What is the main difference between debt and equity financing?

Debt financing involves borrowing, equity financing sells ownership stakes

What is the purpose of a budget in sport finance?

To estimate revenues and expenses for financial planning

What is financial risk in sports organizations?

The potential for financial loss or instability due to uncertainty

Which type of business structure limits the personal liability of its owners while allowing profits to pass as income?

Limited Liability Company (LLC)

What is the primary disadvantage of debt financing?

Interest payments increase overall costs

In a break-even analysis, what does it mean when total revenue equals total cost?

The organization is breaking even with no profit or loss

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Sport Finance Midterm Review

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Questions 15

Answers

1
What is the main difference between debt and equity financing?
Debt financing is only used by nonprofit organizations
Equity financing requires interest payments, while debt financing does not
Equity financing is only available for professional sports teams
Debt financing involves borrowing, equity financing sells ownership stakes
2
Which financial statement shows an organization’s assets, liabilities, and equity?
Balance sheet
Statement of retained earnings
Income statement
Cash flow statement
3
What is the purpose of a budget in sport finance?
To track player performance statistics
To estimate revenues and expenses for financial planning
To predict an athlete's salary for the next season
To determine how many fans will attend games
4
What is financial risk in sports organizations?
The likelihood of losing fans due to poor performance
The potential for financial loss or instability due to uncertainty
The risk of a team relocating to another city
The probability of an athlete suffering an injury
5
Which financial statement shows an organization’s revenues and expenses?
Cash flow statement
Statement of equityAnswer: b
Balance sheet
Income statement
6
What happens to the price of merchandise when demand decreases and supply remains constant?
Prices increase only for luxury itemsAnswer: b
Prices fall
Prices rise
Prices remain the same
7
A high demand and low supply of tickets will likely result in:
Increased ticket prices
Lower ticket prices
A surplus of tickets
No change in ticket prices
8
Which type of business structure limits the personal liability of its owners while allowing profits to pass as income?
Sole Proprietorship
Partnership
C Corporation
Limited Liability Company (LLC)
9
What is the primary disadvantage of debt financing?
It requires giving up ownership control
Investors expect dividends in return
Interest payments increase overall costs
It has no tax benefits
10
If a team issues bonds to finance a new arena, this is an example of:
Revenue sharing
Government subsidy
Equity financing
Debt financing
11
In a break-even analysis, what does it mean when total revenue equals total cost?
The organization is making a profit
The organization is losing money
The organization is in debt
The organization is breaking even with no profit or loss
12
What type of risk do professional sports teams face when investing in a new stadium?
Market risk
All of the above
Competitive risk
Financial risk
13
Which of the following is considered a fixed cost in a sports budget?
Concessions revenue
Player salaries
Stadium lease payments
Ticket sales revenue
14
Which type of financing does NOT require repayment?
Bank loans
Equity financing
Debt financing
Bonds
15
Which of the following is an example of variable costs in a sports organization?
Annual stadium lease
Team travel expenses
Depreciation on equipment
Executive salaries

Sport Finance Midterm Review Flashcards | StudBud