely cash flow positive and their value is increasing each year.

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burnshimself t1_ixj9zxe wrote

They are not cash flow positive, they’ve needed to take out debt to fund the business nearly every year.

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wanted_to_upvote t1_ixjt4xs wrote

The debt may be to buy capital goods and expand future business which would not make it cash flow negative if they can make the payments on it.

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burnshimself t1_ixjuca5 wrote

It’s not doing that, it’s a football club. They don’t have any capital equipment of note to invest in, they are not a manufacturing business. Their only property is their stadium, which is a fraction of their spending (8m in FY2022) compared to their acquisition of contracts and intangibles spend (115m in FY2022). The amort is real business expense that gets consumed once the player’s contract expires. The team is a money pit.

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33Marthijs46 t1_ixiv009 wrote

This summer Manchester United bought Antony for roughly €100 million. They gave Antony a 5 year contract. So the transfer sum gets depreciated over the duration of the contract. This has nothing to do with dodging taxes this is just the way the finances work for a football club.

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burnshimself t1_ixjacic wrote

You have a very loose understanding of the accounting concepts here. They are cash flow negative, this isn’t just amortization coming off some long held or stepped up intangible. Their amort is the expensing of acquired player contracts, which they have to pay actual cash for, so it isn’t just a tax shield they’ve fabricated. If you look on a cash basis (eg swap out D&A for Capex and acquisition of intangibles) the business is still CF negative.

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belanaria t1_ixksoed wrote

So the amortisation is players and their contracts

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International-Gap778 t1_ixhtfwp wrote

Maybe elon can buy manu and make them play only on 20% of players

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R3lay0 t1_ixi6l8h wrote

Most players just stand around on the field anyway

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comatoseduck t1_ixjf94z wrote

This is a dumb way to visualize a P&L

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hbentley1998 t1_ixj463a wrote

This is useless - show me EBITDA metrics

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rawfood789 t1_ixjx8jn wrote

EBITDA is probably not a great proxy either since player acquisitions won’t show up there. Probably want to look at FCFF.

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X0AN t1_ixjqqot wrote

Don't think 118m marked as 'other' should be a thing it's not 1-2k. 118m 🤣🤷🏽‍♂️

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avengerintraining t1_ixkwslx wrote

It’s probably a thousand various things that don’t fit in any of the other categories.

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HucHuc t1_ixjvr31 wrote

Many people in here treat football clubs as corporations that need to earn money. Most, if not all, privately owned football clubs are just advertisement/whitewashing platforms for their owners. They were never meant to earn them money, in fact it's kind of expected to loose money on those in return of good publicity. And that's not even limited to English clubs only. The most recent examples of those are PSG, City and Chelsea, but you can go as far back as Berlusconi's Milan in the 90s or Umberto Agnelli's Juventus in the 50s and 60s, all of the state-founded clubs in the late 40s and 50s by the respective communist parties (any variation of CSKA or Red Star/Steaua in the eastern block - army clubs).

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marfaxa t1_ixkyvyh wrote

Lose. For the last time, it's lose.

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if1gure t1_ixj5pig wrote

But it’s an EBITDA gain, so there is value

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VSParagon t1_ixjp7gd wrote

It's been a while since I took an accounting class but doesn't "spend" imply cash flows while stuff like depreciation is strictly income statement stuff that doesn't really reflect whether a company is "making money"?

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MarcusP2 t1_ixjzpbp wrote

Depreciation is the loss of value of assets that will eventually need to be replaced. So it might not affect immediate cash flow but if you don't manage it you will have potential large expenditure later, so it is a loss.

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TooRedditFamous t1_ixra2i0 wrote

By spend they just mean expenses. So this is a very basic P+L of sorts, spitting out the operating loss at the bottom

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jinjuitoRandom t1_ixhyj36 wrote

The title sounded in my head ‘Yo Reddit, should I buy ManU?’

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DrTonyTiger t1_ixieei3 wrote

If it were priced at a P:E of 20, they'll give you four million quid to take it off their hands. You should go for it.

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carlitospig t1_ixihtsg wrote

God I’m such a sucker for a sankey. 😍

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edawg2469 t1_ixizjnj wrote

Other expenses are going to be cut soon. What are they in detail?

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PointandStare t1_ixjikix wrote

That's the kind of figure you present when you want to buy something cheaply.

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rajatsingh24k t1_ixjjcqg wrote

As someone who doesn’t give a shit about ManU, I’m hoping Elon gets them.

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dadsmayor t1_ixjn5j9 wrote

Depreciation and amortization are non cash charges so if you are looking at this on an EBITDA basis they are indeed profitable.

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LordTC t1_ixjoyge wrote

Depends a lot how much of amortization and appreciation is based on reality and how much of it based on GAAP. Some things depreciate to basically worthless in two years according to GAAP but often still sell for half their value later. So it’s quite possible some of these losses are paper losses rather than actual losses.

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froggyjm9 t1_ixjvn1j wrote

You don’t buy teams to make an operating profit.

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TemoSahn t1_ixk4mqe wrote

Somewhere Ryan Reynolds is tapping his fingers

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ron_spanky t1_ixk4q87 wrote

Back out the non cash amortization and depreciation and they made $80 million.

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jorsiem t1_ixk8r9m wrote

They have overpaid on nearly every transfer they've done in the past 10 years and nothing to show for it other than an Europa league.

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GE-DE t1_ixkafv9 wrote

What is this sort of chart called?

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pinkfootthegoose t1_ixkbojo wrote

You can pay yourself a huge salary and make your company not profitable.

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raven4747 t1_ixkf8li wrote

this is a shit way to compare income and expenses lol might as well have just posted a text table

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scandalous01 t1_ixkkg16 wrote

Another Sheik takeover in the works.

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PuddleMyFud t1_ixko4j5 wrote

Still cash flow positive, net loss ain’t mean shit

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Fluffy_Ad_2277 t1_ixkpka7 wrote

D&A is an add back to cash flows. So they are cash flow positive. :)

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moto_gp_fan t1_ixkuibn wrote

Comparing the different values and this visual is not very well scaled

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Sonofpan t1_ixl1obp wrote

I feel like this chart should be flipped around. Could be wrong though.

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Omnisegaming t1_ixl6j8n wrote

I'ma be real by looking at the graph idk. Maybe I can't read this graph right

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Heerrnn t1_ixlfrw0 wrote

Football teams are extremely profitable for anyone looking to launder large amounts of dirty money. That's the plain truth.

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SoloWingPixy88 t1_ixlfxqg wrote

Depreciation reasons? Like I get there's a stadium etc but that's a big write off year. Also is depreciation real money?

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Sonova_Vondruke t1_ixlktzo wrote

This is a feature, not a bug.

Operating at a "loss" means a write off for the owners.

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rowejl222 t1_ixlotkf wrote

That doesn’t look profitable

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Juuna t1_ixlqpsn wrote

Pay football players less. Problem solved. Do this for the entire industry, problem solved for pretty much every club.

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Arbitrage_1 t1_ixml3d0 wrote

It still could be cash flow positive once you take out the amortization and depreciation, and who knows what those other expenses are.

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starry4471 t1_ixlbvcx wrote

Same shit happened to Barca and they had to let go of Messi because of it, kinda weird how history is repeating itself with the whole Ronaldo situation.

0

pirateofmemes t1_ixik6eq wrote

read this as

​

"Man, Utd spends more than it makes"

​

spent a while trying to figure out who Utd was

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VtechX t1_ixj34ew wrote

Amortization (misspelled in graphic) and Depreciation is not a real outflow of funds. It's a book keeping number only, representing the gradual loss of value of assets. For example, a $20,000 car bought 5 years ago will result in a -$4,000 entry every year over 5 years, which stands for the value of the car tending towards 0 as it ages and is used up. It does not mean you are actually paying those $4,000 every year. So, with the above 'operating loss' being -90m, and A&D being -165m, the reality appears to be that they still had roughly 70m more at the end of June 2022 then they had 12 months earlier.

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