Everlasting Seconds
Well-Known Member
- Jan 9, 2014
- 14,914
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There are several entangled reasons.
One of the main reasons for initiating FFP was, among other things, rooted in and motivated by a wish for debt control, and for avoiding large future increase in debt. FFP is correct enough not about whether/how much debt a club has, but how likely the club is to manage the debt (stay solvent).
Operating profit/loss is a FFP key. Operating a club (or any business) by yearly operating losses is simply just another way of saying that one is taking on/increasing (short term) debt.
Negative equity (NE) is a FFP key. NE simply means that the amount of debt is higher than the value of the possessions. NE means you are insolvent, and that the total amount of debt can't be paid off even if every single possession was sold off. It's a very, very basic requirement, but it still is (indirectly) debt related.
No payables overdue is a FFP key. Overdue payables is simply a short term debt related to operating costs, and hugely undesirable under FFP.
As much as one could argue that debt should be more eagerly stressed and regulated under FFP, it is a huge oversimplification to state that debt has nothing to do with FFP. It is such a big oversimplification that it is largely inaccurate. Hence why I disagree.
