Questions and Answers
What is finance?
The science or field of study of fund/money management.
What is accounting?
The action or process of keeping financial accounts.
What is economics?
The study of how people choose to use resources.
Describe the focus of finance in simple terms.
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What are diverse objectives in financing sport organizations?
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Which of the following are ways to finance the operation of sport organizations? (Select all that apply)
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What is debt financing?
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What is debt?
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What are bonds?
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What is credit in sports finance?
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What is equity financing?
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What are retained earnings?
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What is government funding in sports?
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What is gift financing?
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In simple terms, what does debt mean?
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What types of entities affect the structure of the sport business?
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Study Notes
Finance
- Field dedicated to fund and money management.
- Key aspects include investment timing, sources, spending, and the time value of money.
Accounting
- Process of maintaining financial accounts.
- Involves recording, summarizing, reporting, and analyzing financial transactions.
Economics
- Study of resource utilization and allocation.
- Examines production, consumption, and transfer of wealth across households, businesses, and governments.
Simplified Concepts
- Accounting focuses on transaction recording, while economics emphasizes resources and production.
- Finance integrates principles from both disciplines to manage funds.
Financing Sport Organizations
- Owner objectives vary between maximizing wealth and achieving on-field success.
- Considerations include celebrity status and community asset protection.
Methods of Financing Sport Operations
- Debt financing
- Equity financing
- Reinvestment of retained earnings
- Government financing
- Gift financing
Debt Financing
- Involves borrowing money to be repaid with interest over time.
- Sport organizations often issue bonds or secure loans (e.g., New Yankee Stadium financed through bonds and bank loans).
- Lender does not obtain ownership; repayment obligation is limited to the debt.
Debt
- Represents the borrowed amount that needs repayment, including principal and interest.
Bonds
- Financial instruments for borrowing large amounts over long periods (20+ years).
- Typically issued by government or corporations for projects like stadium construction.
Credit
- Some leagues have "credit facilities" for teams to borrow at favorable interest rates.
- NFL debt rated highly, signifying low credit risk and lower borrowing costs.
Equity Financing
- Involves trading a share of ownership for capital.
- Allows organizations to access funds without incurring debt.
Retained Earnings
- Refers to reinvestment of profits instead of distributing them as dividends.
- Common method for financing acquisitions and operational improvements in privately-held sports organizations.
Government Funding
- Private sports organizations often receive financial support from government entities.
- Funding types include land use agreements, tax incentives, direct financial support for stadiums, and infrastructure upgrades.
Gift Financing
- Comprises charitable contributions, both cash and in-kind, to sports organizations.
- Crucial for the operational and investment income of major collegiate sports programs.
Definitions Recap
- Debt: borrowing that must be repaid.
- Equity: exchanging ownership stake for funds.
- Retained Earnings: reinvested previous profits.
- Government: funding from governmental levels.
- Gift: donations supporting the organization.
Structure of Sport Business
- Organizational structure determines tax and legal responsibilities.
- Types include governmental, non-profit, sole proprietorship, partnership, and limited liability corporations.
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Description
Explore key terms in Sport Finance through these flashcards. Understand vital concepts like Finance and Accounting vital for effective money management in sports. Enhance your knowledge and prepare for advanced topics in financial studies.
