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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

(76 cards)

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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
law of supply
increase in production as price of product increases | decrease in production as price falls
26
market equilibrium
intersection of supply and demand | consumers are willing to buy as much of a product as supplier is willing to sell
27
market surplus
suppliers are willing to produce and sell more of a product than consumers are willing to buy
28
market shortage
consumers are willing to buy more of a product than suppliers are willing to produce and sell
29
economic impact of sport events and facilities
events and activity bring substantial amount of economic activity into community spending of money can stimulate the local economy
30
what do sport economic impact studies etimate
changes in net economic activity in a community (revenue, tax dollars, jobs...)
31
methodology of sport economic impact studies
surveys | spending onhotels, cars, food, entertainment, merch...
32
software used for sport economic impact studies
RIMS II; IMPLAN
33
sport economic impact studies
collect info on spending patterns of visitors | suffer from disagreements and manipulation
34
economic impact
ex post | after an event
35
sport leverage
ex ante | before an event
36
functions of financial management
what to do with current financial resources | how to produce additional financial recources
37
key roles of financial manager
determine how much money an organization will need to meet long-term obligations determine how the organization will procure (beschaffen) those funds
38
how to produce neede funds / extra money
four main revenue streams of pro sports investments: PE/VC offering equity in team expansion teams
39
investments. PE/VC
PE -> private equity: riskless; sport teams invest in other companies VC -> venture capital: sport teams invest into start-up; risky
40
offering equity in team
give % of ownership in return of capital (buying of shares/stocks)
41
expansion teams
ourchase of ownership for a new team added to a league | money gets shared in between owners
42
financial statements
balance sheet income statement expenses
43
balance sheet
``` financial condition at a point in time consistent intervals (often ones a quarter) made up of three parts ```
44
3 parts of a balance sheet
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
current assets of a balance sheet
available within the next calender year
46
depreciation of assets
sth. becomes devalued (e.g. players when they get older) | can be positive because taxes are based on that
47
formular for total assets
liabilities + owner´s equity
48
income statement
results of doing business over a given period of time (profitability)
49
revenue included in income statement
income of noncash value )delivery of product not purchase)
50
expenses
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
net income
revenue - expenses
52
what do revenue and expenses depend on
type of the sport organization | nonprofit/for profit
53
sources of revenue unique to the sport industry
game attendance and ancillary purchase media rights sponsorships and endorsements licensed merchandise
54
sources of expenses unique to the sport industry
cost of sport facilities (Public-Private Funded) | cost of salary (>50% of total expenses for sport teams)
55
what does an Economic Impact Analysis (EIA) study
"net economic benefit" coming from facility or sporting event
56
rationale of economic impact of a sport event
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
3 components involved in an EIA
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
two sides of an investment decision
sports related or otherwise
59
questions connected to investment decision making
should govern. be active investors or passive observers who should pay for project who does the investment benefit
60
stakeholders that favor govern spending for sport projects
fans, players, restaurant in location
61
stakeholders that don´t favor govern spending on sport project
non-sport fans | other industries
62
how should EIAs be conducted
scientifically rigorous procedural reproducible unbiased
63
total economic impact
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
11 problems of EIA identified by Crompton related
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
what have sales mutipliers to do with
how new money ripples (rieseln) throughout the city´s business
66
what have income (profit) mutipliers to do with
how new money affects the actual income of residents.
67
what is higher sales or income multipliers
sales mutipliers are always higher
68
what do employment multipliers have to do with
how many full-time jobs will be created from the event or facility least reliable multiplier
69
define the area of interest
city, state. national? who are defined as "out of area visitors"? city´s economy smaller than state´s
70
what kind of visitors should be included
only outside visitors whose primary intention was the event | "accidental" new money should not count
71
what kind of visitors should be included
only outside visitors whose primary intention was the event | "accidental" new money should not count
72
who are "time-switchers" and "casuals"
people who planned to visit area, but change time to combine visit with event
73
what do sketchy multiplier coefficients include
same multipliers as another event, because they are similar rule of thumb to make statements multipliers without math to back them up
74
problem with reporting total economic benefit
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
ROI
benefits received/costs
76
what factors are part of a facility´s cost
build maintain service update and renovate

Kin 152 Sport and Fitness Management (5 decks)

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