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South Bank Hank
⭐⭐🦐
Interesting question - but moved to the Finances part of the board.
Davros
The Whippet
theres a long answer and a short answer, but the short version is based on the way the debt is structured, and the differing assets of the clubs.
Im sure someone with a bit more time will go in to depth
Debt is not necessarily a bad thing as long as it is coverable and manageable.
Actually i am going to try and explain it in a simple way...
A very rich family, the Cunninghams own a very expensive house. There mortgage (debt) on the property is £3m with monthly payments of around £8000. They can afford this because Mr Cunningham brings home a whopping salary of £20,000 a month, which means they can easily pay the mortgage, and afford the finer things in life too, and the bank were willing to give them this mortgage on this basis, plus the fact that the property is worth a good deal.
Secondly, you have a poor family, the Wastages, they have no mortgage or property of there own, they rent a council flat for £500 a month. They do however have a small loan of £1000 out which they used to buy there washing machine and fridge freezer with, but they struggle to make there payments as Mr Wastage is quite unskilled, and only earns £800 a month, and barley has enough money left over for any luxuries once he has paid all his bills each month.
And there-in lies the problem!
Im sure someone with a bit more time will go in to depth
Debt is not necessarily a bad thing as long as it is coverable and manageable.
Actually i am going to try and explain it in a simple way...
A very rich family, the Cunninghams own a very expensive house. There mortgage (debt) on the property is £3m with monthly payments of around £8000. They can afford this because Mr Cunningham brings home a whopping salary of £20,000 a month, which means they can easily pay the mortgage, and afford the finer things in life too, and the bank were willing to give them this mortgage on this basis, plus the fact that the property is worth a good deal.
Secondly, you have a poor family, the Wastages, they have no mortgage or property of there own, they rent a council flat for £500 a month. They do however have a small loan of £1000 out which they used to buy there washing machine and fridge freezer with, but they struggle to make there payments as Mr Wastage is quite unskilled, and only earns £800 a month, and barley has enough money left over for any luxuries once he has paid all his bills each month.
And there-in lies the problem!
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Fish
Manager
In short, it depends on who you're in debt to and how easy it is to manage the debt.
As explained above, if you can afford to service debt without getting in financial trouble, you can have as much debt as you like. Man U are in a lot of debt, but to people who are willing to lend them that money.
Our debt is not that stable. We have little money coming in, which means those we're in debt to are more wary of our ability to pay that back than Man U, so consequently they are stricter with us and give us less lea-way. Added to that, the tax man is not a loan service but a collection service. Taxman is the least sympathetic collector around - they've not lent you any money with a view to making profit from lending, you simply owe him money because you exist.
So it's a double whammy. We're in less of a position to pay for our debt because our cashflow is considerably smaller than Man U, which makes us a target for quick recovery of debt. We're also indebted to the least sympathetic debt collector, which also puts us more under the cosh.
As explained above, if you can afford to service debt without getting in financial trouble, you can have as much debt as you like. Man U are in a lot of debt, but to people who are willing to lend them that money.
Our debt is not that stable. We have little money coming in, which means those we're in debt to are more wary of our ability to pay that back than Man U, so consequently they are stricter with us and give us less lea-way. Added to that, the tax man is not a loan service but a collection service. Taxman is the least sympathetic collector around - they've not lent you any money with a view to making profit from lending, you simply owe him money because you exist.
So it's a double whammy. We're in less of a position to pay for our debt because our cashflow is considerably smaller than Man U, which makes us a target for quick recovery of debt. We're also indebted to the least sympathetic debt collector, which also puts us more under the cosh.
Strykr
Manager
well explained! this came up on talksport today as well, fact that burnley are debt free an will probably go down but man u are 640 mil in debt and will probably win, servicable debt or not, thats still collosally unbalanced, damn u sky sports.. this issue should be married with the whole 3-4 foreign players per club, the quality may decline in the prem, but i would prefer it to be more of an english league, anyway i'll stop waffling now lol!
Shrimpador
First XI
The very short answer is cash is king!
You need cash to pay your interest and pay down your debts.
The Glazers have pumped Man Utd full of debt. The club will generate stacks of cash from TV, tickets and commercial sales which will pay the interest. The Glazers will either pay down the debt over time with the excess cash &/or grow the value of the club faster than the debt grows and sell it for a profit in the future. In the meantime, the huge amount of interest means they'll pay very little tax while they own the club, an added bonus. It's risky if it goes wrong as they could lose the lot if they can't service the debt, but if successful, which it currently is, they will make a fortune.
You need cash to pay your interest and pay down your debts.
The Glazers have pumped Man Utd full of debt. The club will generate stacks of cash from TV, tickets and commercial sales which will pay the interest. The Glazers will either pay down the debt over time with the excess cash &/or grow the value of the club faster than the debt grows and sell it for a profit in the future. In the meantime, the huge amount of interest means they'll pay very little tax while they own the club, an added bonus. It's risky if it goes wrong as they could lose the lot if they can't service the debt, but if successful, which it currently is, they will make a fortune.
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