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 main difference between debt and equity financing?

Debt financing involves borrowing, equity financing sells ownership stakes

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

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

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Sport Finance Midterm Review

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Questions 15

Answers

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

Sport Finance Midterm Review Flashcards | StudBud