(not that Jeremy)

Gini Coefficient of Major League Baseball Player Salaries (2007)

2007-11-01T00:19:00.000-04:00

I was thinking about unionization and it's typical effects. Normally, unionization permits groups of laborers to increase their overall portion of the revenues of a company, by putting them on equal footing with the capitalists (those who own the capital assets which are used in production, i.e. the owners of the company and their agents i.e. management).

You would expect that this would also lead to a harmonization of the Lorenz curve with the perfect equality curve (where x = y, because every person receives equal income, and therefore the percentage of total income for any given percentage of the population is equal to that percentage of the population).

In the case of Major League Baseball...that didn't happen.

Even the lowest paid baseball players make a lot of money. Based on USA Today's 2007 MLB salary data for players on opening day rosters, the lowest paid players received $380,000 for the season. That's a fair chunk of change that immediately puts them in the top echelons of individual incomes in the United States.

However, when you look at the entire data series, and create a Lorenz curve from that data, you find that in fact it does not remotely approximate a perfect distribution. Using the trapezoid method (actually accurate in this case, given that I have the complete dataset), I calculated the Gini coefficient to be 0.6112. The Gini coefficient measures the ratio of the area between the perfect distribution curve and the Lorenz curve to the area between the Lorenz curve and the chart axes (the chart is plotted from 0 to 1 on both the X and the Y axis). In the case where the actual distribution is completely equal, the Gini coefficient would be zero, and in a case where one person has all of the assets, the coefficient would be one.

This ratio is quite high in comparison to, for instance, the coefficient typically presented for the United States (which is high currently compared to it's historical values). The 2005 US Gini coefficient was 0.469 according to the U.S. Census Bureau.

I assume that the players aren't aware of this, or they'd be voting in new union management.

I'm attaching a chart to this post that shows the Lorenz Curve for MLB 2007 salaries. As you can see, the bottom 50 percent of MLB players are only taking in 10% of the total MLB salaries. That's a sufficient number to take control of their union, so I don't know what the fuck they're thinking.

Oh, BTW, Excel has a lot of problems with statistics. Most likely that regression formula is wrong. I got some bizarre numbers when I attempted to integrate it. I'm not sure if that is because of a deficiency in the formula, or a deficiency in my ability to use a new (to me) stat package. Probably some of both, but a friend had similar problems, which is why ultimately I used the trapezoid method.

Re: More War Games

2007-10-31T21:39:00.001-04:00

Response to an FO comment, since my comment on FO seems to keep getting eaten by a black hole.

I’m sure Jeremy can speak to whether this has actually increased transparency in practice, but it definitely has been the case that the onerous nature of Sarbox compliance as it currently stands has hurt the US capital markets because some companies who would otherwise have listed their shares on the NYSE or NASDAQ are now listing overseas instead (like the LSE in London).

Anyone who claims that companies are against Sarbanes-Oxley is about 18 months behind on their accounting news. There are a lot of forces within companies that were highly in favor of the regulations, in particular because they required that companies document their internal controls and that firms report on them.

If you believe congress, though, it's been a massive failure.

In reality, the first year implementation costs were high, but the cost dropped dramatically from that peak because there was a lot of house cleaning to do. After you've got the house cleaned, you pretty much just have to sweep up from time to time to keep it clean and orderly.

The sign-off was just propaganda though.

Oh, and by the way, all of that Sarbanes-Oxley style stuff is coming to a company near you. Anyone who has an audit, whose CPA firm is doing their job, is going to be subject to a new cohort of risk assessment standards that the firms are going to be implementing this year. If the companies want to keep having audits, and intend to keep the cost of audits down, they're going to have to document their own systems of controls. In fact, in a lot of ways, the new standards that are applying to non-public companies are more rigorous than those that now apply to publicly traded companies because the PCAOB basically rescinded most of AS2 in AS5.

Technically SAS 112 went into effect last year, and the risk assessment standards are just now going into effect, but I can tell you that most firms are only now figuring out how they are going to approach the issue of extensive internal control documentation at their clients.

In addition, CPA firms are of course prohibited from becoming part of the client accounting systems, including their system of internal control...so you're going to see quite a bit of belly-aching.

IMHO, it's good because:

1. Companies have always been responsible for maintaining their systems of internal control.
2. CPA firms in general, and particularly at small clients, have had a practice of ignoring internal controls (basically, if you depended on internal controls to safeguard information, then you had to document them, do walkthroughs to confirm that they were in operation, and then test them for effectiveness. In a lot of scenarios it was less work to just do more actual transaction testing).
3. A proper internal control system starts with the tone at the top of the company (and this is something that is stressed in the RASes). The problem at Enron wasn't the honesty of the employees at the bottom, it was the guys at the top who were pushing all sorts of boundaries, with the knowledge of their external auditors. Under the new standards, the fact that they are pushing boundaries rises to a level that it has to be reported to the board of directors of the company because it represents a risk that there will be future financial misstatements BECAUSE of that tone.

Publicly traded companies are required to submit financials so that traders will be on a level playing field when evaluating which companies are good investments and which ones are not. The market doesn't work when nearly all of the information is sealed away. Assuming that the disclosures that need to be made under current rules for publicly traded companies represents "transparency" is a major mistake though.

Nothing that can be done at any level of regulation is going to prevent frauds though. By definition, frauds are difficult to detect. They frequently represent short-circuits of internal control systems, even properly designed ones. In a lot of cases, you are just trying to detect those frauds in a timely manner, and that is the responsibility of management, because THEY are in a fiduciary relationship with the shareholders.

The sign off standards were in part designed to remind management of that fact.

There are a lot of things that need to be cleaned up though. Part of the problem is that in the case of Enron etc, they didn't do anything that was per-se illegal. In fact, a lot of wrangling was done to make sure that they adhered to the letter of the law and accounting standards. There were a lot of weasel words in there that they took advantage of. AA was complicit in that, to the point where they were giving them advice with the explicit purpose of avoiding regulations and avoiding consolidation of companies.

If the company's board of directors had been aware of this, then they probably would have found someone else to run the company (assuming that it was properly comprised of non-shareholders in non-management positions with no relationships to company management or shareholders, and with adequate financial expertise to make these decisions, which is yet another thing that's rolled into the new RASes). The fact that they weren't is kind of scary, because even though the auditors are paid by the company, their responsibility is to report to the board (particularly the subset of the board known as the audit committee).

Whatever, I'm going on at length here.

Publicly traded companies with K-1s etc are NOT providing transparent information. They just aren't. Nothing we do can cause them to do that. However, we can improve the overall environment so that companies are more likely to provide better information.

But you also need to remember, Zuffa is managed by their shareholders (Dana and the Fertitas). Lenders would be fucked if they went out of business, but they would immediately pierce the veil and go after the other assets of those shareholders to recoup their loans if there was evidence of a fraud, and those guys DO have assets.

There's a lot of strength that UFC is currently deriving from secrecy, because they're able to contract with fighters in a way that one guy doesn't know what another guy is making, outside of what is publicly reported, and where they make it clear that a lot of guys are making amounts that are different from what is reported. That cloud of uncertainty works in their favor right up to the point where individual guys start quitting or signing with other organizations.

At some point, transparency to the fighters is going to be necessary if they intend to take that next step. The best way to do that, while keeping the information close to their vests (i.e. not just putting it completely out in public) is to form a fighters association and create a union shop. Negotiate with the fighters as a unit, give them some hard numbers on what they're going to get that's going to be reported to the CSAC or whatever, give them some minor concessions on healthcare etc (a good idea in any case, and not an overly expensive one), give them a 401k to participate in (you don't even have to make matching contributions, guys just want to have a place to sock away some money at fair rates), and put in some incentives that will allow fighters that are loyal to the organization or who are defending champs to have greater participation in event revenues.

What isn't ever going to happen at Zuffa is stock options to fighters.

Which is a good thing. The worst retirement investment that you can have is your own company's stock. That's the least diversified, and most risky investment you can hold.

Estimating Zuffa's Owner's Equity based on S&P's rating of their debt securities

2007-10-18T23:54:00.000-04:00

Horrigan used multiple regression analysis in the 1960s to attempt to create a model that would predict S&P and Moody's bond ratings for companies. Basically, they're attempts to determine financial leverage, and correlate that with the subjective ratings that are coming out of the various ratings houses. Horrigan's bond model uses six components to calculate a Z-score, the Z-score is looked up in a table to determine the bond rating.

The Z-score table is as follows for S&P ratings:

2.855 and higher = AAA
2.094-2.855 = AA
1.602-2.094 = A
0.838-1.602 = BBB
0.360-0.838 = BB
Less than 0.360 = B or lower

The Z-score is calculated as follows for S&P:

Z = 1.197 Xsub0 + 0.0337 Xsub1 + 0.272 Xsub2 -0.501 Xsub3 + 4.519 Xsub4 -0.203 Xsub5

Xsub0 is 1 when the bond is senior and 0 if the bond is subordinated
Xsub1 is Total Assets, in 10s of millions of dollars
Xsub2 is Owner's Equity / Total Debt
Xsub3 is (Current Assets - Current Liabilities) / Sales
Xsub4 is Operating Income (EBITDA) / Sales
Xsub5 is Sales / Owner's Equity

I used total debt of 325 mil (this is total debt outstanding per the September report), EBITDA of 1/3 of 325 mil (that was a forward looking item), Sales of 2 times EBITDA (based on the 50% forward looking margin). I plugged a few numbers for working capital and I found that they didn't significantly change the results, so you can either exclude that entirely or use 25 mil (the value of their revolver).

Then you run the calculation inside out to get back to Owner's equity (remembering that total assets = total debt + owner's equity).

So, I'm getting numbers in the 10.5 to 12 mil in owner's equity range, based on the Z-score range for the S&P rating of BB. Technically, you can also get an intercept if the owner's equity is EXTREMELY negative, but that would create negative assets, which is an invalid result.

If you're interested in Horrigan's model, the citation is as follows:

James O. Horrigan. "The Determination of Long-Term Credit Standing With Financial Ratios," Empirical Research in Accounting: Selected Studies, 1966, Supplement to Volume 4, Journal of Accounting Research, pp. 44-62.

This reference is available in JSTOR (the link is to JSTOR), which you can probably access through your public library (I use it online through Boston Public Library's website).

So, what did Enron do, anyway? - Part 1

2007-10-18T13:27:00.000-04:00

There's a shortage of people out there who even know what fraudulent activities were committed by the management of Enron, let alone understand how it was done. I've also noticed that a great many people don't even know what Enron's line of business was.

So, that's a good place to start.

The short version is that Enron did a lot of different things.

The longer version is that Enron's activities were primarily divided into two sectors:

Ownership and management of utilities
Ownership and operation of commodities futures and other derivatives trading services

Enron's utilities business included a few dozen power plants (including several wind farms), eleven major natural gas pipelines, liquid propane storage and distribution facilities, wholesale and retail distribution of electricity and natural gas, and some oil and natural gas exploration services.

Their more high profile business in the years leading up to the company's bankruptcy was commodities trading. The company operated several commodities exchanges that were used by customers to buy and sell commodity futures and derivatives. In short, a commodity future is a contract to buy or to sell a certain quantity of a good as of a set future date, at a specific price. If you've seen the movie Trading Places, then you might have some idea of what this is all about. If you haven't, go out and buy the DVD, it's cheap and features a healthy amount of nudity, in addition to being damn funny. The contracts are bought and sold by traders who attempt to determine via the available information what the future price of that good will be. As you get closer to the date of delivery, the amount of information about the total supply and demand of a given commodity (for instance, Frozen Concentrated Orange Juice) increases and traders are better able to set the "correct" price. By guessing what that price will be in advance, you can make money selling contracts for more than they will be worth as of the delivery date, or by buying them for less than they will be worth. Derivatives are the generalized form of a tradeable contract. Futures are a type of derivative (and a subtype of a "forward"). The major types or derivatives are forwards, options, and swaps. Forwards are mandatory contracts to buy or sell. Options are contracts which give one party the option to buy or sell at a future date. Swaps are agreements to exchange the cash generated from one activity for the cash generated from another activity.

The company established a large number of exchanges on which new types of commodities were being traded, for example, electricity, broadband network capacity, etc. They also used an online system that permitted extremely fast trading of futures that might not be delivered in days, but in just hours.

These were not the only businesses that Enron was engaged in. It also provided broadband network services, financial consulting, project management services, and was involved in various sorts of manufacturing.

Zuffa's Loans: Re: Payout: The Business of MMA: Second Opinion: Zuffa's Finances Come Into Focus

2007-10-18T11:36:00.000-04:00

Payout: The Business of MMA: Second Opinion: Zuffa's Finances Come Into Focus

My Response

It's no secret, lawyers don't know shit about accounting. So, Zuffa, LLC (which owns the Mixed Martial Arts promotions UFC and WEC, and the former MMA organizations Pride and WFA) took out a loan. This is allegedly a big deal. Yeah, it is, but again, not necessarily how you think.

What we know

Zuffa has a $350 million financing package, this is composed of a term loan and a line of credit.

The line of credit is $25 million, and Zuffa, apparently, hasn't used any of it. This is basically like their Mastercard, they can borrow against it anytime they want, and interest will be charged only on the amount they borrow. However, there is the equivalent of an annual fee somewhere, because banks LOVE MONEY.

The term loan is $325 million and is what's called a Term B Loan. Term B Loans are a type of loan that comes due in one huge payment as of a specific date, they have additional qualifications and terms, but that's basically all you need to know.

So, why does Zuffa need a loan?

The same reasons any company needs a loan: they need cash to fund operations, to fund expansion, and to pay off existing liabilities (non-owner entities holding equity in Zuffa's assets).

Context

Zuffa, LLC was founded by Frank Fertitta III, Lorenzo Fertitta, and Dana White. Dana White is an outspoken, energetic entrepreneur with absolutely no self-censoring capabilities who had been operating a chain of boxing gyms. The Fertitta brothers are somewhat famous for their casino operations (the Station Casinos, they're relatively small operations, but it's a huge industry). The company existed for the sole purpose of purchasing and operating the Ultimate Fighting Championship from Semaphore Entertainment Group (which had purchased UFC from WOW Promotions after HBO and Showtime passed).

At that time, UFC was dying an ugly death. MMA was just beginning to gain legitimacy as a sport after years of persecution by politicians like John McCain. They had lost the ability to air most of their events on pay-per-view cable in most cities, and were reduced to running shows in tiny venues in out of the way places like Iowa and Alabama. It had been a long fall from their Denver origins. They were making major strides in terms of becoming a regulated sport though, and New Jersey had just recently passed laws permitting their boxing regulatory commission to regulate MMA. The modern "Unified Rules" had their origins in the regulations passed by other smaller states (like Iowa), but New Jersey was the first major player in combat sports to regulate MMA, which gave it legitimacy and protection from naysayers who claimed that it was an unregulated no-holds barred street fighting organization, in short, a blood-sport with no place in civilized society.

Zuffa purchased the UFC, and then, conveniently, Nevada passed laws regulating MMA (there is a conspiracy theory about this, that the Fertitta's were blocking the regulation until after they had purchased UFC to drive the price down). The so-called "black period" of the UFC wasn't over yet though. They had a substantial number of shows that were still blocked by major PPV outlets and never became available on home video. These events were expensive to run, and were not able to generate enough ticket sales and PPV buys to make a profit.

In the years after Zuffa bought LLC, the company lost millions of dollars.

Ultimately, the UFC turned things around. Currently, they have record PPV buys, ticket sales in the millions of dollars per show, and marquee fighters appearing in media and on television in the UFC's own reality show.

However, the loans that Zuffa had taken out during that period came due, and the company did not yet have enough cash to pay them off. Additionally, the company wanted to expand into Europe to increase their revenues, and were in the process of the rapid acquisition of three rival MMA promotions (WFA, WEC, and Pride). This stuff takes cash.

Accounting for it

Let's take a thumbnail look at the type of accounting transactions that occurred (all figures are estimates and not necessarily reflective of actual amounts):

The initial loan came due, to pay it off, the company needed cash, so they took out a new loan, and used the proceeds to pay the old one.

Cash                         125m
Debt (old loan)              200m   
       Debt (new loan)                325m

Interest Expense (old loan)   50m
       Cash                            50m

The only part of this transaction that will have an effect on the owner's equity of Zuffa is the interest payment, which will be closed into owner's equity at the end of the year. The increase in creditor equity is offset in large part by the receipt of cash and the payoff of the old loan.

The aquisition of a new loan does not in itself cause Zuffa to have a decrease in owner's equity. The interest expense does decrease owner's equity, like any other expense of the company would. That isn't to say that Zuffa actually had positive owner's equity to start with though. The accumulated losses from the early period of the company may well have reduced Zuffa's owner's equity to a number lower than zero, which would indicate that the creditors of the company had the right to more stuff than Zuffa actually posessed.

Creditors might still be interested in loaning money to a company with negative equity, as long as they were assured that the company was likely to have enough cash to pay off the loan in the future.

There are distinctions between cash flow and net income that I'm not going to go into at this time, but in a nutshell, when a company uses the "accrual basis" of accounting, certain revenues and expenses are not recorded in the year that they are received or paid, they are recorded in the year that they are earned or incurred instead. This means that the amount you pay out and receive in cash may not tie to the amount that you are reporting as expenses and revenues in any particular period.

Because of these differences, banks are typically more interested in the "cash flow" of a company than whether or not it is reporting a profit or whether it has positive owner's equity when they are considering whether or not to lend the company money.

Accounting 101 - Part 1

2007-10-18T09:08:00.000-04:00

I was in a particularly repetitive meeting a couple weeks ago and filled my time by starting to write an accounting textbook for people who don't understand accounting. One of my goals is to use as much plain language as I can. There's no point in trying to explain an idea with words that no one understands.

DOUBLE ENTRY ACCOUNTING

Almost all accounting today is based on a very old approach known as "double entry accounting." The idea is pretty simple: for every item or event that you record, you increase numbers (or decrease) in two places.

In the old days, you would write down every event in the history of a company in a book (also called a journal). Then, occasionally, you would transfer all of those journal entries into a running tally of the sum of each account, which is known as the ledger. This process was called posting. These days, we still use those terms, but in practice, all of that information is stored in a file on a computer (typically a relational database, go talk to a computer expert for a plain English explanation of that one), then that file is used to create various views of the activity over time, so there's really no posting involved. It used to be a major concern because if the ledger wasn't posted to, then you couldn't rely on those numbers to reflect the current situation of the company.

Since you're making your entry in two places, it's a good idea to start by explaining the various accounts that you could be making entries (posting) against. Basically, they fall into two groups stuff, and a list of people who own that stuff. There are other accounts used during the year, but in the end, they are all added back into the permanent accounts at the end of the year (this is called closing).

At the end of the year, after closing the temporary accounts, you have all of the information that's used on a financial report called the balance sheet.

It's called the balance sheet because in double entry accounting, unless you've fucked up pretty badly, the total of the numbers representing stuff and the total of the numbers representing ownership are going to be the same (or, in other words, they will be in balance).

Accounting is like any other profession, we like to make up funny words that no one else understands so that we can keep our customers from doing what we do for them on their own.

Some definitions are in order:

Assets --> Stuff (this includes both real stuff (tangible assets) and imaginary stuff (intangible assets).
Equity --> Ownership (the right to have stuff).
Owner's Equity --> The rights of the owners of the company to take or keep the stuff that the company has.
Liabilities --> The rights of people who don't own the company to take the company's stuff (this could be the right to take stuff right now, also known as a current liability, or it could be the right to take stuff later, which is called a long-term liability).
Capital --> This actually has several meanings. In normal use, it just means Owner's Equity.

In double entry accounting, we don't use negative numbers (because negative numbers belong to SATAN! No, seriously, that's why, long story), we therefore use positive numbers that offset one another instead. There are two special words that are used to explain the two "sides" of an entry:

Debit --> This is a number that increases an asset, or decreases equity.
Credit --> This is a decrease in assets, and an increase in equity.

In modern practice, we show credits as negative numbers because it's easier, but it's important to remember that even though there is a minus sign there, that doesn't always decrease whatever that account is. It could be an increase if the effect of that side of the transaction is to increase equity.

CUMULATIVE ACTIVITY -

Ok, so all that text above is great. We can make a list of stuff and an anti-list of people's rights to take stuff. That's all well and good for determining who owns stuff at any point in time, and reflecting how much stuff the company has, but it doesn't tell you much about what the company is actually doing.

We record current events using two groups of temporary accounts that are closed into the balance sheet (permanent) accounts at the end of the year. These groups are as follows:

Revenues --> ooh, we got stuff, let's write that down
Expenses --> oh crap, we lost stuff

Since revenues and expenses are temporary accounts that are closed into owner's equity at the end of the year, they have "normal balances" (ie, they increase with a debit or credit usually) that reflect the normal balance of owner's equity. If you want to show revenue, then you use the credit side of an entry to increase revenue. Expenses have a normal debit balance.

At the end of the year, the revenues that you got during the year belong to the owners of the company, and are added to their ownership number. Similarly, expenses decrease the owner's right to take stuff.

SIMPLE TRANSACTIONS

Ok, so we kind of know the lay of the land, let's do something.

When you start a new company, you need to have some assets to be able to do anything. This might be buildings, but in most cases, it's cash money. So when you toss some money into a company that you own, you debit cash, and credit owner's equity.

Cash                        $1000
        Owner's Equity                $1000
        (to record contribution of capital)

Ok, when accountants write out entries, they typically show the debit first, then they show the credit indented a bit to avoid confusion.

So, our company now has some assets (cash). Cash is great because if the company goes out of business, that cash is worth exactly what's on the face of the bills. You can also trade cash on a one for one basis for other stuff. This business is in the business of business, so let's buy some stuff from China that we can sell for crazy profits.

Inventory                    $500
        Cash                           $500
        (to record purchase of lead painted toys from China)

But hey, isn't buying inventory an expense? Yep, but not yet.

Ok, let's sell these toys to children who will grow up with severe learning disabilities as a result of chewing chips of lead paint off their Hotwheels (tm, used without authorization).

Cost of Goods Sold           $500
Cash                         $700
        Inventory                      $500
        Revenue                        $700
        (to record sale of inventory)

Ok, I'm being a little sneaky here, I've combined two entries into one. The expense of buying or building things to resell is only recorded when you actually sell it. A typical expense account title for that is "Cost of Goods Sold." So we're debiting that expense, and we're crediting Inventory (to show that we lost an asset). Meanwhile, we gots paid yo, so we'll increase cash by $700 and we'll increase revenue (by crediting it) by $700.

If we subtract our total expenses from our total revenues, we get our net profit or loss, in this case, a profit of $200. You've got to admit, a nation of retarded worker drones is a small price to pay for $200 in cold hard cash.

At the end of the year we'll close our expenses and revenues into owner's equity so that our temporary accounts all have zero balances, and our permanent accounts will balance each other out.

Revenue                      $700
        Cost of Goods Sold             $500
        Owner's Equity                 $200
        (end of year closing)

So our ending balance sheet now looks like this:

Assets                        Equities
=====================================================
Cash    $1200                 Owner's Equity    $1200

It's a new year, and our goal is to triple our profits. To do that we've got to buy three times as many toys, and sell them for the same margin. But, OH NO, we've only got $1200, and we need $1500 to buy three times as many toys.

We're going to have to get more cash. We can either get it by admitting a new owner, or we can borrow it from someone. If we admit a new owner, then that guy is going to get a share of the net profits or losses at the end of the year. We're greedy bastards, so we're just going to have to borrow some money.

Cash                        $300
        Debt                        $300
        (to record loan proceeds)

Ok, so we're showing that we received cash from Banco Popular, and we're showing on the equity side that it isn't really our cash. We have to pay those guys back, or they're going to send Maria and Gwendolyn to break our legs. Oh, and they're going to want some interest. Money isn't free you know.

Let's just rush out the entries for buying and selling inventory for the year here:

Inventory                   $1500
        Cash                          $1500

Cost of Goods Sold          $1500
Cash                        $2000
        Inventory                     $1500
        Revenue                       $2000

Alright, looks like we had to lower prices a bit to clear out that inventory, but we're still managing to keep a good margin by selling our stuff for more than we paid for it.

Unfortunately, those loan sharks are charging us 200% interest, and if we want to keep our legs in working condition, we need to pay them back, including the interest, by midnight on December 31st.

Interest Expense             $600
Debt                                   $300
        Cash                           $900
        (to record payoff of loan)

Let's add up our expenses and revenues for the year and see how we did:

Statement of Profit and Loss:

Revenues:                             $2000

Expenses:
        Cost of Goods Sold  $1500
        Interest Expense     $600
Total Expenses:                       $2100

===========================================

Net Loss                              ($100)

Well, shit. Let's close our revenues and expenses into owner's equity:

Revenue                     $2000
Owner's Equity               $100
        Cost of Goods Sold            $1500
        Interest Expense               $900

Since that owner's equity number is a debit, that decreased our rights to stuff, which is exactly correct, since we've now got less stuff than we had at the beginning of the year.

Balance Sheet:

Assets                  Equities
===============================================
Cash    $1100           Owner's Equity    $1100