Sport Finance Final Exam Questions

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

Which of the following is a source of governmental financing whose proponents often say is not paid for by the public? a) Certificate of participation b) Tax increment financing c) Contractually obligated income d) Asset backed securities

b) Tax increment financing

Another name for a university's athletic support group is _______________.

booster club

Which league has negotiated salary slots for its first-round draft picks?

NBA

If the demand for certain games or events increases and the demand curve shifts to the right, what should ticket managers do?

Charge more for those games or events

Of the following, which is not an adjustment made to determine the value of a specific ownership interest?

Controlling interest, marketability, synergistic premium

Which section of the feasibility study determines the luxury seating capacity of a market?

Corporate demand

What is the main expense of the NCAA?

Distribution of revenues to member institutions*, association-wide programs, and costs associated with conducting championships

T/F. For community recreation programs, grants are more important for construction, and fundraising is more important for operations.

False

T/F. Though securitization is popular, facilities cannot be financed through securitization.

False

Time switchers leave a community when it hosts an event.

False

T/F. A personal seat license is typically valid for the life of the facility.

False (permanent)

The second most common tax source to fund the construction or operation of recreational sport facilities is the sales tax.

False (public sector sport)

For schools in major conferences, where does the largest portion of the athletic program's revenues come from?

Football

NCAA v. Board of Regents affected television revenue generated from which sport?

Football

For all sports and entertainment organizations, ___________, financing may include land use, tax abatements, direct facility financing, and infrastructure improvements.

Government

Of the following, which NOT a form of equity financing?

Government grants (?)

The NCAA distributes revenue to member institutions based on a formula. Of the following, which is a criteria for establishing the amount of revenue a member receives?

Historical performance in NCAA Division I Men's Basketball Championship, the number of sports sponsored, the number of scholarships offered

Most of the recent bankruptcies in the "Big 4" professional sport leagues have involved ______________ franchises.

Hockey franchises

This ratio measures how often an organization sells and replaces it inventory over a specified period of time.

Inventory turnover ratio

For minor Division I-FBS conferences, increased revenue depends on which of the following?

Performance in the NCAA men's basketball tournament, a conference football championship, having 12 football playing teams in a conference

Which of the following measures the return rate an organization's owners or shareholders are receiving on their investments?

Return on equity

During which phase of facility construction were sport facilities built with private dollars?

Phase 1

During which phase of construction were stadiums built with a mix public and private dollars? The stadiums usually only housed one major tenant, not two.

Phase 3

According to the text, which of the following was the first major professional sport team to declare bankruptcy in the middle of a long-term facility lease?

Phoenix Coyotes

Leagues have created rules and policies to improve competitive balance. What do these rules and policies typically relate to?

Player drafts, free agency, and player salary

As part of a feasibility study, a ________ directly investigates actual facilities that might compete with a subject facility in order to host events.

competitive analysis

In general, the chances of receiving back an investment in a large market Major League Baseball team are ___________ that for a small market professional team.

greater

An analysis of NCAA revenue and expenses shows that operating expenses are _______________ than operating revenues.

growing on par with or increasing faster

Which section of the feasibility study drives much of the rest of the study?

market demand analysis

Today, the USTA generates __________ through the operation of the Billy Jean King National Tennis Center for New York City on an annual basis.

$230 million in revenue and $130 million profit

Most development departments define a major gift as a donation worth ______________ or more.

$25,000

Of the following, which is a trend impacting financial management in parks and recreation facilities?

- demand for services has increased - the type and variety of services and facilities have increased - programs are now designed to appeal to a broad demographic

Which of the following is the responsibility of the commissioner's office under the franchisee/franchisor league structure?

- negotiate national television contracts - establish relationships with vendors for league-wide licensed merchandise sales - hire and supervise game officials - negotiate a collective bargaining agreement with the player's union.

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

Of the following statements regarding the Arts, Entertainment, and Recreation segment (NAICS 71) of our economy, which of the following is true?

Rising incomes and increasing leisure time over the next 10 years should lead to an increase in demand in this sector.

What is a measure of risk or uncertainty of time?

Risk

Risk increases as the length of time funds are invested increases. This is known as __________

Risk of time

College athletic department allocated revenues include which of the following?

Ticket sales, NCAA and conference distributions, student fees, alumni donations

When constructing a survey to measure direct spending at an event, the following question is designed to detect which type of visitor. Survey Question: "Does this visit to Houston replace any other past/future visit to this area?"

Time switcher

In the late 1950s, which professional league failed to recognize that is should expand to emerging markets, which is allowed an upstart league, the AFL, to establish a presence in those markets?

WHA (World Hockey Association)

This league began in a single-entity structure and switched to a franchisee/franchisor model?

WNBA

If a facility is successful in identifying comparable cities, then a facility will be successful in the subject city. Where does this notion come from?

a comparable analysis

When taking over the Singer Bowl, what did the USTA offer?

a minimum of $15 million to renovate the site and facility

What does one mill equal?

1/1000 of a dollar

In a traditional gifts table, the lead gift (largest single campaign gift) should be set at ________ of the campaign total.

10%

Approximately ____________ of Division I athletic programs have expenses that exceed revenues on an annual basis.

90%

Which of the main factor is driving up the costs to operate a college athletic department?

Arms race(???), Moving up a division, free market for college coaches, increasing tuition on college campuses

When an organization borrows money that must be paid back over time, usually with interest, __________ financing is being used.

Debt

This ratio measures how an organization finances its operation with debt and equity

Debt ratio

When selecting the type of bond to use when building a recreation facility, a municipality must do which of the following?

Determine whether the facility will generate enough revenue to retire the debt, operate the facility, and maintain the facility

NCAA revenue distributions to member schools go directly from the NCAA to the school.

False

A form of line-item budgeting, last year's budget is increased or decreased by a percentage using which method of budgeting?

Incremental Budgeting

Of the following statements regarding economic impact, which is true?

Incremental spending of casual visitors and time switchers should be counted in an economic impact analysis.

Factors examined in which part of the feasibility study include population, age, income, and competing sports franchises?

Individual ticket demand

Which professional league continues to operate under a single-entity model?

MLS

To reach a capital campaign goal, development departments need to receive ____________ gifts from the program supporters.

Major

This valuation approach relies on prices that similar assets sell for in the marketplace.

Market approach

Of the following, which is a valuation method used in the market approach to measure the value of a business?

Market multiples approach (?)

Which of the following forms of budgeting is preferred in sport as it begins with a floor of expenses while also using cost behavior and cost identification techniques?

Modified Zero Based Budgeting

Under this sport franchise ownership model, __________ is the most common model of team ownership

Multiple owners/private investment syndicate model

Through 2010, the highest expansion fee paid by a new team entering a North American professional league was in which league?

NFL

Which professional league prohibits the publicity traded ownership model?

NFL

In its policies regarding deferred salaries, which of the following professional leagues has stated that deferred payments must be placed by the team in a league fund for administration and future disbursement

National Football League

Pete Rozelle was commissioner of which professional league where his idea of "league think" was implemented?

National Football League

Which of the following is profitability ratio that measures what percentage of an organization's total sales or revenues was net profit or income?

Net profit margin

In which league have franchises typically been owned by corporations?

Nippon Professional Baseball

This budgeting system is associated with output budgeting in which specific goals and objectives form the framework for a strategic, goal-oriented budgeting process.

Program Planning Budgeting Systems

According to which gift table rule, the top 10 gifts to a capital campaign would account for 33% of the campaign's total goal and the next 100 gifts would account for an additional 33%?

Rule of thirds

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?

Scarcity

Of the following, which is an indirect source of public financing?

Tax abatements

What are the primary sources of NCAA revenue?

Television and marketing right fees

Of the following, which is not an advantage of incremental budgeting?

The approach encourages managers to spend up to the budget to ensure that the budget is maintained the following year (spend it or lose it mentality)

Joint use agreements and public/private partnerships are collaborations between the public and private sectors.

True

T/F. Not measuring opportunity cost causes the overestimation of economic impact.

True

T/F. The NBA recently used pooled-debt instrument to assist financially struggling franchises.

True

T/F. The four major North American sport leagues all share revenues from licensed merchandise sales equally among their teams.

True

When a team has signed multiyear contracts to receive money, these revenues 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

c) contractually Obligated Income

This type of individual comes to a community for one event while also attending a basketball game. If a university is performing an economic impact study of its basketball team, this individual would be classified as a ________.

casual visitor

Which of the following is a type of equity financing? a.) convertible debentures b.) common stock c.) loan with warrants d.) loan without warrants

common stock

Advertising and sponsorship revenues must be sought by parks and recreation programs according to which state's laws? a) South Carolina b) Utah c) Minnesota d) Michigan

d) Michigan

Which of the following are impacts that occur in the area of impact that represent the circulation of initial visitor expenditures?

direct input

Financial returns measured by an economic impact study include which of the following? a) new jobs b) new earnings or income c) new tax revenues d) positive externalities e) all of the above

e) all of the above

Psychic impact is the __________ impact on a community that results when the community hosts prestigious events or major sports teams.

emotional

The ____________ measures the direct, indirect, and induced effects of an extra unit of spending on employment in the local economy.

employment multiplier

The ________ measures the indirect and induced effects of an extra unit of direct impact spending on economic activity within the local economy.

output multiplier (?)

The Billy Jean King National Tennis Center is an example of which type of public-private partnership model?

private-sector takeover

Which of the following is the most common tax source used to fund the construction and operation of public sector sport facilities?

property tax

Land, buildings constructed on land, and improvements made to land are known as which of the following?

real property

Overestimations of economic impact occur because most analyses do not account for _________, those local residents who leave town during the event period because of the event.

reverse time-switchers

This type of individual changes the time he or she is coming to a community to coincide with an event being held in that community. If the university is performing an economic impact study of its basketball team, this individual would be classified as a ______________.

time switcher