FINANCIAL ADMINISTRATION OF SPORT SUBTITLE
Dec 30, 2015
FACTS ABOUT THE SPORT INDUSTRY The sport industry is large and diverse.
▪The majority of the sport industry are grouped within the Arts, Entertainment, and Recreation segment.
▪This segment employs the largest seasonal and part-time workers.
▪It is estimated that sport industry grew from 47 billion in 1986 to over 200 billion currently.
▪See: Sports fast facts
▪ Football (soccer) is the most attended or watched sport in the world.
▪ Fishing is the biggest participant sports in the world.
▪ Sports command the biggest television audiences, led by the summer Olympics, World Cup Football and Formula One racing.
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WHAT IS FINANCE▪ Finance is the science of fund management including application of concepts like:
▪ A. Accounting
▪ B. Economics
▪ C. Statistics
▪ There are (3) interrelated concepts:
▪ A. Money & capital markets
▪ B. Investments
▪ C. Financial management
▪ Key Terms:
▪ 1. capital markets are markets for intermediate or long term debt including stocks.
▪ 2. money markets are markets that are high liquid, short term securities.
▪ 3. financial management are decision within firms regarding acquisition of funds or use of funds.
▪ 4. investments are choices made by individuals or institution.
▪ Examples of capital and money market are the New York Stock Exchange, Chicago Mercantile Markets, and Insurance and Mutual Funds.
▪ Examples of investments are Merrill Lynch, and Edward Jones.
WHAT ARE SOME OF THE RESPONSIBILITIES OF FINANCIAL MANAGERS IN SPORTS?
▪ 1. To calculate cash flow increase
▪ 2. Build a new facility.
▪ 3. Increase player payroll.
▪ 4. Decide debt financing to be used for what , when, or who.
▪ 5. Pursue efficiency of operation and resource utilization.
▪ Commonalities in the business sector:
▪ 1. Value creation.
▪ 2. increase value of the firm overtime
▪ 3. Revenue growth.
FINANCING THE OPERATIONS OF A SPORT ORGANIZATION.
FINANCING THE OPERATIONS OF A SPORT ORGANIZATION.
▪ There (5) methods to finance a sport organization operation:
▪ A. Debt
▪ B. Equity
▪ C. Retaining earning
▪ D. Government
▪ E. Gift
▪ There (5) methods to finance a sport organization operation:
▪ A. Debt
▪ B. Equity
▪ C. Retaining earning
▪ D. Government
▪ E. Gift
DEBT▪ Debt financing is when an organization borrows money that must be repaid over a
period of time, most time with interest. This either short or long term.
▪ EXAMPLE:
▪ (AR)*
▪ The New York Yankees financed a new Yankee Stadium this way.
▪ The team borrowed 105 million from a group of bank.
▪ The sport organization’s obligation is limited to repayment of the debt.
EQUITY▪ Equity financing is when the owners exchange a share or portion of their ownership
for money.
▪ The owners obtain funds with incurring debt and without repaying back the funds.
▪ Disadvantage are:
▪ 1. the owners interest will be decrease.
▪ 2. the owner may lose control if the more investors are added.
▪ EXAMPLES: (RA)*
▪ Stephen Ross used equity financing to raise capital after buying the Miami Dolphins in 2009. He sold minority share to entertainers (Mark Anthony & Gloria Estefan).
▪ Green Bay Packers used 20.6 million of stock proceeds to help finance renovation of Lambeau Fields
RETAINED EARNINGSRetained earnings is when the earnings that a firm saves in order to fund operations or acquire assets.
RA*
EXAMPLE:
The Green Bay Packers reinvested retained earning to maintain a competitive and successful football operations.
GOVERNMENT FUNDING▪ Most high schools, universities, and professional sport teams receive funding from
governmental sources. Those sources could be either:
▪ 1. federal
▪ 2. state
▪ 3. municipal
▪ 4. land use
▪ 5. taxes
▪ 6. direct stadium
▪ 7. infrastructure
▪ 8. state & municipal appropriations
GOVERNMENT FUNDING (CONTINUED)▪ EXAMPLES:
▪ Giant stadium New Jersey Sport Exposition state appropriation
▪ Camden Yards Maryland Stadium Authority state appropriation
▪ Soldier Field Illinois Sport Facility Authority state appropriation
GIFT FINANCING
▪ Gift financing are contributions made to an organization. It is the primary source of operation and investing income for major collegiate sport programs.
▪ There are two types:
▪ 1. charitable donation
▪ 2. cash or in-kind
▪ Gifts are used to:
▪ 1. offset rising cost of collegiate sports
▪ 2. build or renovate facilities
▪ 3. increase endowment of the athletic departments
DISCUSSION▪ QUESTIONS:
▪ What were the fastest growth area in professional sports? And why ?
▪ What trends do you see in the future for professional sport based on your answer?
▪ What were the fastest growth area in collegiate sports? And why ?
▪ What trends do you see in the future for collegiate sports based on your answer?
▪ Remember we are requiring research of related topic of the class. This is due next Wednesday.