Sports Finance Exam 2 Study Guide

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Which of the following is added to the risk-free rate to reflect the likelihood that the issuer will default? a. Inflation risk premium b. Default risk premium c. Liquidity premium d. Maturity risk premium e. None of the above

b. Default risk premium

The __________ lists the primary activities undertaken by a unit to achieve its goals and allocate dollar amounts to each. a. Revenue budget b. Expense budget c. Cash budget d. Capital expenditure budget e. Fixed asset budget

b. Expense budget

The __________ of a bond is the face value, or amount of principal that the bond is worth when the principal amount is due. a. Coupon rate b. Par value c. Maturity d. Current yield e. Yield to maturity

b. Par value

This budgeting system is associated with output budgeting in which specific goals and objectives form the framework for a strategic, goal oriented budgeting process. a. Incremental budgeting b. Program planning budgeting systems c. Modified program planning budgeting systems d. Zero based budgeting e. Modified zero based budgeting

b. Program planning budgeting systems

When sport leagues do not expand into a market that can support a franchise, or when they create rules to limit the movement of existing franchises, which of the following economic concepts is being applied? a. Demand b. Scarcity c. Price d. Equilibrium e. None of the above

b. Scarcity

Which of the following is the final step in the capital budgeting process? a. Conduct a post-audit analysis b. Select the capital budgeting method c. Determine the incremental cash flow of a project d. Determine the initial cost of the project e. None of the above

a. Conduct a post-audit analysis

Last year's budget is increased or decreased by a percentage using this method of budgeting (a form of line-item budgeting). a. Incremental budgeting b. Program planning budgeting systems c. Modified program planning budgeting systems d. Zero based budgeting e. Modified zero based budgeting

a. Incremental budgeting

Of the following capital budgeting methods, which one ignores the time value of money as it fails to take into account the cost of capital? a. Payback period b. Discounted payback period c. Net present value d. Internal rate of return e. Modified internal rate of return

a. Payback period

Which of the following is the number of years required to recover the initial capital investment of an organization? a. Payback period b. Discounted payback period c. Net present value d. Internal rate of return e. Modified internal rate of return

a. Payback period

A __________ is a forecast because it is based on projecting future sales. a. Revenue budget b. Expense budget c. Cash budget d. Capital expenditure budget e. Fixed asset budget

a. Revenue budget

Of the following, which is NOT a form of equity financing? a. A loan b. Retained earnings c. Government funding d. Gifts e. Donations

a. A loan

The vast majority of for-profit businesses in the United States operate as which of the following? a. Sole proprietorships b. General partnerships c. Subchapter S corporations d. Limited liability corporations e. C corporations

a. Sole proprietorships

The __________ forecasts how much cash the organization will have on hand and how much it will need to meet expenses. a. Revenue budget b. Expense budget c. Cash budget d. Capital expenditure budget e. Fixed asset budget

c. Cash budget

Which league prohibits the publicly traded ownership model? a. NBA b. MLB c. NFL d. MLS e. NHL

c. NFL

Which capital budgeting method is preferred by most managers as it analyzes cash flows rather than net earnings? a. Payback period b. Discounted payback period c. Net present value d. Internal rate of return e. Modified internal rate of return

c. Net present value

Which of the following is a discounted cash flow method that compares the present value of a project's future cash flows to its initial costs? a. Payback period b. Discounted payback period c. Net present value d. Internal rate of return e. Modified internal rate of return

c. Net present value

What percentage of businesses have equity ownership? a. 5% b. 25% c. 50% d. 75% e. 100%

e. 100%

In order for investors to purchase stock in a company, they will require a return of at least a certain amount. The amount investors require depends on which of the following? a. Production opportunities b. Time preferences for consumption c. Risk d. Inflation e. All of the above

e. All of the above

The initial cost of a capital project is the actual cost of starting the project adjusted for which of the following? a. Any installation, delivery or packaging costs b. Discounts to the initial price c. The sale of existing equipment or machinery d. Taxes e. All of the above

e. All of the above

The choices that individuals and organizations make regarding financial management are influenced by which of the following? a. Demand b. Scarcity c. Price d. Only a and c are correct e. All three—a, b, and c—are correct

e. All three—a, b, and c—are correct

The major disadvantages of forming a business under a _____ structure is that there is double taxation of profits, and the cost of forming the business and operating the business is higher than other structures. a. Sole proprietorships b. General partnerships c. Subchapter S corporations d. Limited liability corporations e. C corporations

e. C corporations

As facility projects can often lead to non-normal cash flows, it is recommended that which of the following be used when developing a capital budget? a. Payback period b. Discounted payback period c. Net present value d. Internal rate of return e. Modified internal rate of return

e. Modified internal rate of return

Of the following, which is an indirect source of public financing? a. Sales tax revenue b. Sin tax revenue c. Tourism tax revenue d. Lottery proceeds e. Tax abatements

e. Tax abatements

Which of the following budgets allows management to forecast future requirements related to property, facilities, and major equipment? a. Revenue budget b. Expense budget c. Cash budget d. Capital expenditure budget e. Fixed asset budget

d. Capital expenditure budget

This budgeting system requires starting the budgeting process with a zero base. a. Incremental budgeting b. Program planning budgeting systems c. Modified program planning budgeting systems d. Zero based budgeting e. Modified zero based budgeting

d. Zero based budgeting


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