Nine of the 12 Scottish clubs have a negative value for net working capital. Does this mean
Question:
Nine of the 12 Scottish clubs have a negative value for net working capital. Does this mean that these clubs are in danger of insolvency? Can you explain why in football, negative net working capital for most clubs can be explained as normal? Refer to Real World Insight 29.2.
Real World Insight 29.2
In 2012, European football was rocked when Rangers Football Club entered administration. Although the club had the 14th largest match-day revenues in Europe, a lack of commercial and television opportunities led to its demise. What about other Scottish football clubs? Were they living beyond their means as well? In the table below, we present the Z-scores for each club using the most recent set of accounts. Almost all Scottish clubs are private firms and so the modified Zscore model will be used.
Step by Step Answer:
Corporate Finance
ISBN: 9780077173630
3rd Edition
Authors: David Hillier, Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan, Jeffrey F. Jaffe