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Guest chopey

A very well written and comprehensive article, however nothing in there convinces me that we are going to employ a good manager and spend on players, in fact I can see plenty of reasons in that article for us not to spend this summer.

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Excellent article.

 

http://1.bp.blogspot.com/-d57yeOXl9Kw/VTOr3RZmv2I/AAAAAAAAIcc/1Dqk6tauqMI/s1600/4%2BNewcastle%2BProfit%2BLast%2B4%2BSeasons%2B2014.jpg

 

Says it all.

 

This, too:

 

http://3.bp.blogspot.com/-VIN5lynWwHE/VTOsvpSr3HI/AAAAAAAAIdU/JlW1bJgh2ok/s1600/11%2BNewcastle%2BRevenue%2BGrowth%2B2014.jpg

 

Shows that the club isn't well stewarded at all, they are just milking the TV revenues, while there's no growth on other fronts. Hell, commercial and match day revenue where higher before he took over!

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Guest chopey

Eh that chart makes no sense shouldn't Man City, Liverpool, Aston Villa and Chelsea have been relegated by now

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Eh that chart makes no sense shouldn't Man City, Liverpool, Aston Villa and Chelsea have been relegated by now

Yeah they'll go the way of Portsmouth and Leeds soon enough, they can't have long left.

 

And Blackpool. Don't forget Blackpool.

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Guest chopey

Just a quick question to the resident accountants, If someone buys a company that has large cash reserves does that money stay with the company or does the previous owner take it ?

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I'm not an accountant and not any good at maths whatsoever but surely in that situation the selling company would just get rid of its cash reserves somehow before selling up?

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Just a quick question to the resident accountants, If someone buys a company that has large cash reserves does that money stay with the company or does the previous owner take it ?

 

Cash reserves are factored into the valuation of the company, so whatever cash is removed by the existing owner prior to sale reduces the price the company is sold by under normal circumstances.

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Guest chopey

Just a quick question to the resident accountants, If someone buys a company that has large cash reserves does that money stay with the company or does the previous owner take it ?

 

Cash reserves are factored into the valuation of the company, so whatever cash is removed by the existing owner prior to sale reduces the price the company is sold by under normal circumstances.

 

So if you are planning to sell your company is it prudent to get rid of your cash reserves before a company has a chance to do due diligence and then increase your valuation to suit ?

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Just a quick question to the resident accountants, If someone buys a company that has large cash reserves does that money stay with the company or does the previous owner take it ?

 

Cash reserves are factored into the valuation of the company, so whatever cash is removed by the existing owner prior to sale reduces the price the company is sold by under normal circumstances.

 

So if you are planning to sell your company is it prudent to get rid of your cash reserves before a company has a chance to do due diligence and then increase your valuation to suit ?

No. The value of the cash will be wiped off the companies valuation.

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Couldn't he just buy more assets with it elsewhere?

 

Well the company could, but then the assets would belong to the company in the same way as the cash does. As much as it doesn't seem like it, Mike Ashley and the company are different entities.

 

Anyway, the cash makes the company more attractive to buyers and more valuable, so I doubt he would bother to dispose of it.

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He could take some as dividends.

 

I'm no expert but I don't think lots of cash in the bank makes the club more attractive. Being profitable does. I'm not certain but if the club is worth 100m  (sans cash reserves) and has 50m in the bank, the buyer has to come up with 150m which obviously makes it harder to purchase. You would also purchase our debts.

 

IMO Mike being unwilling to pay himself back is an indication he's not looking to sell. If he was looking to sell he would begin paying back his loan, investing in infrastructure and maximising profits to attract buyers.

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Any chance he could be keeping the cash in the bank to increase the value of the club to sell in 2016, which was the date he said he wouldn't consider selling until? Would the club be more valuable with a big squad of players, or £50m in the bank?

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Companies can be bought by different means - eg through shares. When it's not a cash purchase then cash in the bank can be attractive (in some cases share based acquisitions are made to get your hands on free cash), if it's a cash purchase then it's more attractive to hold less cash for a buyer - typically assets are bought at a premium so in effect you would be buying each pound for pound + premium. Makes no sense from a buyers PoV

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typically assets are bought at a premium so in effect you would be buying each pound for pound + premium. Makes no sense from a buyers PoV

 

Any premium would be applied to an enterprise value, which deducts cash. You wouldn't pay a premium to book value of net assets.

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