A bit of background, I am obviously an avid Barca supporter and I work at a financial institution so understanding finance and how corporations and entities function is second nature to me.
Let me first regurgitate (copy&paste) what I wrote in another thread to share my views:
Please bear with me, all I want is the best for our club and to look at everything with objectivity and not be a sheep to the masses’ opinions.
Having looked at and analyzed the cash flow and balance sheets of Barca vs Madrid, it's clear that money and debt is very poorly managed and we have no clear way to structure our debts. Whereas Madrid’s focus on smart investments in players and branding has allowed them to re-balance their cash flow and drastically decrease their debt and debt to revenue ratio. This in turn provided growth in revenue and becomes a cycle. Early 2000's Madrid was crippled with debt (again please refer to their financial statements and not just people's words) but they were successful in their financial management which allowed them to be less leveraged on their debts. It's a credit to Perez's management but his money had nothing to do with it. I work in the financial industry and it's clear to me just by looking at the financial statements that our management is a mess.
The key point is that it's not about how rich Perez is. Madrid is now basically self sustaining meaning revenue>losses and growth while Barca is still dealing with ways to restructure leverages and debts. Finance/Money is important to every organization because it is the means of running all the operations. If we had proper financial structure or even better a proper management team, not only would we be more free financially and be able to pursue players like Verratti with ease without compensating wage structures and worry about overflowing debt owed but we would most likely never be in this mess of trying to fix problems after they occur and not having any foresight. More importantly, we are losing focus of the core philosophies and identities of our Club. It's such a pity that our golden years in our club history which should propel us to new heights for decades are thwarted by poor management.
In the following reply, someone had asked me "How come Barca are the second most valuable club in the world if their financial structure is a mess?".
So this can be very complicated but let me try to simplify the best I can. Recently articles came out with valuations of Barca being the second most valuable football club in the world and man u and madrid being 1st and 3rd respectively. However, how valuable a club is has nothing to do with their cash flow and matters like how much money they can spend on players.
The amount of money we can spend on players is (again a eli5 analysis) generally how much money we make (from selling players, shirts, sponsors, tournament&league payouts, etc) and then subtract how much money we spend (transfers, wages, rents, equipment). After that you also have to subtract debt and various leverages (this can be complicated because of different duration and types of debts ranging from 1year to 10years+ and debts in the forms of loans, corporate debt, etc). The rest of the money remaining would be barcelona's budget. Of course for huge clubs even if the budget at the end is small we can take out loans from banks and our club acts as a lien (think mortgage). This whole process of how money is "flowing" (from revenue to expenditures, spending, debt) is cash flow. The problems with loans is that we have to pay them back and with interest which makes the amount of loans we have larger so it can become a negative cycle if cash flow is not managed properly.
So an eli5 equation would be something like this for Barca: Revenue-Expenses-Debt= Budget
If our budget is small we can take loans out which "should" increase our revenue since having higher budget=better team and more marketability. Problem is we aren't necessarily having better teams so now our budget increased but that has only increased our debt and while revenue has grown in the past decade, so has debt. Again if you look at Madrid's cash flow statement, you can see they were much better at managing cash flow and getting rid of debt as opposed to us. And how? the short answer is that they were smarter with the way they were investing and spending their money. They were able to refinance their loans with better cash flow management and that is why as of the 15/16 season they were sitting on -$13Million net debt (which means they could pay back all of their debts and still have $13million in cash) and Barca was sitting on a net debt of $287million meaning if we had spent all of our cash and equivalents to pay back our debts, we would still be $287million short. (see sources below)
So back to your actual question of why is the second most valuable club a financial mess? Because value as it was defined in the ranking is EV, which is enterprise value, has nothing to do with how well we manage our finances. Valuation of a club or corporation is basically how much someone else would have to pay in order to buy Barcelona FC. So our EV would be things like the value of Messi, Neymar, Suarez, etc as players, the value of our stadium, the value of our fan base and media and social network, etc. However EV does not include cash or investments (hence why even if Madrid or other clubs have more cash than us, we are still more valuable). Think of it this way. If you have a house worth $1mil and there is also $500k of cash in the house, and I were to buy the house. I am essentially paying only $1mil because if I pay $1.5mil for the house and cash I would get the $1mil value of house and get BACK the $500k. So while Barcelona is the second most VALUABLE club in the world, it has absolutely NOTHING to do with how well we invest and manage our finances. We could be billions of dollars in debt but have the best players in the world so anyone who would want to buy Barcelona as a club has to pay the most to buy Barca compared to all the other clubs (this is not very realistic because in reality whoever buys Barcelona also has to buy and pay back all of our debt). So in a scenario where we have no cash at all but the best players ever, we could still be the most "valuable" club because it is the most expensive club to buy. In essence, EV has more to do with the fact that we have extremely valuable players, club culture and social media presence and if someone were to buy all the clubs in the world, FCB would be the second most expensive club to buy.
I apologize if this is too long but I think it is important to be more informative than to be over simplistic. Please let me know if this was at all helpful and informative.
Thank you! Mes Que Un Club
P.S. What alarms me the most is that our club seems to be the least transparent in their financial statements. There are multiple years where the statements are not accessible to the public (which by the way they HAVE to be unless there is some laws/loophole I'm not aware of) and then there are annual reports where they only give graphs with numbers but no actual balance sheet and cash flow statement.
Edit: Clarifications and added source.
Source:
https://www.fcbarcelona.com/club/press/card/memoria-anual-del-fc-barcelona
http://www.realmadrid.com/en/members/member-card/annual-reports
If you look, Barca had net debt of $287 million in 15/16 season (page 193) whereas Madrid's net debt is -$13million meaning they actually have POSITIVE cash flow and could in theory have NO debt if they chose to pay everything off at once (page 307).
