Nice.
Thank you, David.
That was awesome.  Concise and informative.



May 15, 2009 03:30:11 PM, [log in to unmask] wrote:

It is with shame for my profession that I must tell you that there is no answer to that question.  Let me be clear:  there is no answer because making or losing money is defined in so poorly a way as to render any attempt at an answer confusing at best, and meaningless at worst.

Consider two companies, operating ski areas:

Company A bought its operation ages ago.  It has no debt, has fully depreciated its fixed assets, and has fully amortized its goodwill.  Company B buys the mountain from company A, using part equity and part debt.  It’s the same mountain, with the same employees and the same snow.  But, company A will show plenty of income, since it has no interest, depreciation or amortization expense.  After the acquisition, Company B will have a loss, after these expenses. 

One option is to look at what is called EBITDA (earnings before interest, depreciation and amortization).  That would make A and B comparable.  But, it is only part of the equation.  What if EBITDA is less than the opportunity cost of the value tied up in the investment.  That, I suspect, is what AIG has concluded.  In other words, even if the mountain makes money, the sale price for the property could be invested somewhere else, and make even more.

But, my profession has done little to make this information available or meaningful to investors or lenders.

Of course, you probably just wanted an answer, not a long-winded non-answer.

Sorry.

~~~~~~~~~~~~~~~~~~

David Merfeld CPA

--Telenaut enquired--


From: Vermont Skiing Discussion and Snow Reports [mailto:[log in to unmask]] On Behalf Of telenaut
Sent: Friday, May 15, 2009 9:28 AM
To: [log in to unmask]
Subject: Re: [SKIVT-L] RE Stowe up for sale

Pardon me if this has all been hashed out in depth, but does Stowe presently make or lose money?
I assume AIG is selling mainly because they need to raise cash, which doesn’t answer my question.
Thanks,
--tn

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