Profit & Loss Statement
The key portion of accounting a station's financial status revolves around its profit and loss statement, which can be demanded by owners or banks on a daily basis. The profit and loss statement provides a regular status check on a station's performance and can often be the barometer by which a financial institution considers whether to lend a broadcasting company money for future station or equipment purchases.
The P&L, as the statement is sometimes referred, provides a juxtaposition between collections, or revenues gained through sales, production, or station compensation---all referred to in the industry as revenue streams, and disbursements, or payments to vendors, financial institutions, and federal and state governments for taxes. The object of any profit-and-loss statement is to show a station does not spend more than it collects.
Balance Sheet
A station's balance sheet provides an ongoing comparison of its assets and liabilities. The overall figure after assets and liabilities are totaled constitutes a station's net worth, a combination of the initial investment in the station when it was purchased and its annual net income over a three-year period.
Assets
Assets include the station property, equipment, and any specific items which the station could sell, use, or convert to cash within a one-year period. These include both fixed, or long-term, assets; prepaid or deferred charges, or short-term assets; and intangibles, or specific station properties which cannot be bought or sold from a vendor, but increase the station's net value.
Fixed assets include the station building, equipment, furnishings, and transmitter. All of these properties are tangible items which are bought and sold from suppliers or real-estate companies. These properties are considered to be those which the station is likely to hold onto (allowing for technological upgrades) for the life of its ownership.
Prepaid or deferred charges include insurance on the property, which could provide replacement of items in the event of fire, flood, or other natural disaster; the tax value of the property, which is considered short- term, because it fluctuates with subsequent appraisals of the property; rentals, such as charging for space on the station's transmitter, or equipment which is obtained through short-term rentals; and depreciation value of equipment, which allows for tax writeoffs.
Intangibles are those assets for which a specific dollar value cannot be placed, but are considered enhancing to the value of the station at the time of a potential sale. These can include the station's FCC license, which is the ultimate premium for an ownership, in that it gives the owning company permission to broadcast; channel position, in which a VHF (2-13) position is more valuable than a UHF (14-69), because of stronger signal strength; network affiliation, the value of which can fluctuate, depending on the immediate success or misfortune of the affiliated network; the station's ratings performance, of which a long-term success provides a major enhancement if the station is offered for sale; and the quality of station personnel, particularly if managers and on-air talent are considered to be the most valuable in the market.
Liabilities
Liabilities are items which ultimately decline the value of the assets and lessen the potential sales price of a station. The primary liabilities are current, or items for which immediate payments are made; and long-term, items for which the station makes extended payments over a period of more than one year.
Current liabilities include the single year's payments for a station's property and equipment; the annual state, local, and federal taxes paid by a station; annual licensing fees paid for programming, particularly programs purchased from syndicators on a one-year basis (for most first-run programming, other than the premium shows offered in syndication---or the cost of local production on an annual basis; salaries, the one-year payments to employees and managers; and sales commissions, the percentage of sales dollars paid as bonuses to account executives and managers.
Long-term liabilities include multiyear program costs, including those paid for most off-network sitcoms and dramas, which are sold for longer than a one-year license fee (stations set up a payment period to amortize, or absorb the costs of these shows); bank debt, the interest payments stations make on a multiyear basis to purchase equipment or finance other station acquisitions; and mortgages, the long-term interest paid on the station's real estate property.
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