Most likely the unsold stock would have been valued at the price at which they bought them from the supplier. That would be standard accounting practice for recently bought stock which has not gone out of date.

So if they had succeeded in knocking the suppliers price in half, that would not benefit them when valuing the stock? They were both given the same amount of money to spend, so I don't really understand how or why valuing unsold stock was part of deciding who won, unless you were penalized for having too much stock left, or were given credit for your stock being worth X but if you negotiated Y, the difference between X & Y would count as a profit somehow. This did not seem to be explained.

Also everyone who thought a cardboard toilet was the best thing to buy should have been fired just for that.

Just picking up on this point, and I know others have posted various answers, but in the real world how would this type of business actually value its assets?

Is it simply a case of adding up what was paid for them? Or an estimation of what their resale value would be if sold? For instance you buy 100 toilets at £10 but the RRP is £20? Does that mean the toilets are worth £1000 or £2000 to the business?

I ask only because if you managed to negotiate brilliantly in this task and obtained (to take an extreme example) £10000 of stock for £1500 would that in some way have disadvantaged you if you were actually treating this a real world situation?

Not disputing the correct team won - they sold more stuff which was the main point of the task - the stock value was added to prevent blatant underselling given that both teams had £1500 to start obviously, but it kept me awake thinking about it - or it may have been the rain!

thanks

I didn't do a very good job of explaining this last night, so let me try again as I think it's an important point which is easily overlooked because Sugar never explains it to us.

The aim of this entire process is for Sugar to determine who is the best person to invest his £25,000 in. Let's say for sake of argument he is looking for the candidate with the best business idea.

The 'total assets' measure is the perfect way to judge this particular task because it replicates what Sugar is looking for in real life. "I'm going to give you a sum of money X. Go and make me the best return on that investment." In other words, this task is a bit like an on-the-job business interview.

Usually tasks are judged on sales or profit. But you can win a task on sales by gutting your profit margins, which is not sustainable in business - and yet many tasks in the past have been won this way. (I'm thinking in particular of Steven in this year's grown-up Apprentice, where he won the gym class task by throwing in lots of freebie equipment, which boosted sales but would in reality have bankrupted him.)

And you can win a task on profit by cutting costs and minimising how much stock you buy, to ensure you are not left with a load of excess stock which brings down your profit (actually it doesn't, but it does in the way they count profit in the show).Such tasks can be won by a team which keeps most its money in its pocket and sells out of limited stock, whereas another team can lose despite selling more but being left with excess stock which is unsold at the end of the day.

But Sugar doesn't want a "winner" who wins simply by putting his investment in the bank.Judging the task on assets makes perfect sense for a start-up. If you have cash to start up a business, you invest as much as you can in stock that you can sell. If at the end of the day you have not sold it, that's okay, as the stock still has value - you can sell it tomorrow. Or at another event/festival in the case of last night's task. That's how an ongoing business works, and that's why it's fair to value unsold stock at cost price as part of the task.

(There is also a counter-balancing consideration about not tying up too much money in stock as it ties up cashflow, but that's a bit too complex for a TV programme. Although in truth the reason most small businesses fail is not because they are unprofitable but because they do not have enough liquid cash. But that's a discussion for another time - like never ...)

The sales by both teams last night were so low that if it had been judged by profit the winner would most likely have been the team with the least amount of unsold stock, which wouldn't be fair.

Of course, there are some businesses where it IS important to sell your stock "on the day". For instance, fresh fruit is perishable and only has value for a few days, so rate of sale is just as important (probably more so) than asset value, as the value of said assets quickly reduces to zero. SImilarly, if you have 100 tickets for an event, they are of no value once the event has happened, so even selling a £100 ticket for £5 can make sense. But last night's task featured "normal" items which would have been sellable for months afterwards, so that isn't an issue.

Anyhow, the long and the short of it is that this was an entirely appropriate set of criteria for a semi-final task. It's intended as a test to simulate starting up a real business with Lord Sugar's money, as opposed to being a test of pure selling or pure negotiation or pure cost management as other tasks have been - although that was of course a key part of it - which is why measuring on sales or profit alone would have been less appropriate.

Hope that makes sense. It's a small distinction but an important one, and one which the producers would do well to explain to bemused viewers.

It would actually have benefitted the better negotiator. I'll try to explain - bear with me as the maths is a bit tricky ...

For instance, if team A buys 80 cardboard boxes at £10 each (as Ashleigh did last night) and team B buys 100 of the same boxes at £8 each, then B has done a better negotiation. But both have spent £800, and I am assuming that in the final count the asset value of both would have been counted as £800 (that would be standard accounting practice for goods of this nature).

But now let's say the two teams both sell 40 units each on the day at £20 each. Both have sales of £800 - so equal - and both have also made exactly zero profit (£800 spent, £800 sales). But the remaining stock value for team A is 40 x 10 = £400. For team B it is 60 x 8 = £480. So team B would have won by £80 - AND they have more stock left to sell tomorrow, next week, next month etc. Double whammy.

Equally, if team A had bought 80 at £10 and team B had also bough 80 but at £8, then team B would have freed up £160 (80 x 2) to spend on other stock to sell - also a benefit.

That's why I keep banging on about the appropriateness of the total assets method, particularly for a semi-final task where you are trying to assess all-round business performance, not just selling. It's quite complex to explain, but hopefully not so hard to understand. That's why in the real world a business is valued on both its profit and loss account (i.e. sales and profit) and its balance sheet (i.e. how well it utilises its assets) - it's the basis on which most acquisitions are valued.

slouchingthatch, no you are doing a great job explaining your position, I give you credit for that, but I don't agree it was the right way to judge this task, for the reasons I have given, especially in the post I just made, above

I'd also say (as someone who runs a business) that unsold stock being counted as assets really depends on a number of factors, and generally it's not a good thing. You have to store the bloody stuff, which is an expense. Now take those cardboard toilets, or any other stupid choices they could have made - they may never sell a single one for years. That's not as asset it's a waste of money, a mistake that you ever bought that thing, money that should have been better spent. You might end up shifting it at a great loss just to see the back of it. It's not worth what you paid for it, its worth what you sell it for, and if you don't sell it you should be penalized - I realize that's not how the task was presented, but thats what i'm criticizing. The rules were not made clear, as usual, and the rules didn't make enough sense (as usual).

The toilets at WOMAD were exceptionally well maintained this year, not that they are ever as bad as Glastonbury/Reading, mainly due to the more family/ageing hippy clientele.

I remember seeing them selling the onesies (didn't know it had anything to do with the Apprentice at the time)

An accountant would NEVER value assets based on an assumed resale value. (Indeed it is illegal to do so.) It would always be based relative to the cost price of the items. Depending on the "lifetime" and age of the item - and on the nature of the accounting practice used by a company - this would vary between 100% and a much smaller percentage of the actual cost of the item. So for, say, a toaster that was bought last week, it would be valued at cost price. For an item with a limited lifetime, or which perhaps has not been sold for several months, its value would be "written down" over time, from 100% to, say, 50% to 25% and eventually to zero ("written off").

In the case of last night's task, I would assume that all unsold stock was simply valued at the price at which it was purchased.

Hope that makes sense!

Thats how I saw it, unsold stock is useless stock if it is sitting looking at you, it is not really an asset just wasted money.

"Slouchingthatch", thank you also for the explanations, yes I now understand why unsold stock is counted as an asset, but still think it is a silly idea, still it explains why these Companies with supposedly tons of "assets" suddenly go out of business!

Still cant understand how Ashleigh, Patrick and Maria won when they barely sold a loo and those onesies of Lucys' were flying off the shelves.

You're 100% right about the 'hidden' costs such as storage - which is why big companies rightly allocate costs for such things (the bane of my life) - and of simply tying up cash in unsold stock that will potentially never shift. I guess for the purposes of any task (young or grown-up version) that's too advanced for either candidates or audiences to grasp. (They seem to have enough trouble handling basic maths and general knowledge ...)

I accept your point of view is a perfectly valid one to hold and we'll just have to agree to disagree on that one. But i do wish that the producers/Sugar would take some time out to explain the point of measuring the task on an assets basis. Unless you have some experience with how to run an actual business, it's not a concept that's easily understood. At least that way viewers could make up their own minds in an informed way.

Having lots of assets isn't necessarily a good thing unless they're being used productively. So, for instance, an empty factory which is only in operation one day a week is an asset - just not a very productive one. Nonetheless it still has a value in financial terms, as it is a building on land which could be sold.

As with many things in life, it's a matter of balance. Assets are good - but only if they are being productive. Which is why businesses are valued on a combination of absolute measures - e.g. how many £ of assets, how many £ of profit - and efficiency measures - e.g. what level of return are you generating on your assets (return on net assets), what is your % profit margin, how much earnings are you generating per share (earnings per share - a key stock market measure).

The issue of whether unsold stock has any value is a thorny one. You NEVER value stock at selling price, as that is presumptuous. You DO value it at some % of cost price (sometimes 100%, sometimes less - I've explained in another post why that is) but that value decreases over time. Patrick's unsold umbrellas, for instance, retain an intrinsic value - they could have been sold at another festival, or at a small loss to another retailer, for instance. Even the cardboard boxes have a "value" for accounting purposes - it's just that they were a rubbish product. (We're all agreed on that one, right?) But accounting practices do not judge whether a product is good or bad, merely how much it is "worth" financially.

Norrin_Radd also makes good points that unsold stock carries its own ongoing costs - storage, the lost opportunity to have invested the cash in other products that do sell, or so on - but even so no accountant would classify them as worthless on the basis that they hadn't sold on one day, simply because there remains the potential to sell them again.

All good discussion, though!

Given that Maria and Ash appeared to be pretty lackluster with selling the loos perhaps its wise to assume that Patrick sold lots of the umbrella-seats, possibly being more key to the team's win than he appeared to be.

We saw Ashleigh struggling to sell them and being criticised by Maria, Maria closing several deals at reduced prices of the loos....yet they won, it must have been the umbrellas that did it, particularly after seeing Lucy's team's success in sending the onesies flying off the shelves.

I also thought Patrick's branding of the store as 'take a seat' was quite good.

Years ago I was told that British Rail (or whoever they are nowadays) own the land which used to be the old Snow Hill station in Birmingham. It's acres and acres of prime city centre land, but because its asset value on the books is so high, they'd never be able to sell it for anything close, and prefer to have it as a hugely valuable asset rather than sell it...

As for this task, it was unfortunate that both teams picked such poor products, because it exaggerated the "asset" part of the final count-up, and it was really the "least-worst" team that won... it would have been interesting to be told if any of the full product selection were proven "winners" at festivals - LS heavily implied that the facepaints and fan-hat might have sold well, but it would have been instructive to be told that "company XX sold 500 hats a day last year" or similar.

Still can't get rid of the nagging feeling that the wrong team won, though...

"Lots" is a relative term - we're only talking about a few hundred pounds' worth of sales, so at £50-70 each, that's only 5 or 6 umbrellas (maybe one sale per hour?), which yes, is a helluva lot better than the boxloos, but is hardly anything to write home about, and as the losers sadly stated, they were only one washing machine (or I presume 3 or 4 onesies) from winning themselves...

Thanks sloucher!

Believe it or not I actually did run my own business once, but it didn't involve me selling any stock..

Unsold stock is essentially not costs yet, it only becomes costs when you sell the stock in question (then the cost price is compared to the selling price). It (stock) is an asset until it is sold.

Problem is offcourse that it features in both the assets list and the costs (p&l) list, which is confusing in itself (just like cars, which is an asset but there is write off monthly which features on the p&l).

I don't think so, personally. It's not a business show - it's an entertainment show. Unlike a selection procedure away from the cameras, there is an incentive (in reality TV shows in general) to retain people who the public find irritating or who in some way make the programme more watchable and talked about.

Even more so when you are evicting all contestants in the losing team save one. It is easy to be left with a poor team member on the winning team and have a good team member evicted.

The team lost, in my opinion, due to a bad decision by Stephen to get the washing machine. Worse still, Stephen said after he lost that he still felt that it was the best product on offer. (Credit to Stephen for his earlier idea of a cartoon cookbook - he just got it wrong this time. Badly wrong.)

Andrew left with his head held high & a compliment from Sugar. In my opinion, Maria doesn't.

We will all have different opinions and that's healthy.

Broadcast it and call it (insert name of your pet hate TV programme)



:


It just gets better.







Stop it. You're killing me.

People on here write great comments.

Aren't there laws about how you are supposed to dispose of human waste? Are you allowed to put your poo in a bin at a festival? Should that man actually be in business selling those things for that purpose?

Isn't it fairly obvious when The Apprentice are filming? I know they're not allowed to tell people, but I would have thought that if there is a camera crew there, and Nick and Karren as well, it would be clear what was going on. One of my friends was there, and he told me that there was going to be a WOMAD task on The Apprentice...

I have to say, I was shocked that the teams wanted things like toilets and washing machines. I was thinking, 'What?' I don't really go to festivals, but I would have thought fun things like animal onesies and face-paint would sell much better. But, I don't go to them and I don't know much about business, so I thought maybe I just didn't understand what kind of things would sell at festivals. After all, six people can't be wrong, right? And then it turned out that I was right, and I was like, 'Yes George! Get in!'

Love it.

I really miss joining in live, it's not the same. I will just add that I don't agree with LS about people just going to festivals to buy stuff. my son goes to festivals and it costs a huge amount of money to get in, so why go when you can google things and get them delivered

Ah, so, Dix likes Sex.

All Dix do

I think that comment was tongue-in-cheek.