Sport Funding Exam 1

Financial Sectors

Money & Capital markets, investments, financial management

Is sport recognized as an official injury?

No

Gross Domestic Product

The market value of goods and services produced within the borders of a country, state or other region in a given year

Gross Domestic Sport Production

The market value of the nation’s output of sport related goods and services in a given year

What are similarities with other industries?

Value creation and revenue growth

Differences from other industries

Diverse objectives of owners, imbalance of competition, revenue sharing & other forms of cooperation

Franchise Ownership Models

Single owner/private investor, multiple owners/private investment syndicate model, multiple owners/publicly traded corporation model

Single owner/private investor

An independently wealthy person owns the firm

Multiple owner/private investor

Most common model. Multiple owners with different stakes of ownership

Multiple owners/publicly traded corporation model

Shares of franchise are sold publicly

Single-entity ownership model

A single group or an individual owns a league and all of the teams that compete within that league

Distributed Club Ownership Model

Each individual franchise has its own ownership, comissioner runs daily operations

Are teams and leagues typically sibject to the Sherman Antitrust Act?

No

Debt Financing

Borrowing money that must be repaid over time, generally with interest

Financing Options

Debt financing, equity financing, reinvestment of retained earnings, government financing, gift financing.

Equity Financing

Owners exchange a sharae or portion of ownership of the organization for money

Reinvestment of Retained Earnings

Reinvestment of prior earnings. Benefits wealthy ownership groups.

Government Financing

Funding is provided from federal, state or municipal sources.

Gift Financing

Charitable donations, either cash or in-kind

Financial & Economic Factors

Economic cycle, television revenue, real estate, sustainability

Economic Cycle

Four stages: Growth, peak, recession, recovery

Television Revenue

Guaranteed form of revenue coming from television contracts.

Real Estate

Development surrounding stadiums and arenas. Offset the debt service of their facilities

Sustainability

The ability to meet today’s needs without compromising future generations’ ability to meet their own needs.

Accounting Basics

Double-entry bookkeeping, generally accepted accounting principles, T-accounts, debits and credits

Financial Statements

The primary source of information used to evaluate the financial health and performance of an organization

Three basic types of financial statements

Balance sheet, income statement, statement of cash flows

Balance Sheet

A picture or snapshot of the financial condition of an organization at a specific point in time

Three sections of a balance sheet

Assets, liabilities, owner’s equity

Owner’s Equity Formula

Owner’s Equity = Assets - Liabilities

Assets Formula

Assets = Liabilities + Owner’s Equity

How are assets and liabilities listed?

Order of liquidity

Income Statement

Shows an organization’s income or loss over a specified period of time, often on an annual or quarterly basis.

Statement of Cash Flows

Financial statement that tracks cash flowing into and out of an organization over a period of time

Financial Ratios

Key information about a company’s condition and performance

Current Ratio

The organization’s ability to meet its current liabilities with its current assets

Quick Ratio

The organization’s ability to meet its current liabilities with current assets other than inventory

Total asset turnover ratio

How efficiently the organization is using its assets to make money

Inventory turnover ratio

How often the organization sells and replaces its inventory over a specified period of time

Debt ratio

How the organization finances its operation with debt and equity

Interest coverage ratio

The organization’s ability to pay the interest on its debt owed

Net profit margin

The percentage of the organization’s total sales or revenues that was net profit or income

Return on equity

The return rate that the organization’s owners or shareholders are receiving on their investment

Market Value

An estimate of the organization’s worth according to the stock market

Price-to-earnings ratio

An estimate of how much investors will pay for each dollar of the organization’s earnings