Chapter 4

A business or organization that faces no direct competition for its products or services, and as a result possesses high bargaining power. monopoly
Leagues that compete directly with established leagues rival leagues
a system in which each team receives a percentage of various league-wide revenues revenue sharing
Occurs when a borrower is unable to repay a debt Default
Financial instruments typically issued by large corporate entities or governments that allow the borrower to borrow large dollar amounts, usually for a relatively long period of time Bonds
An amount of money that an organization borrows Debt
A summary of the revenues, expenses, and profits of an organization over a given time period income statement
The sum of debts that an organization owes liabilities
A financial statement that shows the assets, liabilities, and owners equity of an organization balance sheet
The difference between revenues and expenses also called profit income
The notion that the outcome of a competition is uncertain, and thus provides greater entertainment value for spectators competitive balance
The original amount that an organization borrows. one who authorizes another to act on his or her behalf as an agent. Principal
The uncertainty of the future benefits of an investment made today risk
A fee that a team incurs when it exceeds a set payroll threshold Luxury tax
Things that an organization owns that can be used to generate future revenues, such as equipment, stadiums, and league memberships assets
The funds that flow into an organization and constitute its income revenues
The cost incurred by an organization in an effort to generate revenues expenses
the difference between an organizations revenues and expenses profits
The amount of their own money that owners have invested in the firm. owners equity
Money that is paid for the use of money let, or principal, according to a set percentage (rate). interest
The process of developing a written plan of revenues and expenses for a particular accounting cycle; the budget specifies available funds among the many purposes of an organization to control spending and achieve organizational goals. budgeting
A financial mechanism that limits team payroll to a percentage of league revenues, thereby preventing large market teams from exploiting their financial advantage to buy the best teams salary cap
The expected dollar value return on the financial cost of an investment, usually stated as a percentage. The achievement of specific marketing and sales objectives from sport sponsorship Return on investments (ROI)
The concept of _______ is probably the best single measure of an industry’s impact. value-added
Which of the following most accurately defines the managerial discipline of finance? how an organization generates the funds that flow into the organization, how an organization allocates its funds once they are in the organization
In a basic sense, financial success relies on higher: profits
______ is/are anything that an organization owns that can be used to generate future revenues. assets
Which statement concerning the tradeoff between financing through debt or equity is true? Generally, financing with equity is more expensive than debt. Generally, financing with debt carries more risk than equity.
Which financial statement measures the financial performance of an organization over a specified time period, usually a year? income statement
All of the following are examples of “financial” mechanisms for altering competitive balance EXCEPT all of the above are financial mechanisms
Teams prefer their stadiums to have more luxury and club seating than ordinary regular seating. TRUE
The payroll threshold set for a luxury tax acts the same as a hard salary cap. FALSE
What financial mechanism helps improve the effectiveness of revenue sharing to improve competitive balance? hard salary cap
The National Collegiate Athletic Association’s (NCAA’s) 14-year contract with CBS and Turner Sports, signed in 2010, to televise the NCAA Men’s Basketball Tournament every March will pay the NCAA about ______ over the life of the contract. $11 billion
The Department of Commerce estimates total output for the sport industry in 2011 to be $231 billion. It, however, estimates the value added to be ______. $148 billion
The concept of value added is probably the best single measure of an industry’s impact. TRUE
Of the 121 sports facilities in use in 2010, it is estimated that 78% of all construction costs came from ______ sources. government (i.e., taxpayer)
______ leads all other corporate conglomerates in number of franchises owned with teams in the National Hockey League (NHL), Major League Soccer (MLS), American Hockey League (AHL), East Coast Hockey League (ECHL), and European hockey and soccer leagues. AEG
Generally, the NFL’s debt receives the highest credit rating in sports, indicating that the NFL has the highest credit risk, which means it borrows at the highest interest rate. FALSE

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