Originally posted by malvolio
Personally I feel it's a bit silly, as assuming the company is profitable, it's fairly easily manipulated by timing of dividends.
Eg company A and company B both have £100k retained profits in run up to end of March (and let's assume that's their year end).
Company A declares an £80k dividend 31 March, year end accounts show net assets £20k.
Company B delays a day, declaring an £80k dividend 1 April, year end accounts show net assets £100k.
Is company B any healthier than company A?
The real "asset" of an accounting firm is the recurring client income. When a firm is bought/sold, that's what the money is predominantly for...but when it's been generated internally it's not something that shows on the balance sheet with any value.
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