Did everyone catch the below? It means that you DO NOT need to retain ANY profits in a business for it to continue to operate effectively and profitably.
The purpose of a business (usually) is to make money for the owners, and that money comes from distributing the profits or by selling the ownership to someone else at a profit. In the the case of all these LUFC subsids, all profits can be distributed to the owner (I have no idea whether it is LUFC or Ken Bates Inc). Don't get sucked into the conventional wisdom that a business has to retain profits to survive. Simply not true. So KB does have a legitimate argument for doing what he is doing. He is making money to re-invest in the club. [blue touch paper lit, stand back] On 20 January 2012 23:39, Paul Cundell <[email protected]> wrote: > 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 > > _______________________________________________ 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
