week 6: financial management

Question 1

financial management

Answer 1

• planning and implementing the efficient and effective use of financial resources to achieve the goals of the organization
• goals vs means
• it is NOT just about numbers

Question 2

fundamentals off management

Answer 2

• income statement
• balance sheet
• cashflow statement

Question 3

assets

Answer 3

a resource owned or controlled (ie. money, a building, inventory)

Question 4

liabilities

Answer 4

• a debt or financial obligation (what you owe on a loan)

Question 5

owners/shareholders equity

Answer 5

total value of assets, taking into account liabilities
(equity = assets - liabilities)

Question 6

revenue

Answer 6

funds received by an organization; increase in money

Question 7

expenses

Answer 7

costs; outflow of money

Question 8

profit

Answer 8

financial gain (revenue > expenses)

Question 9

loss

Answer 9

financial loss (revenue< expenses)

Question 10

what are the different financial statements?

Answer 10

1. balance sheet
2. income statement
3. cashflow statement

Question 11

balance sheets

Answer 11

provides a clear picture of the wealth of a sport organization through a compilation of assets and liabilities
- assets always appear at the top of these balance sheets
assets = liabilities + equity
- assets can be appreciate or depreciate

Question 12

appreciate asset

Answer 12

value increase over time (ie. property)

Question 13

depreciate asset

Answer 13

value decreases over time (ie. cars, gym equipment, office supplies etc)

Question 14

income statements

Answer 14

provides a clear picture of the wealth of a sport organization through a compilation of revenues and expenses
- across a period of time
- records transactions when they occur regardless of when cash changes hands and shows the profit/loss achieved
- operating, investing, financing activities

Question 15

cashflow statement

Answer 15

profit and cash are NOT THE SAME
- organizations cannot trade on profit terms, only cash terms
- basically summarizes what has gone in and our over the last accounting period

Question 16

ratio analyses

Answer 16

• a method of evaluating an organizations financial performance by comparing in accounts with those of : previous years, budgets, other companies

Question 17

key points to establish when using ratios

Answer 17

what are the “units” of the ratio?
what does the ratio mean?
what does a change in the ratio mean?
what is the “norm” for the ratio?
what are the limitations of the raio?

Question 18

what are units for ratios

Answer 18

• growth
• profit
• productivity
• liquidity

Question 19

profitability (performance)

Answer 19

growth, profit, and productivity ratios
- gross profit

Question 20

liquidity

Answer 20

financial status ratios
- current ratio

Question 21

profitability ratios

Answer 21

gross profit ratio:

Question 22

gross profit ratio

Answer 22

how much profit an organization generates after deducting its costs of revenues
- gross profit ratio = (gross profit/profit) x 100%

Question 23

gross profit and profit

Answer 23

gross profit: total earned - total spent

profit: total earned

Question 24

liquidity ratios

Answer 24

current ratio

Question 25

current raio

Answer 25

establishes whether a business has enough resources to meet immediate financial requirements - current ratio = current assets/ current liabilities

Question 26

current assets

Answer 26

can be converted into cash easily

Question 27

current liabilities

Answer 27

short term

Question 28

ratio of 1

Answer 28

$1 of resource to meet $1 of liability - ideally, should be >1 but it varies by sector - caution: not necessarily good to have plenty of current assets

Question 29

what are the three types of budgets

Answer 29

1: operating budgets 2: program budgets 3: capital budgeting

Question 30

operating budgets

Answer 30

estimate as accurately as possible, the organizations' revenue and expenses

Question 31

program budgets

Answer 31

allocating a designated amount of funds to each activity or program

Question 32

capital budgeting

Answer 32

involve significant investments that are intended to produce some level of financial return or public benefit

Question 33

what are some benefits for budgeting in sports organizations

Answer 33

1. anticipate the future (assisting the strategic planning) 2. determine resource needs and program priorities 3. identify revenue shortfalls 4. manage and monitor spending 5. communicate the financial plans to key partners 6. set and measure financial performance goals

Question 34

costing

Answer 34

is essential to budgeting - provides a starting point for controlling and managing costs contrasting between fixed and variable costs

Question 35

fixed costs

Answer 35

remain constant - independent of the level of activity, or number of spectators, clients, or units

Question 36

variable costs

Answer 36

change in direct relation to the number of spectators clients and users

Question 37

break-even analysis

Answer 37

1. break even 2. profit 3. loss

Question 38

break even

Answer 38

revenues = expenses - not making money; not losing money

Question 39

profit

Answer 39

revenues > expenses - making money