New Financing Options

[Starfury483]

So I stumbled across this website a week or so ago. I work in for a large Wall Street Firm, and I was curious about it. One thing I noticed that might be nice to add, is an additional way to raise money. Right now you get money a few ways, at the start of the game, by revenue or via a loan. Why not add a stock market feature, where you can take your company public, and sell say 49% of the airline at say $3 dollars a share, a new way to raise capital. It would also allow for futher expansion of larger airlines which can buy the stock of smaller airlines and swallow them up. In additional, direct capital infusion would be nice as well, for example Airline A is a large airline with a pile of cash, it wants to directly infuse capital into Airline B, in return for which Airline A recieves 5% of Airline B's revenue until paid back.

Just some ideas

[Sami]

As you are an expert, all "hands on" info on these is appreciated. I do have couple of airline finance related books but I am not an expert on this sector (..being more an "airplane guy"), so info/detailed proposals/links/etc. are of course welcome.

[Starfury483]

Thanks Sami. But I would not call myself and expert. I just work in the 'biz' as they call it. My suggestion is rather simple, i'm not a computer guy so I dont know how to write code, or how to write it into the game.

So its simple,right now everyones airline in the game is a privately held company, meaning the CEO or backers own the airline. Now think for a second, in the real world none of the large airlines are private companies for the most part, in the United States Delta, American, Southwest, United, JetBlue, Airtran all trade on the New York Stock Exchange or NASDAQ. So here is how it would work, say the game runs a total of 10 years in game time, after year 1 or year 2, you can release shares in your company. Use an easily number first of 100. As the CEO I have to continue to control at a minimum 51 of those shares, so I can continue to own the company and run it. The other 49 shares can be sold to anyone who wants to buy them, within a reasonable price. A feature would have be to be set up to give the airline a stock price, so for example right now my company as negative value of around $500K, but I have had two months of consecutive profit, so my stock price might only be worth $2 dollars a share, as my profit improves so does my stock price, the more money I made the stock price goes up. In this example by issuing stock I only get $98 dollars. Now think of my example on a larger scale, think you have 1 million shares to issue if I issued 499,999 shares then I just generated almost $ 1 million dollars. It would be an new component to getting airlines money.

So of the larger companies in the game would be able to issue stock and generate millions of dollars. To take this one step further, once the shares are issued, which is called and IPO. Then the other airlines can jump in and buy them. So at this point Airline A steps in and says I want to buy Airline B shares. The game is listing Airline B shares @ $2.00 dollars a share, and Airline A is offering to buy them at $1.95 dollars a share, so the game sends a message from Airline A to Airline B and Airline B either excepts or declines.  Once people get use to the feature, then the gap of 5 cents would disappear, and really the offer would have been $1.99 for $2 dollars a share.

The last thing this might allow for is consolidation, larger airlines would be able to buy up shares to combine airlines, or on the same grounds smaller airlines make small investments in larger airlines, then sell the shares for the profit or loss. Simply a new way to make money in the game. Possibly an interesting component.

[swiftus27]

Sami,  I have a master's degree in Business (MBA).   You can always use me as a reference if need be.

Some food for thought:

I do like Starfury's idea to sell up to 49.9% of your company.

However,


If you issue shares, can you buy them back?
How will share prices change or be affected other than just by income?  This is BAD right now because it looks like you are losing money in this game when you are actually simply buying planes.
Who will be buying the shares?  CPU or other players?
Will you have to pay dividends to your shareholders?
Will shares split if their unit price gets too high?
If you buy an airline, are you limited to those in your "economic zone" or all across the world"?
If you buy an airline that has 3 hubs already, will you have to close them?  
Does all of the other airlines obligations (loans, leases, and orders) move to you as the new owner?
Also, how could you buy out another airline if only 49% of it is on the market?


In real life each airline would have to be incorporated (as it is in real life) in order to keep liability off of the sole proprietor or the partners.

Personally, I find that this will be a whole new avenue for this game but will also be an absolute nightmare to program.

[Sami]

Initial step would be (already thought before):

* When you enter a game world you as a person have certain amount of $$$.

* This can be used to start a new airline, and you can invest any amount of $$ from your "own" pocket for the airline. Rest of the startup capital would come from other investors who will also then get a share of the airline accordingly (you can choose this relation between ownership and money at hand). But you should have at least >50% ownership.

* You then start the airline and run it normally ..

* When time comes you can choose to list the airline into stock market (how this is done in practice, you tell me.. :p)

* When the airline is a public stock company other users and AI investors (see item #2) can buy/sell the airline shares, changing the ownership relations accordingly. In the first stage the player is still required to keep a majority share of the stocks.

* If company is not listed into market the stocks could be still sold I believe, but again you'd need to tell me details on how non-public corp's/LLC's work. Haven't read on the literature on these at all yet really.

* In later versions ownership of player can be less than 50% but this would possibly mean takeovers, firing of the CEO if actions are not satisfactory, etc.

* Also planned and related would be the CEO resignation that does not lead to airline closure but instead a placement of temporary (AI) management and possibility for other human players to apply for the CEO position (stock owners could decide this then?).


But before any of these the financial / bookkeeping / etc systems need an update.

[JumboShrimp]

IMO, #1 priority should be improvement of the simulation of airline traffic - regarding connecting traffic, better modeling of demand.

Then, just some accounting fixes, accounting for pre-paid expenses to get the value of asset correctly (balance sheet) would be a pre-requisite of deeper financial simulation.

Then, a better calculation of profitability, distinguishing plain expenses from capital expenses, depreciation of assets etc.

Then, with proper accounting, to determine profits correctly Valuation of the company could be determined, which would be a function of net assets, profits, revenue and growth.

Only when the system has ability to valuate the company, any kind of stock market, share offering etc. could be done.  Otherwise, what would guide the prices of shares on the market?

BTW, valuation of the company would be a good category on the Airline Statistcs page.

[Sigma]

I'd have to agree with JumboShrimp on what should be top Priorities including a proper Demand model and far better financial systems and reporting.

I know stock markets are often requested for some reason, but it's generally done so as a "cool feature" not as something that's actually thought all the way through.

And after all the things that JumboShrimp mentioned are done, what most definitely what needs to be untaken before even touching the idea of buying/selling shares of companies, is getting a control on expenses in this game.  A stock market simply won't work in a game with the absurd 40%+ margins that people are able to generate in this game.  Already people generate more cash than they have a clue what to do with.  You'll further the problem of disparity between players and, even worse, players will be able to buy others clear out of existence.  There's enough issues already trying to create some sort of pseudo-regulation that bears some semblance to reality without throwing financial markets, the most regulated industry in the world, into the mess without the proper systems in place and checks on that system to minimize the massive potential for exploits.

And once that's done, the clamoring for this "stock market" feature will probably die down considerably.  People want it today because they're sitting on so many tens of billions in cash that they literally cannot spend it all.  Get expenses in line and people are only making enough to take care of their own airline, and they'll stop wanting so much to buy everyone else up.  Which is the precise reason why airlines in the real world aren't sitting around spending billions of dollars buying and selling shares in each others companies and why it's a bit of an absurd idea to begin with.  We're supposed to be running airlines not hedge funds.

Some sort of access to capital markets would be a great aspect of the game, don't get me wrong.  And it's the only suitable way that we'll ever conquer the problem of new airlines entering a game later and having even a remote chance (i.e. the massive amounts of capital the likes of JetBlue or RyanAir generated to start with).  But it's an extremely delicate thing to do correctly (or even at all -- the difficultly simply cannot be underestimated) and until we get a much more dynamic world in terms of demand and a much more realistic world in terms of expenses, it simply cannot be done because there are far too many ways for a relative handful of players to currently exploit the system for their own gains and putting in financial markets without the other systems being mature will only create far more means for a relative handful of players to dominate worlds with far more ease than they do today.  There's a good reason why, to the best of my knowledge, no game company has ever tried to create a financial market within their game made up of player-ran organizations.   Even EVE Online, with far and away the most complicated economic modeling ever done in a game by a wide margin, doesn't have open player-controlled stock markets.  It is exceptionally, exceptionally difficult to do at all and even more difficult to do it in a manner that works properly within a given scope in a game without significant detrimental to a majority of the playerbase that makes it simply not worthwhile for a developer to pursue.

[Starfury483]

I actually agree with everything else said. A firm control on the financials needs to be under take, much like what Jumboshrimp said. But to press a point home, I would never suggest giving players control of the stock market (A Disaster would ensue), actually give the AI control. Allow the AI to determine a fair price on the company based on its value, assets and lilabilities and expenditures, and as we all agree this can only be done when the financial models are refined a bit more, which would lower profit margins. Once that is done the AI sets the stock price, on a daily basis for the companies and the players can either buy or sell it at that price. Excess shares can be bought by the AI. But rules get put in place, namely you can only sell 49.5% of the company, never any more. Any attempt to buy more of the company, meaning to take a majority share would need to be agreed by the CEO.  At that point one of two things happens, either the CEO agree's and folds up shop, or the CEO agrees but the airlines remain seperate with the buyer as a parent airline. What would this do, well first simaliar to an alliance it would create a greater feeder system for hubs of some airlines, and some stipulations on the child airline could be put in place. All of these would be pre-fabricated, you as the player could not just make up rules for your child airline, you would be given a list of say 10 choices when you buy the 51% ownership, and both players would have to agree or no deal goes through.

To my first point about Jumboshrimp and Sigma, I agree the valuation needs to be corrected. Once done it is a start point for a Capital Market. My arguement for a Capital Markets is three fold, first allows you to take all that money some of the airlines have, and dump it, or spend it. Second Fuel, it would be nice to add a component to hedge your fuel bets, saw buy a contract for Oil at current price for 1 year, which means you the airline now have a set figure roughly for fuel. Much line Southwest Airlines did in the 1990s, hence it survived the last decade with few problems. Finally I think it would add some interesting components to the game.  But im more then willing to assist with ideas and possible solutions, like Swiftus said I'm more then willing to be a help.

[Riger]

Hello all,

I agree that there should be a priority placed on the "passenger connectivity" area of the game as this goes to the root of most/all of we are doing here.  

However, if the updates and upgrades to the system are only ever done in a linear fashion, and the focus remains on the operational matters, I fear that Sami (due to the human element of his being) will not ever be able get to these other great ideas.  Perhaps Sami would consider using the volunteer services of the "Wall Street Guy" (StarFury483) to write up a white paper on how the financial interactions would be, give sight of the paper to some of the more "senior/experienced" folk here at AWS (working group) and then let them propose a complete solution for this matter for Sami's consideration.

In this way, Sam gets to consider a "workable" proposal and may be able to implement (after consideration) such a change without having to wade through the "specifications" part of the process.

Just my 2¢

Very Best Regards
Richard

[swiftus27]

You dont have to stop being the CEO when you don't own a majority.  In real life the board of directors appoint the CEO.  The CEO does not have to own any shares. 

[bukatino2000]

I fully agree with Sigma and Jumboshrimp. Stock market is a very nice feature. It is realistic and improve interaction. Two things that are at the top of everybody`s wishes as showed also by pools

but:

• some modifications in accounting are a prereq for this. See https://www.airwaysim.com/forum/index.php/topic,7393.0.html
  or https://www.airwaysim.com/forum/index.php/topic,20723.0.html as sample contributes.

• There must be some way to reduce the 40%+ margin generated by some people. My compliment to those players but too large profits seems not realistic. This drives otherwhere a game that has to remain focused on the technical aspects of aviation (airway operations).

Stock market has to be very accured modelled into the game and also risky. That means at least 50% prob. to loose money. Is this with the actual one-direction-growing model compatible? Here more options/variables for companies to decrease their value are to be integrated (air disasters/wars/no fly restrictions etc).

Only after this adjustments the game will ready to accept a stock market module.

Any other comments? 

[swiftus27]

Now incorporate bankruptcies... how will those be modeled/handled?

[JumboShrimp]

A stock market simply won't work in a game with the absurd 40%+ margins that people are able to generate in this game.  Already people generate more cash than they have a clue what to do with.  You'll further the problem of disparity between players and, even worse, players will be able to buy others clear out of existence.  There's enough issues already trying to create some sort of pseudo-regulation that bears some semblance to reality without throwing financial markets, the most regulated industry in the world, into the mess without the proper systems in place and checks on that system to minimize the massive potential for exploits.

I think the improved demand system will make 40% margins a thing of the past, or, very difficult to achieve and maintain:

- the starting demand between any airport pairs will be much lower to begin with.  A player can "earn" extra demand by bringing a lot of connecting traffic.
- but the connecting traffic, say A-C-B will be much harder to monopolize.  Another player may offer A-D-B connection to draw some traffic away
- hopefully, there will be improved demand elasticity, to create real competition, to make it more difficult to sell out the a/c without discounting

I think it is a little too easy to make a profit, flying with LF in 30s.  I think it should be more challenging to make profit flying a/c that is not even half empty.  IMO, it should be more important to have the right a/c for the route.

Another thing with demand (but that may have to wait for the next iteration) to have a concept of pent-up demand.  If the demand is not satisfied today, some of it should carry to the next day, day after etc.  This way, it would be a viable strategy to fly to certain destination 2 or 3 times per week, reflecting real life.

As far as uses of stock market it could initially be there just to keep score - saying that the company is worth XYZ on the market, which would be derived from determining of the value of the company (combination of assets, prifits, revenue and growth).

It might be a tool to raise capital by public offerings of the stock (with some consequences).

Beyond that, (buying out competitors etc), I would have to agree with Sigma that it is a little iffy, open to exploits....  It is not exactly the core of this sim.

[JumboShrimp]

Swiftus,

If there is a stock market at some point in the game, and a player chooses to raise money by selling stock, I think the consequences would be that the CEO would be under pressure of investors to reach some benchmarks - bottom line, the shares, as a function of valuation of the company would have to be generally going up, and not down.  Otherwise, the board of directors would fire the CEO.  So that wuld be a second threat, similar to the bank closing down the airline...  So raising capital could accelerate players growth, but the consequence is that the player would have to maintain growth to avoid being fired.

[swiftus27]

Swiftus,

If there is a stock market at some point in the game, and a player chooses to raise money by selling stock, I think the consequences would be that the CEO would be under pressure of investors to reach some benchmarks - bottom line, the shares, as a function of valuation of the company would have to be generally going up, and not down.  Otherwise, the board of directors would fire the CEO.  So that wuld be a second threat, similar to the bank closing down the airline...  So raising capital could accelerate players growth, but the consequence is that the player would have to maintain growth to avoid being fired.

These ARE other people's credits after all.  If they want to go BK, they will.  There should be NO reason to force any player to remain in a game.  

Also, with the absolute ease of making money in this game, I feel that there is just no reason for this system after, say, the first human week of a game.

New players will be bought up by players already in the game. 

I am not saying this is a bad idea, there are just alot of possible abuses/factors that will make this too difficult to put into the game. 

[Starfury483]

Here is a little more detail of my suggestion. This is only an idea, and I'm more than willing to assist, and take in other ideas.

1) Correct Passenger Demand/ Plane fill models

2) Income Statement is revamped as follows: The top income section is divided into three sections, income from tickets, income from extras (bag fees, food fees, club room fees) and finally planes leased out.

The expenses section is divided into two sections, Capital Expenses and daily expenses. Under Capital Expenses the cost of buying planes or the onetime fee for landing slots, or anything else that is a onetime cost if placed. Under daily expenses we place everything else that it would cost to run the airline each and every day, except for taxes.  Now two new lines are created, one reads available cash , this would be all available money the company has on hand; the second line is profit/loss which would be exactly how it reads. The lines are separate for two reasons, one a company can have cash on hand and still not be making a profit, and two the company could have no cash on hand and still owe the 30% income taxes.  This leads to the final change to the income sheet, taxes. Taxes would be calculated by the profit/loss number, so you could have made a profit, spent it and still owe money on December 31.

3) A change in how loans and credit rating are done.  The credit rating should be on the assets/liabilities of the company and the profit/loss, with equal weighting. So for example your company has assets of $1.5 million, and you have $250K cash you should only be able to borrow a certain percent against the liabilities, and depending on the amount you borrow depends on how much your credit rating suffers. You should only borrow up to 200% of your assets, but in taking on this much debit it would make your rating suffer to C rating.  Those who want and unsecure loan, only can borrow say 50%. As for credit rating, they should reflect only profit/loss, assets/liabilities and available cash. The effects of each are weighted differently. Profit/Loss holds a 50% weight, assets/liabilities holds a 45% weight. Available Cash should hold a low, minimum weight, because reality is you are not going to bank for a loan unless you need money

4) Adjust Bankruptcy rules closer to real world options, but in a similar fashion. For example using just American Bankruptcy code for a moment here, we set up two options, one is re-organization and the second is full liquidation of a company. In option one re-organization would go something like this: Upon filing for re-organization the company continues to operate fly and people get paid.  Any money the company has is taken away and given to the bank, if they are in negative available cash they are put to zero. The bank then gives the company a loan of $2 to 4 million dollars, with a high interest rate, upwards of 10%.  Now I know this seems like a free hand out, so now we punished the company who does it, so that they use this as a last resort.  First we ruin their Company Image, set it back to zero. Next company moral collapses, to 1/3 of its current number at the time of bankruptcy. Credit Rating falls to "D". No additional loans can be taken out until the banks emergency loan is repaid. The company loses ownership of any planes it is currently leasing out to the bank. Basically we make re-organization a disaster for an airline, something they do not want to do. The second option would be the standard leave the game, except we add an interesting twist if possible (because I don't know if it will work from a programming standpoint) when a company leaves the game its assets either get pushed back into the available used pool, or auction them off to the highest bidder.

5) Is finally my original idea regarding the stock market and issuing stock. I have read a number of the comments and questions so here is a basic format to incorporate some of the fears I have read and ideas as well.  A full blown stock market would not work, it would be impossible to manage and control, but a limited market would work as follows. First each player is allowed to issue stock in their company up to 10 million shares initially.  They are required by rule to own 5,000,001 shares. Basically we set up a game limit which will allow them to sell only up to 4,999,999 shares.  This ensures that no player can force another player out of the game with a takeover, or a board forcing the CEO out. It ensures that since we pay for credits, we still make the decisions, and have the ultimate say in how our airline is run.  We force the player to pay a dividend, which can be a minimum of $.10 to an unlimited maximum, so we now have put a price on issuing stock. So if Airline A issued 499,999 shares and Airline B bought all 499,999 shares they would receive a quarterly check from Airline A for $49,999.90 dollars.   So this gives Airline A and incentive to issue stock, because they will get cash up front and Airline B the incentive to buy the stock because they get the dividend.  The price of a single share will be set based on the value of the company at issuance, so for example we set up a ratio say for everyone $100K in value its $1 dollar a share, so essentially if your company is worth $900K, your stock is $9 dollars a share, if you sold 499,999 shares multiplied by $9 and you would get a cash amount of just under $5 million dollars. If you are issuing stock at an earlier point it would be much less of course.  If you have a negative value all stock is issued at $1 dollar a share so you would only get around ½ a million dollars for the 499,999 shares.  We can also place in blockers, so in year 1 to 5 a company can only issue a maximum of 2.5 million shares, and then in year 5-10 it's another 2,499,999.  This adds a few new things into the game, first it gives clients another option to raise cash when needed without going to the bank and having to fight a credit rating, but it does this with a form of risk to the company just like a loan, but forcing them to pay a dividend. Second it adds in the real feel of running an airline, since the majority of world airlines are publicly traded companies. We can make this regulated so it would work in an orderly fashion and allow for greater competition.

6) Final idea for finance options was mentioned above, adding in FEES. Most American Airlines and some European Airlines now charge for a number of things, like snacks, drinks, liquor, bags, early boarding, and club room access at airports. This would be an interesting way to add this feature in, along with the same type of price setting features that already exist.

7) Another idea concerns an expense: FUEL and maintenance. Currently we all buy fuel in the open market, and it floats. An option to pre-pay for fuel would be nice, for example like what Southwest Airlines did in the 1990s in the United States. A game example would be this: Airline A enters into an agreement good for 1 year to buy fuel at 180 a barrel. During the next year regardless of fuel costs they pay 180 a barrel. Players would have to think wisely about this because if fuel drops to 150 a barrel, they are still locked in at 180 a barrel, while if it moves up to 210 a barrel they still get it at 180, so it would be a more fixed expense. The second is maintenance, currently we pay a particular amount for maintenance, but this option would be like outsourcing. We are given say three maintenance companies to choose from and we request a quote for 1 year and then either accept or refuse it. If we choose to continue to do maintenance on our own, then it will fluctuate like it does now.

Last thing would be Unions. This is how I would envision it to work, Airline A is in business for 3 years of a 10 year game. In year three in the message box they receive a notice that Pilots are demanding a pay increase of 20%, which is followed by a note that if refused by management, they will join the Union. Airline A management refuses the 20%, so the next week they receive a new message which states the pilots voted to join a union, and the effect would be either an automatic pay increase or decrease, with the option for the management to agree. If they refuse now, then a strike occurs.

I know this was very long, but I wanted to give some detail. I think the ideas which have been floated in here are excellent, and can be done (but like I have said I am no programmer), but it would make the game more on pair with a real world airline. It would give players a feel for what it is really like to run one of the hardest business models in the world.
Thoughts?

[JumboShrimp]

Here is a little more detail of my suggestion. This is only an idea, and I'm more than willing to assist, and take in other ideas.

1) Correct Passenger Demand/ Plane fill models

2) Income Statement is revamped as follows: The top income section is divided into three sections, income from tickets, income from extras (bag fees, food fees, club room fees) and finally planes leased out.

The expenses section is divided into two sections, Capital Expenses and daily expenses. Under Capital Expenses the cost of buying planes or the onetime fee for landing slots, or anything else that is a onetime cost if placed. Under daily expenses we place everything else that it would cost to run the airline each and every day, except for taxes.  Now two new lines are created, one reads available cash , this would be all available money the company has on hand; the second line is profit/loss which would be exactly how it reads. The lines are separate for two reasons, one a company can have cash on hand and still not be making a profit, and two the company could have no cash on hand and still owe the 30% income taxes.  This leads to the final change to the income sheet, taxes. Taxes would be calculated by the profit/loss number, so you could have made a profit, spent it and still owe money on December 31.

(disclaimer, I am not an accountant)

There would have to be a balance sheet as well, because that's where some of the cash flows end up with, sometimes bypassing the income statement.  Here are some examples:

Player borrows $60 million from the bank (notice, nothing hits the income statement):
- Cash (asset) goes up $60 million
- Loan (liability) goes up $60 million

Player buys a used a/c for $60 million, $20 million down payment (again, nothing hits the income statement): On contract date, player pays $20 million, and the following chages take place in the balance sheet.
- Cash (asset) goes down by $20 million
- Pre-payments (asset) goes up by $20 million

One month later, the plane is delivered:
- Cash (asset) goes down by $40 million
- Pre-payments (asset) goes down $20 million
- Value of aircraft (asset) goes up by $60 million

Again, notice there is nothing on the income statement other than:
- interest expense for the loan (nothing new about that)

All of this could be done by improving the current Company Value, turning it into full fledged balance sheet.

Now, let's step forward another month.  The a/c is flying, earning income from ticket sales, accruing expenses from ground operations etc.  Now the month ends, most of the income and expenses are the same as what the game already has with exception of:

- Value of Aircraft:  Let's say the useful life / depreciation period of a/c is 10 years, which is 120 months.  After one month, 1/120 of the original value of the aircraft is the depreciation.  The amount is $500,000.  So the book value of the aircraft is decreased by $500,000 from $60,000,000 to $59,500,000.

On the Income statement for this month:
- Depreciation (expense) $500,000

With these simple changes, the accounting info becomes more meaningful.  Looking at income statement actually tells you if you are making profit.  The upgraded income statement would also be a good basis for income taxes.  Looking at the balance sheet actually tells you the book value of the company.

Now, there is a slight complication.  There will be 2 values for the price of each a/c:
- book value (determined by depreciating the asset over its useful life)
- market value (this fluctuates, depending on supply / demand for the a/c, condition of the a/c)

For all of the accounting / profitability, book value is used.  Except when using the a/c as a colateral for secured loan, in which case, I don't know.  Market value might be appropriate.

When the player decides to sell the a/c, gain or loss would be recorded on the income statement, corresponding the difference between the book value and market value.

When flying own a/c, instead of lease payment, the depreciation charge would show up instead, giving the player realistic view of profitability of the aircraft and route.  The value wuld not be zero, as it is now under cash accounting which the game uses.

It may happen that the a/c is fully depreciated and the player is still using it to fly.  This is when the margins can really jump, because the depreciation charges for the a/c (or route) become zero.  Also, selling fully depreciated a/c with book value of zero is pure profit.

[swiftus27]

We've had many threads on GAAP.  Trust me, I am not going into it again. 

[Starfury483]

Im going to agree with Swiftus. It needs to be fixed, so be it. The point of my introducing a new financing option was not to break down into the income sheet, but because of questions around the idea I had to answer them. It still remains the idea of a stock market, which I think based on the idea is workable with the limitations put in place that were suggested.

[JumboShrimp]

Im going to agree with Swiftus. It needs to be fixed, so be it. The point of my introducing a new financing option was not to break down into the income sheet, but because of questions around the idea I had to answer them. It still remains the idea of a stock market, which I think based on the idea is workable with the limitations put in place that were suggested.

Sorry about delving into GAAP.  But in my opinion, it is a pre-requisite of having a stock market.  Shares are derived from how investors value the company.  What should be the price of shares being traded?  The share price should always gravitate to Company Value / number of shares outstanding.  And the fundamentals of the target - Company Value - fluctuate based on the performance of the company.

Again, my point is that any stock market model would be flawed without proper accounting system in place.  BTW, in real life, having a proper accounting and reporting in place is a requirement for a company to be placed on any reputable exchange.