- Jul 28, 2004
- 27,719
- 54,929
But that money was not available to buy players other than Defoe and Keane.
I'm sure Levy would explain it all infinitely better than I can if he could be bothered.
I'll have a stab at it:
One asset in a business is Cash. This can be used to buy another asset, which in our case is players.
Another kind of asset is Debt from Debtor's, i.e the money owed to us by others, in this case Liverpool and Portsmouth.
On a Balance sheet, both are positive and increase the final total.
In this case, because a lot of Cash has been directed at bringing in players already, there might not have been much of that Asset remaining, even though we are in a strong financial position. However, the Debt owed has been used to bring in players instead, because by writing it off, we decrease this asset in the cash and in return receive two new assets, Jermain Defoe and Robbie Keane.
This is a shrewd way to do things, because the two clubs we were dealing with, especially Portmouth, may not have been able to meet the payment of their debt because of their well publicised financial difficulties. As a result, if the worst happened and it all went tits up at those clubs, we'd have to write off the money they owed as Bad Debt, which means we would never get it and our Profit and Loss account would have a hefty negative on it. This way, receiving Player's, a more stable asset than Debt, instead of Cash, means that even if we have not received Cash from them, our Balance sheet will show that our Asset's have not gone down at all, because the Asset of Debtor's Debts has been replaced with the Asset of Player's, which I think would count plant and machinery for these purposes.