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Kin 152 Sport and Fitness Management > Midterm #1 Finance & Economics in the Sport Industry > Flashcards

Midterm #1 Finance & Economics in the Sport Industry Flashcards

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Sports Trivia flashcards
1
Q

financial situation of U.S. professional sports

A 
pro segment is growing
financial problem (imbalance)
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2
Q

method against the financial problem and imbalance in U.S. pro sports

A

revenue share

luxuary tax

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3
Q

formula for profitability

A

profit = total revenues - total costs

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4
Q

biggest part of revenue in pro sports

A

media contracts

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5
Q

rising costs

A

salaries, travelling, facilities, equipment

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6
Q

tough financial future decision for athletic departments

A

conference afiiliation
which divisions to compete in
which teams to field

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7
Q

solution for rising costs

A

find ways to increase revenue

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8
Q

what deals economics of sport with

A

scarcity (limited recources)

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9
Q

efficacy

A

get job done

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10
Q

economic interaction

A

exchange of recources to willing party

one product of interst for another item of value

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11
Q

2 or 3 areas of study withing economics of sport

A

macroeconomics
microeconomics
behavioral economics

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12
Q

what is macroeconomics concerned with

A

performance and behavior of the entire countries´ economies

unemployment, interst rate, inflation…

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13
Q

what is microeconomics concerned with

A

behavior and performance of single industries or individual businesses
price, cost, revenue, profit

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14
Q

what does the microeconomics model explain

A

behavior of producers and consumers

how market operate

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15
Q

market

A

place where consumers and producers exchange goods and services - doesn´t need to be a physical place

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16
Q

what is behavioral economics concerned with

A

behavior and decision-making of individuel people

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17
Q

what does behavioral economics often throw out

A

old assumptions macro-and microeconomics had to make
e.g. individuals´ judgement aren´t random and “offsetting”
there are cognitive biases that affect everyone consistently

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18
Q

examples what behavioral assumptions help to understand

A

why NFL coaches punt on 4th and inch
why teams draft certain players
how much sport gamblers make

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19
Q

why is microeconomics given most of the attention in sport

A

dmand and law of demand
supply and law of supply
market equilibrium
market surplus and shortage

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20
Q

quantity demand

A

the amount consumers are willing to buy at various prices

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21
Q

law of demand

A

the cheaper the price - the higher the demand

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22
Q

demand

A

relationship between the price of a product and the amount of a product consumers are willing to buy

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23
Q

supply

A

relationship between the price of a product and the amount of a product a suppliers is willing to produce and sell

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24
Q

quantity supplied

A

the amount of a product suppliers are willing to produce and sell at various prices

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25
Q

law of supply

A

increase in production as price of product increases

decrease in production as price falls

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26
Q

market equilibrium

A

intersection of supply and demand

consumers are willing to buy as much of a product as supplier is willing to sell

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27
Q

market surplus

A

suppliers are willing to produce and sell more of a product than consumers are willing to buy

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28
Q

market shortage

A

consumers are willing to buy more of a product than suppliers are willing to produce and sell

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29
Q

economic impact of sport events and facilities

A

events and activity bring substantial amount of economic activity into community
spending of money can stimulate the local economy

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30
Q

what do sport economic impact studies etimate

A

changes in net economic activity in a community (revenue, tax dollars, jobs…)

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31
Q

methodology of sport economic impact studies

A

surveys

spending onhotels, cars, food, entertainment, merch…

32
Q

software used for sport economic impact studies

A

RIMS II; IMPLAN

33
Q

sport economic impact studies

A

collect info on spending patterns of visitors

suffer from disagreements and manipulation

34
Q

economic impact

A

ex post

after an event

35
Q

sport leverage

A

ex ante

before an event

36
Q

functions of financial management

A

what to do with current financial resources

how to produce additional financial recources

37
Q

key roles of financial manager

A

determine how much money an organization will need to meet long-term obligations
determine how the organization will procure (beschaffen) those funds

38
Q

how to produce neede funds / extra money

A

four main revenue streams of pro sports
investments: PE/VC
offering equity in team
expansion teams

39
Q

investments. PE/VC

A

PE -> private equity: riskless; sport teams invest in other companies
VC -> venture capital: sport teams invest into start-up; risky

40
Q

offering equity in team

A

give % of ownership in return of capital (buying of shares/stocks)

41
Q

expansion teams

A

ourchase of ownership for a new team added to a league

money gets shared in between owners

42
Q

financial statements

A

balance sheet
income statement
expenses

43
Q

balance sheet

A 
financial condition at a point in time
consistent intervals (often ones a quarter)
made up of three parts
44
Q

3 parts of a balance sheet

A

assets (things that are value) - current and long-term
liabilities (thing we have to pay for) - current and long-term
owner´s equity - capital and retained earning

45
Q

current assets of a balance sheet

A

available within the next calender year

46
Q

depreciation of assets

A

sth. becomes devalued (e.g. players when they get older)

can be positive because taxes are based on that

47
Q

formular for total assets

A

liabilities + owner´s equity

48
Q

income statement

A

results of doing business over a given period of time (profitability)

49
Q

revenue included in income statement

A

income of noncash value )delivery of product not purchase)

50
Q

expenses

A

direct - tied directly to cost of making product
operating - other normal expenses (slaries, rent…)
other - expenses related to outside of normal business operations
income tax - paid to state/federal government, based on revenue

51
Q

net income

A

revenue - expenses

52
Q

what do revenue and expenses depend on

A

type of the sport organization

nonprofit/for profit

53
Q

sources of revenue unique to the sport industry

A

game attendance and ancillary purchase
media rights
sponsorships and endorsements
licensed merchandise

54
Q

sources of expenses unique to the sport industry

A

cost of sport facilities (Public-Private Funded)

cost of salary (>50% of total expenses for sport teams)

55
Q

what does an Economic Impact Analysis (EIA) study

A

“net economic benefit” coming from facility or sporting event

56
Q

rationale of economic impact of a sport event

A

residents give money to govern. (taxes)
govern. spends money to put on sporting event
sporting event/facility attracts new money from outside
facility earn a ROI for city and residents

57
Q

3 components involved in an EIA

A

of people that attend an event
the amount each visitor spent
an economic multiplier (their money gets spent more than ones within the community - on average how many times?)

58
Q

two sides of an investment decision

A

sports related or otherwise

59
Q

questions connected to investment decision making

A

should govern. be active investors or passive observers
who should pay for project
who does the investment benefit

60
Q

stakeholders that favor govern spending for sport projects

A

fans, players, restaurant in location

61
Q

stakeholders that don´t favor govern spending on sport project

A

non-sport fans

other industries

62
Q

how should EIAs be conducted

A

scientifically rigorous
procedural
reproducible
unbiased

63
Q

total economic impact

A

direct impact (initial money spent by visitors) + indirect impact (ripple effect of re-circulating direct impact $ (B2B)) + induced impact (employees´ spending additional wages from direct impact $ (P2B, P2P))

64
Q

11 problems of EIA identified by Crompton related

A
  1. Using sales-based multipliers instead of household income-based multipliers
  2. Using employment multipliers
  3. Using incremental Multiplier Coefficients
  4. Defining the area of interest
  5. Inclusion of local spectators/residents
  6. Inclusion of ‘time-switchers’ and ‘casuals’
  7. Sketchy Multiplier coefficients
  8. Reporting ‘Total’ Economic Benefit
  9. Confusing Turnover and Multiplier
  10. Not discussing the opportunity costs
  11. Ignoring the costs (!!!)
65
Q

what have sales mutipliers to do with

A

how new money ripples (rieseln) throughout the city´s business

66
Q

what have income (profit) mutipliers to do with

A

how new money affects the actual income of residents.

67
Q

what is higher sales or income multipliers

A

sales mutipliers are always higher

68
Q

what do employment multipliers have to do with

A

how many full-time jobs will be created from the event or facility
least reliable multiplier

69
Q

define the area of interest

A

city, state. national?
who are defined as “out of area visitors”?
city´s economy smaller than state´s

70
Q

what kind of visitors should be included

A

only outside visitors whose primary intention was the event

“accidental” new money should not count

71
Q

what kind of visitors should be included

A

only outside visitors whose primary intention was the event

“accidental” new money should not count

72
Q

who are “time-switchers” and “casuals”

A

people who planned to visit area, but change time to combine visit with event

73
Q

what do sketchy multiplier coefficients include

A

same multipliers as another event, because they are similar
rule of thumb to make statements
multipliers without math to back them up

74
Q

problem with reporting total economic benefit

A

If a city contributes $2M towards a $100M facility, it should only be entitled to 1/50 of the economic benefit generated by the facility
intersted in “mariginal” economic benefit

75
Q

ROI

A

benefits received/costs

76
Q

what factors are part of a facility´s cost

A

build
maintain
service
update and renovate

Kin 152 Sport and Fitness Management (5 decks)

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