440 final exam

Why is the budgeting process important to the success of a sports organization

-It defines in clear terms the financial objectives and direction for each department. -Establishes organization budget goals -Identifies what has to happen during the process -Explains and describes the changes that may affect the planned actions

what are the 3 major sections on the balance sheet and an example of each.

Assets - Cash Liabilities - accounts payable Owner's equity - stock in the company

what is a balance sheet statement

A financial snapshot of an organization in a specific point in time

Fund management involves three areas, what are they

Accounting, Economics, Statistics

the focus of capital expenditure includes

All the above -increasing organization future earnings -reducing organizations future operating cost -acquiring operational assets needed

planning as first step prior to forecasting and budgeting involves:

All the above: establishment of objectives formulation, evaluation and selection of actions required

Two of the principles for public financing are

Equity and Efficiency

The purpose of feasibility study is to determine...

If a project makes sense? How successful will the project be? Is it affordable? Is there a market for the project? What are the economic impact?

T/F: Capital projects involves spending of $20,000 or more

False

T/F: Financial ratios are used to evaluate an organization current performance to its current performance

False

T/F: Return on equity measures how efficient an organization is with debt

False

T/F: Return on equity ratio formula is Net income/Long liabilities

False

T/F: Sources of risk does not include the conditions of the economy

False

T/F: The higher the organization debt ratio, the lower the risk of financial problems

False

T/F: amortization of project cost is not required in capital projects

False

T/F: budget formulation process do not involve the establishment of an organization budget goals

False

T/F: budgeting deals with what the future will look like

False

T/F: in capital budgeting, achieving the best return on a project is not important

False

T/F: in measuring return vs. risk, dollar return method takes into account size of investment and timing

False

T/F: in measuring risk, level of risk and timing is not important

False

T/F: net profit margin does not take into account sales.

False

T/F:Debit financing does not involve borrowing

False

What are the 5 forms of financing and explain only how two of them are used within sport organization?

Debt financing Equity Financing Retained Earnings Government Financing - Gov't raises taxes in a city to help fund the building of a new facility Gift Financing - Donations made to a sports organization that allows them to pay for a new building

what are the economic principles affect an organization decision making, and how is one of the principles used in sports

Demand, price, scarcity Scarcity is used in sport for -Expansion policy -Movement Rules

Public Financing Principles def.

Determines the financing source that fits a project

Capital budgeting is a process that:

Develop and compare alternative projects for implementation

What are the factors of production

Land, labor, capital, enterprise

Parts of a feasibility study

Market Demand Location and Construction Costs Financing of Project Economic and Fiscal Impact

equity principles

Measure of fairness

Teams and Owners Why new stadium?

New Stadium has many benefits NFL rule on profit sharing Leagues benefits Fans benefits Cities and the geographic regions

Curent expenditures involves:

None of the above

Disadvantages of zero based budget include

None of the above

budget formulation process in an organization is important because?

None of the above

the main difference between Modified zero based budget and zero based budget is

None of the above

What type of budgeting approach will a city use to plan building a new arena and list the elements involved with this type of budgeting approach

Program Planning Budgeting System (PPBS) -Programming -Planning -Budgeting -Operation -Evaluation

what are the 4 approaches to budgeting (look over how they are different and an example of who would use it)

Incremental Zero based budgeting modified zero based budgeting program planning budgeting system

what are the four parts to the capital budgeting process (look over how each differ)

Initial cost determination incremental cash flow select project project post audit

what are the methods managers use to evaluate capital projects?

Internal rate of returns Net present value payback period

T/F: Forecasting is concerned with what the future will look like

True

What are the four common depreciation methods, and what is common in all four methods?

Straight line method sum of year's digits double declining method units of production *all have in common showing the useful life of an asset and the declining value of an asset.

Vertical Equity

Tax payer ability to pay

Efficiency Principle

Tax to be easy to understand Simple to collect Low compliance cost Difficult to evade

Benefit Equity:

The user pays

For both Net present value and payback methods:

none of the above

capital budgeting process includes:

none of the above

the allocation of an asset lost value over a period of time is

depreciation

payback period

is the amount of time it takes for the company to see q return on their investment to a certain project

If an organization's current ratio value is below 1.00, what might that suggest about the organization

it shows that the companies liabilities are great than their assets. this could suggest that the company in question would be unable to pay their obligations if it came time for them to be due.

What is the difference between an income statement and a statement of cash flow?

statement of cash flows is a Financial statement that tracks cash flowing into and out of an organization over a given period of time. has three parts: Operating, Investing, Financing income statement - Shows an organization's income (loss) over a specified period of time, frequently on an annual or quarterly basis. Has three parts: Revenues and Expenses, Non-operating, Net Income

what is net present value

tells managers exactly the value of what they will get out of their project, but does not consider capital in the company

what is the formula to the debt ratio?

total liabilities / total assets

three types ideas in the equity principle

vertical, horizontal, benefit

In the balance sheet statement, Assets =?

Liabilities + owner's equity

what are the five ways to quantitatively evaluate an organization financial condition?

Liquidity, asset management, financial leverage, profitability, market value

what is the formula to the Quick Ratio?

(Current assets - inventory)/ Current liabilities

In most cases in sport feasibility studies address...

-Whether a city, university, community, etc. should build a sporting complex -Whether a city should go after a major sporting event (i.e. Olympics, NCAA playoffs, NBA playoffs, Super bowl, etc.) -Whether a university should undergo a major sports facility expansion -What type of management style will be used (i.e. in-house management, or private management)

Horizontal Equity

: Tax payers with similar income should pay the same amount

What is the difference between budgeting and forecasting?

Budgeting- is the financial revenue and expenses that are at a given point in time. The budget is the ideal plan of how all of the money will be issued to effectively run the organization. the budget deals with "how the future should look like". Forecasting - is a big prediction. when managers forecast they are predicting what the "future will be". they look at current conditions and past budgets to make their prediction. In forecasting they are predicting what the future will look like.

Consumer price index is produced by

Bureau of labor statistics

Sub-budgets include:

Revenue, expense, cash and Capital budgets

What are the two main ratios used to measure an organizations ability to pay its short term obligations? And what is the main difference between the two?

-Current and Quick ratio -Main difference: Quick ratio subtracts out the inventory

Some of the best practices in an organization budgeting includes:

-Input for all departments -Information shared to all -Aligned budget to organization strategic plans and actions -Establish and leverage a well organized and understood data warehouse -Changes to the budget need to be easy and quick

What is the purpose of post audit in capital budgeting process

-This the final step in capital budgeting -Project actual results is compared with the assumptions made at inception -Deviations are identified and explained

what is the difference between capital and current expenditure?

Current Expenditure: -Short Term in nature -Normal operating budget item -Can not be amortized Capital Expenditure: -Involves long term -Total amount amortized over the life of the project -Commitment of resources today with future benefits

what is the formula to the Current Ratio?

Current assets/ current liabilities

Individuals involved with budgeting should only consider budget time horizon

False

Payback method takes into account the cost of capital

False

what is internal rate of returns

shows how fast the company will get its money back to build the project