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Published online by Cambridge University Press: 20 December 2023
The cash flow statement summarises the cash in and out of a club over a period of time, which matches the period covered in the profit or loss account. It explains how the cash figure has changed from one balance sheet date to the next. Cash flow statements are no different to a bank statement for an individual. They highlight the sources from which the club generates cash, and the choices management made when spending it over the year.
The rules on how to present a cash flow statement vary from country to country. Under the most common rules cash flows are split into three main categories: operating, investing and financing.
Table 4.1 higlights how Borussia Dortmund had €49.3 million at 1 July 2017 and how this increased to €55.9 million in the two years to 30 June 2019. The cash flow statement is a very good “why” document that explains to the reader the reasons behind the overall increase or decrease in cash over the period.
Cash from operations
This represents the cash generated by the club in terms of its day to day activities, which include selling tickets and merchandise, paying wages and suppliers. In a normal business one would expect this to be a positive number, but for football clubs this is not always the case, especially if the club has a big wage bill compared to the income it generates. The cash from operations figure is calculated by adjusting the club's profit for the year for:
• Non-cash expenses such as depreciation, player amortisation and gains on player sales;
• Converting sales and purchases in the profit or loss account to cash received from customers and paid to suppliers.
Table 4.2 provides some extra detail on the operating cash outflow total of £13.8 million for Leicester City in 2019. It starts with the net loss of £17.3 million. Included in that total are some non-cash expenses such as depreciation, gains on player sales and amortisation.
These are accounting adjustments rather than cash amounts and so are adjusted for by reversing their treatment from the profit or loss account.
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