Definitions 1
Primary way in which sports teams/organizations raise funds.
Revenues
Difference between revenues and expenses, was revenues more than expenses
Profit
Revenue disparities across schools and conferences.
Competitive Balance - NCAA
What are the primary 2 activities of finance
How an organization generates the funds that flow into that organization
How these funds get allocated and spent once they are in the organization
Money that flows out of an organization
Expenses
Anything an organization owns that can be used to generate future revenues
Assets
Team payroll limit is an absolute and cannot be violated
Hard Cap (salary cap)
Extra investment dollars that can be used to increase the value of their assets and organization as a whole.
Investment expenditures
The amount of owner’s own money that they have invested in the organization
Owner's Equity
Amount of money an organization borrows
Debt
Payroll limit is set but teams can exceed this limit through various types of exclusions or exceptions.
Soft Cap (salary cap)
This shows the expected dollar value return on each investment expenditure option
Return on Investment (ROI)
Fees assessed by banks or lenders when organizations borrow money
Interest
Financial instruments that allow organizations to borrow large amounts of money for longer periods of time (usually 20+ years)
Bonds
Teams in the league agree to share certain types of revenues
Revenue sharing
These 2 estimates are calculated for an ROI
Calculate the initial cost of each investment option
Estimate the magnitude of the revenues that each investment option will generate
Refers to the fact that the future is uncertain so the future benefits of any investment made today cannot ever been known with certainty at the time the investment is made.
Risk
A payroll threshold is set prior to a season and if a team goes over that payroll threshold they pay a tax on the excess amount
Luxury Tax