Bring Back Kerrea Gilbert wrote:
Tambourine Man wrote:
https://shewore.com/2018/05/19/arsenals-50m-budget-explained/
Had a friend send me this about the budget. Personally think it's wishful thinking. The person in the article is talking about the impact of the transfers from an accounting perspective and how the expense would hit the P&L. It doesn't change the fact that money must be available up-front as the bulk value of the transfer needs to be paid for in the current fiscal year. This would have a balance sheet impact (lowering cash and increasing assets) with the total value of that then being amortised over the value of the contract. It would hit the P&L impacting our bottom line over four or five years but does nothing for cash flow in the current period. And cash flow is king. Anyway not an accountant so thought I'd see if any actual accountants have a say on this and if the article makes sense.
In normal humans' English, please.
If you sign a player for £50m on a 5 year contract, you've effectively only spent £10m of your budget for that year because the cost is spread over the length of the contract.
Likewise with wages. You give Aaron Ramsey a new 5 year contract at 100k a week more than he is currently earning and you've committed to spending an extra £25m, but that is spread over the course of the contract. So you've just spent another £5m of your £50m annual budget.
This year we can increase our annual spend by about £50m (Swiss Ramble says it's £70m but that doesn't matter here) because our turnover has increased in the last 12 months and that's the money we have left over after all costs are accounted for.
If players are sold then their annual cost--wages and the spread out cost of their their transfer fee-- is deducted from your annual costs and is then added to the £50m budget. So, sell Mustafi and his £5m/year wages and £6m/year transfer fee (£30m spread over his 5 year contract) is added to your available spend. The £50m budget for this year becomes £61m.
