I was stretching the pure economic definition of supernormal profit, but I think you well know what I am getting at.
A subsidiary should expect to manage its own affairs and have first call on its normal operating profits. Especially when that business is still being developed, as it would be with the conference centre for example. If it didnt then its managers have no power or incentive to grow that business. I guess in effect you are privatising that business. Anything over and above that profit should go back to the parent in this case. If you have a business then the analogy would be, after you have calculated what your profit is, how much is retained in the business (for development etc) and how much do you pay yourself as a dividend or bonus. I am saying that in my opinion it is not unreasonable for the club to take out that proportion of profit which is deemed to be in excess of what the business needs. Billys bar etc doesnt fall into this scenario because I dont think it is a subsidiary, it will just be a different cost centre of the football club. -----Original Message----- From: [email protected] [mailto:[email protected]] On Behalf Of Paul Cundell Sent: 20 January 2012 12:39 To: Leeds List Subject: Re: [LU] Leedslist Digest, Vol 19, Issue 50 Nope, sorry - Super-normal Profits are profits made under 'not normal' circumstances, they are profits that one can't imagine being sustained for a long period hence they are super-normal. Super-normal does not fit with the profits of the business models we are discussing. In businesses, like subsidiaries, repairs and renewals would be accrued for at the same time as the asset was depreciated thereby keeping the balance sheet balanced. "We made a loss this year because we bought a load of chairs" or "We made a loss this year because our chairs are worth 75% of what they were last year" is nonsensical in a business that needs chairs- like a conference centre does. The only loss that would be incurred in this scenario would be if the cost of replacement chairs was more than the business had accrued, even then the tangible assets value would increase at purchase. However don't confuse asset value with cash flow, the bank balance will still be depleted at repurchase time. The profit and loss just won't yo-yo irrationally. All surplus from the subsidiary would be absorbed into the parent just as all losses would be covered by the parent. If the subsidiary needs further investment at a later date it would then come from the parent. The assets and liabilities of the subsidiary are by default the assets and liabilities of the parent. Cheers Paul > -----Original Message----- > From: Mark Humphries [mailto:[email protected]] > Sent: 20 January 2012 12:08 > To: 'Ian Murray'; 'Paul Cundell' > Cc: 'list leedslist' > Subject: RE: [LU] Leedslist Digest, Vol 19, Issue 50 > > You guys need to understand what supernormal profits mean; > > http://economicsonline.co.uk/Business_economics/Profits.html > > I would expect that with football club subsidiaries they would expect > to be > making supernormal profits in order to feed back to the club. > > Let me be clear - if you take all profit, aka "normal" profit, then > there is > no incentive for the subsidiary businesses to continue to operate, or > for them to have the resources available for continual development. > Taking the > conference centre as an example, if the club stripped all the profits, > the carpets/tables/décor would get increasingly shabby and the > business would collapse. > > -----Original Message----- > From: [email protected] > [mailto:[email protected]] > On > Behalf Of Ian Murray > Sent: 19 January 2012 21:23 > To: Paul Cundell > Cc: list leedslist > Subject: Re: [LU] Leedslist Digest, Vol 19, Issue 50 > > Wow. I agree. > > Sent from my iPhone > > On 19 Jan 2012, at 20:48, "Paul Cundell" <[email protected]> wrote: > > > Mark H wrote: > > > >> Dave, there is a distinction between primarily match day activities > >> (like the bars etc), and the conference centre for example. The > >> former need to make a profit but would, I expect, go into the > >> "match day > takings" pot. > > The > >> conference centre is non-match day and should remain separate and > > distinct. > >> Same for any hotel. > >> > >> And I would also want their profits go towards improving their > >> product and generating more revenue - not to open up > >> franchises/branches elsewhere. I believe the business model is > >> simply to ensure the club has revenue > > streams > >> throughout the year, not just on match days during the season. The > > business > >> model is not to expand beyond Elland Rd I don't think? > > > > If non-match day businesses are self-sufficient how do they ensure > > the club has revenue streams throughout the year? > > If all their 'profits' go towards improving their own product what > > was the point in the parent entity investing in them at all? > > If the ROI for the parent isn't as good as can be got from the > > Liquid Gold account at the Leeds Perm then the investment is misplaced, surely? > > If the aim is to give the club 365 days a year income then the > > profits must come back to the club on a regular basis otherwise the > > club only has the same 22 pay days as it gets without them but > > without the initial > lump sum. > > > > Cheers > > Paul > > > > _______________________________________________ > > Leedslist mailing list > > Info and options: > > http://mailman.greennet.org.uk/mailman/listinfo/leedslist > > To unsubscribe, email [email protected] > > > > PETE CASS (1962 - 2011) Rest In Peace Mate > > > _______________________________________________ > Leedslist mailing list > Info and options: http://mailman.greennet.org.uk/mailman/listinfo/leedslist > To unsubscribe, email [email protected] > > PETE CASS (1962 - 2011) Rest In Peace Mate _______________________________________________ Leedslist mailing list Info and options: http://mailman.greennet.org.uk/mailman/listinfo/leedslist To unsubscribe, email [email protected] PETE CASS (1962 - 2011) Rest In Peace Mate _______________________________________________ Leedslist mailing list Info and options: http://mailman.greennet.org.uk/mailman/listinfo/leedslist To unsubscribe, email [email protected] PETE CASS (1962 - 2011) Rest In Peace Mate
