SPTE 440 - Final Study Guide MC & T/F

Which of the following is a picture or snapshot of the financial condition of an organization at a specific point in time? a. Balance sheet b. Income statement c. Statement of cash flows d. Budget e. None of the above

Balance Sheet

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

C Corporations

T or F Asset-backed securities are a public source of stadium financing.

False

T or F During Phase 2 of the construction of sport facilities, there was a significant decrease in the amount the public was willing to pay for construction costs.

False

T or F The geographic moniker chosen by a team (e.g., Chicago Cubs, Colorado Rockies) affects the amount cities are willing to pay to publicly finance their stadiums.

False

T or F Tourism tax revenues are the most common source of public financing for sport facilities.

False

Historically, which bond was the most common method used for facility financing? a. General obligation bonds b. Auction-rate bonds c. Lease revenue bonds d. Revenue bonds e. All of the above

General Obligation Bonds

This type of financing includes charitable donations, either cash or in-kind, made to an organization and is the primary source or operating and investing income for major collegiate sports programs. a. Debt b. Equity c. Retained earnings d. Government e. Gift

Gift

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

Government Funding

Which of the following is a bond issued by a municipality in which the revenue stream backing the payment of the bond is an actual lease, not just revenues from a source? a. General obligation bonds b. Auction-rate bonds c. Lease revenue bonds d. Revenue bonds e. All of the above

Lease Revenue Bonds

Other than __________, sport leagues in the United States are subject to the Sherman Act. a. The National Football League b. The National Basketball League c. Major League Baseball d. The National Hockey League e. Major League Soccer

Major League Baseball

An estimation of an organization's worth according to the stock market is __________. a. Interest coverage ratio b. Net profit margin c. Return on equity d. Market value e. Price-to-earnings ratio

Market Value

When calculating the nominal interest rate, which of the following premiums is added to account for the risk of time and interest rate risk?a. Inflation premium b. Liquidity premium c. Default risk premium d. Maturity risk premium e. None of the above

Maturity risk premium

Which of the following is calculated by investigating changes in the Consumer Price Index (CPI)? a. Inflation rate b. Interest rate c. Business activity rate d. Development rate e. Discount rate

Inflation rate

Which ratio measures how often an organization sells and replaces its inventory over a specified period of time? a. Current ratio b. Quick ratio c. Total asset turnover ratio d. Inventory turnover ratio e. Debt ratio

Inventory Turnover Ratio

1. Which type of bond is a form of public finance paid off solely from specific, well-defined sources such as hotel taxes, ticket taxes, or other sources of public funding? a. General obligation bonds b. Auction-rate bonds c. Lease revenue bonds d. Revenue bonds e. All of the above

Revenue Bonds

Which of the following is a single cash flow per year forever into the future? a. Annuity b. Infinite annuity c. Perpetuity d. Inflation rate e. Infinite cash flow

Perpetuity

1. During which phase of facility construction were most sport facilities built with private dollars? a. Phase 1 b. Phase 2 c. Phase 3 d. Phase 4 e. None of the above

Phase 1

1. During which phase of facility construction were sport facilities primarily financed using general obligation bonds? a. Phase 1 b. Phase 2 c. Phase 3 d. Phase 4 e. None of the above

Phase 2

1. During which phase of construction were stadiums built with a mix of public and private dollars? The stadiums usually only housed one major tenant, not two. a. Phase 1 b. Phase 2 c. Phase 3 d. Phase 4 e. None of the above

Phase 3

Which of the following was the first major professional sports team to declare bankruptcy in the middle of a long-term facility lease? a. New York Yankees b. Phoenix Coyotes c. Milwaukee Brewers d. San Francisco Giants e. New England Patriots

Phoenix Coyotes

For this type of bond, the annualized interest rate on the bonds is reset at auctions held every 7 to 35 days. a. General obligation bonds b. Auction-rate bonds c. Lease revenue bonds d. Revenue bonds e. All of the above

Auction-rate bonds

In general, the chances of receiving back an investment in a large market Major League Baseball team is __________ that for a small market team. a. Less than b. Slightly less than c. Equal to d. Greater than e. None of the above

Greater than

The __________ shows the organization's income over a specified period of time. a. Balance sheet b. Income statement c. Statement of cash flows d. Budget e. None of the above

Income Statement

If it is expected that it will be hard to sell a security, which of the following will be added? a. Inflation risk premium b. Default risk premium c. Liquidity premium d. Maturity risk premium e. None of the above

Liquidity premium

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

All of the above

Of the following bond types, which is issued by a public entity? a. General obligation bonds b. Auction-rate bonds c. Lease revenue bonds d. Revenue bonds e. All of the above

All of the above

Typically, owners in a specific industry compete for wealth maximization. Owners in sport might not be interested in this goal. Rather, they may be interested in __________. a. Winning championships b. Seeking celebrity status c. Protecting a community asset d. All of the above e. None of the above

All of the above

What is determined by comparing the risk of one asset to another? a. Risk of time b. Level of risk c. Risk premium d. Liquidity premium e. None of the above

Level of risk

Risk increases as the length of time funds are invested increases. What is this known as? a. Risk of time b. Level of risk c. Risk premium d. Liquidity premium e. None of the above

Risk of time

T or F Sin taxes are taxes on alcohol and cigarettes

True

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

100%

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

All three - a, b, and c- are correct

When the citizens of Hamilton County, Ohio, decided to raise their taxes to fund two new sports stadiums rather than to raise taxes for something like improving the educational system in the county, they missed a chance to improve the educational system. What is this known as? a. A marginal cost b. A fixed cost c. A variable cost d. An opportunity cost e. None of the above

An opportunity cost

A series of equal payments or receipts made at any interval of time is referred to as which of the following? a. Cash inflow b. Cash outflow c. Annuity d. Lump sum e. None of the above

Annuity

1. Here, a sport team may package together guaranteed or expected revenue streams and sell bonds based on the assets. a. Certificate of participation b. Tax increment financing c. Contractually obligated income d. Asset backed securities e. None of the above

Asset backed securities

1. Which of the following is sold by either a government agency or a non-profit corporation set up to build a facility? a. Certificate of participation b. Tax increment financing c. Contractually obligated income d. Asset backed securities e. None of the above

Certificate of participation

1. When a team has signed multiyear contracts to receive money, these revenue sources can be used as collateral to get loans. This is referred to as __________. a. Certificate of participation b. Tax increment financing c. Contractually obligated income d. Asset backed securities e. None of the above

Contractually obligated income

Which ratio is an indication of whether an organization can meet its current liabilities―those due within a year―with its current assets? a. Current ratio b. Quick ratio c. Total asset turnover ratio d. Inventory turnover ratio e. Debt ratio

Current Ratio

Which of the following is the amount earned annually from the interest payment compared with the price of the bond reflected as a percentage return? a. Coupon rate b. Par value c. Maturity d. Current yield e. Yield to maturity

Current Yield

When an organization borrows money that must be paid back over time, usually with interest, what kind of financing is being used? a. Debt b. Equity c. Retained earnings d. Government e. Gift

Debt

Which ratio measures how an organization finances its operation with debt and equity? a. Current ratio b. Quick ratio c. Total asset turnover ratio d. Inventory turnover ratio e. Debt ratio

Debt Ratio

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

Default Risk Premium

What is a measure of risk or uncertainty of time? a. Inflation rate b. Interest rate c. Business activity rate d. Development rate e. Discount rate

Discount rate

Which of the following is the depreciation method that is most aggressive at allocating loss of useful life to the early years of the asset's use? a. Straight-line b. Sum-of-years digits, decelerating deprecation c. Sum-of-years digits, accelerating depreciation d. Double-declining balance e. Units of production

Double-declining balance

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

NFL

In its policies regarding deferred salaries, which of the following leagues has stated that deferred payments must be placed by the team in a league fund for administration and future disbursement? a. National Basketball Association b. Major League Soccer c. National Hockey League d. National Football League e. Major League Baseball

National Football League

Which of the following is a profitability ratio that measures the percentage of an organization's total sales or revenues that was net profit or income? a. Interest coverage ratio b. Net profit margin c. Return on equity d. Market value e. Price-to-earnings ratio

Net Profit Margin

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

Par Value

Which of the following is today's value of a future cash flow? a. Nominal value b. Real value c. Future value d. Present value e. None of the above

Present value

Which of the following is an estimate of how much money investors will pay for each dollar of the organization's earnings? a. Interest coverage ratio b. Net profit margin c. Return on equity d. Market value e. Price-to-earnings ratio

Price-to-earnings Ratio

1. What is the interest rate that banks charge their best customers? a. Discount rate b. Federal funds rate c. Prime rate d. Statement rate e. None of the above

Prime Rate

Which of the following refers to the purchasing power of a dollar? a. Nominal value b. Real value c. Future value d. Present value e. None of the above

Real value

Which of the following measures the return rate an organization's owners or shareholders are receiving on their investments? a. Interest coverage ratio b. Net profit margin c. Return on equity d. Market value e. Price-to-earnings ratio

Return on Equity

Which of the following is the rate of return required over and above the risk-free-rate? a. Risk of time b. Level of risk c. Risk premium d. Liquidity premium e. None of the above

Risk premium

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

Scarcity

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

Sole Proprietorship

The owners of which franchise agreed to a perpetuity when they negotiated to fold their team after the ABA and NBA merger. a. New York Nets b. Denver Nuggets c. San Antonio Spurs d. Indiana Pacers e. St. Louis Spirits

St. Louis Spirits

Which financial statement tracks cash in and cash out of an organization over a specified period of time? a. Balance sheet b. Income statement c. Statement of cash flows d. Budget e. None of the above

Statement of Cash Flows

Which of the following methods of depreciation attempts to take the non-linear loss of a fixed asset's value into account with depreciation occurring late after purchase. Using this method, the denominator for a fixed asset with a useful life of five years is 15. a. Straight-line b. Sum-of-years digits, decelerating deprecation c. Sum-of-years digits, accelerating depreciation d. Double-declining balance e. Units of production

Sum-of-years digits, accelerating deprecation

Which of the following methods of depreciation attempts to take the non-linear loss of a fixed asset's value into account, with depreciation occurring quickly after purchase. Using this method, the denominator for a fixed asset with a useful life of five years is 15. a. Straight-line b. Sum-of-years digits, decelerating deprecation c. Sum-of-years digits, accelerating depreciation d. Double-declining balance e. Units of production

Sum-of-years digits, decelerating deprecation

1. 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

Tax Abatements

1. Which of the following is a source of governmental financing that, according to its proponents, is not paid for by the public? a. Certificate of participation b. Tax increment financing c. Contractually obligated income d. Asset backed securities e. None of the above

Tax increment financing

Which of the following is the nominal or quoted risk-free rate of interest? a. The real-risk-free rate plus an inflation premium b. The real-risk-free rate plus a default risk premium c. The real-risk-free rate plus a liquidity premium d. The real-risk-free rate plus a maturity risk premium e. None of the above

The real-risk-free rate plus an inflation premium

T or F A recent trend has seen cities opt to leave the stadium management business and either allow the team or a third party (e.g., AEG or SMG) to manage the facility in exchange for a fee.

True

T or F An indirect source of public financing is infrastructure improvements.

True

T or F Psychic impact is the emotional impact of having a local sports team.

True

T or F The sale of naming rights has little to do with getting a new stadium financed and completed.

True

T or F When cities and other political entities invest in a new stadium, the team using that stadium will receive most, if not all, of the additional revenue generated within the stadium while paying for only part of its cost.

True

One source of risk is current economic conditions. Of the following, which is impacted by changes in current economic conditions? a. Capital finance b. Operating budgets c. League loan pools d. Both a and b e. a, b, and c are all impacted

a, b, and c are all impacted