Definitions of 5 ways to financing an organization
- debt financing: organizations borrow $ that must be repaid over a period of time, usually with interest
-equity financing: a share or portion of ownership is exchanged for $ (funds obtained w/o incurring debt)
-reinvestment of retained earnings: finance
most common model for team ownership
Multiple owners/ private investment syndicate model
financial statements
the primary source of information used to asses the financial health and performance of an organization
the organization's ability to pay short-term liabilities or debt with its short-term assets
liquidity
based on finical statements, _________ provides key information about the condition and performances of a company and are vital for managers to understand
Ratios
three interrelated sectors of finance
-balance sheet, income statements, cash flow statements
-money and capital markets, investments, financial management
-financial management, financial economy, investments
a profitability ratio that measures what percentage of an organization's total sales or revenues was net profit or income?
net profit margin
the measure of uncertainty about future conditions that may affect the value of money?
Risk
_____ risk premium= ____ credit quality and _____ total risk
1) increase
2)decrease
3)increase
_____ risk premium= ____ time invested and _____ total risk
1) increase
2)increase
3)increase
the likelihood of low or negative future returns
Investment Risk
the rate of return required over and above the risk-free rate?
risk premium
risk of time, capital finance, operating budgets, league loan pools, economic conditions
Sources of risk
what is determined by comparing the risk of one asset to another?
level of risk
the purchasing power of a dollar?
Real Value
devaluation of money over time?
inflation
factors impacting the change in value of money?
-inflation: the devaluation of money over time
-risk: uncertainty about future and future returns
-liquidity: the ability for assists to be converted into cash
____ is based on estimates of future inflation rates, interest rates, and business activity
discount rate
as the discount rate ____, the present value of future income ____.
1)increases
2) decrease
today's value of future cash flows?
Present Value
the power of compounding interest is enhanced if the compounding occurs______?
more often
discount rate?
measure of risk or uncertainty of time
-utilized in estimates of present/future value
-often called capitalization rate
the present value formula is the inverse of the future value formula?
true
the supply and demand is the same for sports as it is in general?
False
issues encountered at the macroeconomic level?
national income, unemployment,and inflation
the allocation of an item's loss of value over a period of time?
depreciation
_____ is the quantity of a product or service desired by consumers?
demand
when demand increases then ticket price _____?
increase
depreciation method that is most aggressive at allocating loss of useful life to the early years of the asset's use?
straight-line
the major disadvantages of forming a business under which structure is that there is double taxation of profits and the cost of forming the business and operating the business is higher that then other structures?
c corporation
purpose of budgeting
financial plan that sets out a businesses financial targets expressed in monetary terms
not an advantage of zero-based budgeting?
unrealistic and forces prioritization
the most common approach to budgeting amongst sport organizations?
Modified zero-based budgeting
capital expenditure budget?
-analysis of potential additions to fixed assets
-long-term decisions involving large expenditures
Future Value
FV=PV(1+r)^n
Debt Ratio
Interest Compounding
DR= total liabilities/total assets
IC=EBIT/interest expenses
Present Value
Present Value annuity
PV=FV{1/(1+r)^n}
PVA=PMT[{1/(1+r)^n}/r]
compounding interest intervals
FV=PV(1+r)^n
-divide annual interest rate by compounding rate
beta
https://www.youtube.com/watch?v=QGQLXe7p-Tk
depreciation
D=(cost-salvage)X(remaining years/sum of years of useful life)