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Sport Finance -- Taylor -- Wolfe
Exam #1
35
Sports
Undergraduate 2
10/18/2012

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Cards

Term
Internal vs. External Constraints
Definition
internal -- things that have occurred in the past within the company that are still currently affect the company -- things that are currently occurring in the external environment that are affecting the company
Term
What must a team do in order to get a new stadium?
Definition
Increase public attention or at least give the impression that the stadium will increase attention
Term
Benefits of a new stadium
Definition
Increased public attention, more ticket sales, new sponsorship opportunities
Term
Revenue vs. Expenses and examples
Definition
Revenue = cash coming in; ex: tickets, broadcast contracts, concessions, sponsorships
Expenses = costs that are incurred; ex: salaries, equipment, travel, rent, insurance
Term
Finance vs. accounting
Definition
finance looks at what will or should happen, accounting is what DID happen
Term
4 maneuvers used by owners to show a loss of money
Definition
1) Owners receive salaries from their teams
2) Shifting revenue among different entities (team, stadium, broadcasting, etc)
3) Subchapter S corporations
4) Veeck Tax Shelter Convention
Term
How do teams use a Subchapter S corporation to show a loss of money
Definition
shareholders report gains/losses on the individual 1040 according to proportional share
Term
Marketable securities (def)
Definition
instruments so widely accepted and purchased by others that they are very similar to cash
Term
low-risk securities
Definition
U.S. Treasury bills, Commercial paper
Term
high-risk securities
Definition
Corporate bonds, Common stocks
Term
Government Entity
Definition
Can run numerous sport entities at a time.
Most sports organizations throughout the world are owned or operated by gov't entities.
Olympic programs are Gov't entities
Term
Sole proprietorship
Definition
-Business owned by a single person
-Most businesses in the world and Sole Proprietorship
-Independent contractors such as pro bowlers, figure skaters, and race car drivers are sole proprietorships
Term
General vs. Limited partnerships
Definition
General -- individuals/groups combine resources to work together
Limited -- One partner manages and the others are only financial managers
Term
Subchapter S Corporations
Definition
-May have up to 100 shareholders
-Must be based in U.S.
-Can own subsidiaries
Term
C Corporations
Definition
Simply corporations
Term
Limited Liability Corporations
Definition
Benefits of corporations and partnerships w/o the drawbacks of typical corporations
Term
current vs. fixed assets
Definition
current is highly liquid -- cash, a/r, inventory, etc.
fixed is not liquid -- PP&E
Term
Net working capital
Definition
current assets - current liabilities
Term
Current ratio; formula & explain
Definition
(current assets)/(current liabilities)

measures if the sale of current assets will cover current liabilities
Term
Acid test ratio (quick ratio)
Definition
(Cash + short term investments + Net Receivables)/(current liabilities)

examines whether a firm can pay its current liabilities without relying on the sale of inventories
Term
Total asset turnover ratio
Definition
(total revenue)/(avg. total assets)

how effectively the firm uses its assets to generate sales
Term
Inventory turnover ratio
Definition
(COGS)/(Avg. inventory)

How many times during the year inventory is purchased and sold
Term
Receivable turnover ratio
Definition
(Net Credit Sales)/(Avg. Net receivables)

how often your receivables are collected
Term
Debt ratio
Definition
(Total Liabilities)/(Total Assets)

high ratio = greater chance for distress/bankruptcy
Term
Net profit margin
Definition
(net income)/(revenues)

measures the extent to which a business is profitable
Term
return on assets
Definition
(net income)/(avg. total assets)

measures amount of profits earned on the investment in all assets of the firm
Term
Return on equity
Definition
(net income)/(avg. stockholders' equity)
Term
Annual return per share
Definition
(increase/decrease in value) + dividends
Term
Earnings per share
Definition
(Net income)/(avg. # of shares outstanding)
Term
Dividend payout ratio
Definition
(dividends per share)/(earnings per share)
Term
Price-earnings ratio
Definition
(price per share)/(earnings per share)
Term
Present Value formula
Definition
PV = (FV)/(1+r)^2
Term
Future Value Formual
Definition
FV = C*(1+r)^t

C = initial amount of cash that is invested today
r = interest rate or rate of return
t = number of years the cash is invested
Term
Perpetuity
Definition
Single cash flow per year forever in the future

If perpetuity pays $100 per year, interest rate of 8%, PV = $100/.08, PV = 1,250
Term
Benchmarking
Definition
allows a business to compare itself with other similar businesses
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