Questions and Answers of Financial Management

Boggs Sports Holdings has a total investment of $500 million in five companies:What is the beta of this portfolio? Company A INVESTMENT (IN MILLIONS) BETA $130 0.3 Company B $160 1.5 Company C $70
For the portfolio described in Problem 3, if the risk-free rate is 10% and the market risk premium is 5%, what is Boggs’ required rate of return? Problem 3:Boggs Sports Holdings has a total
You have been hired as the manager of a portfolio of ten sport assets that are held in equal dollar amounts. The current beta of the portfolio is 1.9, and the beta of Asset A is 2.1. If Asset A is
The Sports Investment Fund has a total investment of $$5$ million in the following portfolio:The market’s expected rate of return is 10%, and the risk-free rate is 4%. What is the required rate
Following is a distribution of returns:What is the coefficient of variation of the expected dollar return? PROBABILITY RETURN 0.4 $35 0.5 $24 0.1 -$15
Risk directly affects the values of professional teams. Groppelli and Nikbakht (2012) state that to maximize the value of a firm, managers must focus on increasing the growth rate of cash flows and
Explain the concept of inflation. How does inflation affect saving and investing?
How does a preference for liquidity influence an individual or organization’s financial decisions?
Explain the difference between simple and compound interest.
What aspects of the time value of money must professional sport organizations and athletes consider when negotiating contracts?
What mistake did the NBA make in its dealings with the owners of the Spirits of St. Louis?
What are some advantages and disadvantages of deferring salaries (both from the player’s and the team’s perspectives)?
What concerns should a sport organization contemplate when negotiating future payments from sponsorships or other long-term agreements?
What is the real increase in value if $$1,500$ is invested for one year at 5% interest and the rate of inflation during that time is 1.79%?
A sport organization has a commitment from a sponsor for a $17,000 payment in three years. What is the present value of that money if it is discounted at (a) 3%, (b) 5%, and (c) 9%?
Suppose you are the financial manager for a recreation center that has signed an option to purchase new elliptical machines for $$22,000$ in two years. If you have an investment opportunity that
An athlete signs a five-year endorsement deal with a prominent sponsor. Under this deal the athlete will receive $$5,000$ each year for the first three years and $$6,500$ each year for the final
What is the future value of $$12,000$ invested at 8% interest, compounded yearly for ten years?
If an investor commits $4,500 to an IRA each year for 30 years and receives 6% interest, what will her total investment be worth at the end of the 30 years?
A bank offers customers the option of receiving interest compounded quarterly, semi-annually, or annually. If the rate of interest is the same, which is the best option for the customer?
What is the difference between $$10,000$ invested for ten years at 3% interest, compounded yearly, and at 8% interest, compounded semi-annually?
The director of marketing of your organization asks for your advice regarding sponsorship deals she is contemplating. She has to choose from the following: a 15-year sponsorship paying $$100,000$
Define microeconomics and macroeconomics. What are the main differences between the two?
Define and discuss monetary policy. What specific actions can the Federal Reserve take to achieve its goals?
List actions that a government can take to establish its fiscal policy. What are some fiscal policies specifically targeted to the sport industry?
What is a basis point? How does a change in a few basis points affect a loan?
What is a stock market index? What is an index designed to accomplish?
What are an LLC and an LLP? Why have they become more popular business entities over the past ten years? What concerns should an investor investigate before forming an LLC or LLP?
How has globalization affected sport finance in the past ten years? How might it affect sport financial management in the future?
What is your reaction to Phil Mickelson’s 2013 comments regarding taxes? What is the potential impact of Mickelson and others’ leaving California because of high taxes?
What are jock taxes? How is Tennessee’s jock tax unique?
If an interest rate is currently 6% and a lending institution announces a 25 basis point increase, what percentage increase does this represent?
Calculate the straight-line and sum-of-years’-digits depreciation schedules for a $$450$ video camera that will have a salvage value of $$50$ after five years of use.
Calculate the double-declining balance depreciation schedule for a $$1,000$ item that will last four years. What is the estimated salvage value?
For a fitness center that is purchasing a $$3,000$ photocopier expected to produce 30,000 copies, calculate the units-of-production depreciation schedule if the following numbers of copies are
Darlington Raceway is one of the most important tracks in the history of NASCAR. Opened in 1950, Darlington Raceway became a model for many superspeedway tracks that would be built later in the 1950s
How do budgeting and forecasting differ?
How does incremental budgeting differ from program planning budgeting? How does it differ from zerobased budgeting?
How does program planning budgeting differ from zero-based budgeting?
In team sport (professional or college), which form of budgeting should be used?
After you have calculated the 2016 budget, suppose your boss asks you to revise it so that overall revenues increase by 4% and operating expenses decrease by 1.5%.a. Based on current trends in
The intercollegiate athletics department at Coastal Atlantic University (CAU) has major budgeting issues. For the 2015 fiscal year, the university’s Board of Trustees has approved a $$20.4$
That financial ratios are most valuable when viewed in comparison to the organization’s historical ratio values and competitors’ values. Why is this context valuable when examining financial
What are the five forms of financing, and how is each used within sport?
For many years, women’s professional basketball struggled for consistency in the United States. Since 1978, when the Women’s Professional Basketball League (WBL) was formed, leagues have had
What is financial management? How does financial management differ in the sport industry as compared to other industries?
Why does the definition of the sport industry affect the calculation of its size? How should the industry be defined?
Which has the greater impact on financial management: the structure of a league or the structure of a team?
Many factors affect the economics of sport. What are some not discussed in the chapter? How do they affect financial management within the industry?
Why is sustainability in the sport industry linked to the green movement?
What legislative actions currently being considered in Congress might affect the financial management of sport?
What is a T-account and how is it utilized in double-entry book keeping?
What are the three major sections of the balance sheet? For each of these sections, provide at least one example of the items that would be found there.
What is the primary difference between an income statement and a statement of cash flows?
What is the purpose of computing financial ratios?
If an organization’s current ratio value is below 1.00, what might that suggest about the organization?
What information do leverage ratios provide?
Why is the price-to-earnings ratio so widely used among investors?
Calculate the degree of financial gearing under both the low-geared and the high-geared option when operating profits are:(a) £60m, and(b) £70m.
Calculate the degree of operating gearing for Strategy 2 at the different levels of sales output mentioned in Example 2.7.Data from Example 2.7Lethargo plc has recently been formed to produce vacuum
Unicorn Engineering Ltd is considering three possible investment projects: X, Y and Z. The expected pattern of cash flows for each project is as follows:The business has a cost of capital of 12
Town Mills Ltd is a wholesale business. Extracts from the business’s most recent financial statements are as follows:The levels of trade receivables and trade payables increased by 10 percent, by
Mistor S.A. is a large, event-management business based in Spain that has recently agreed to organise a large trade fair in the US. On 1 August Year 7, the business expects to receive $$10$ million
Robinson plc is an international construction business that is based in the UK. The business expects to receive €10 million in six months’ time as the final payment for a bridge that the business
Enumerate the sources of several limitations to accounting data.
Compute and interpret the financial ratios covered.
From the following information, construct a simple income statement and a balance sheet: Sales Finished goods Long-term debt Raw materials $1,000,000 200,000 300,000 100,000 Cash 50,000 Cost of goods
Given the following information, construct the firm’s balance sheet: Cash and cash equivalents Accumulated depreciation on plant and equipment Plant and equipment Accrued wages Long-term debt
Given the following information, compute the current and quick ratios: Cash $100,000 Accounts receivable 357,000 Inventory 458,000 Current liabilities 498,000 Long-term debt 610,000 Equity 598,000
Jersey Medical earns $9.50 a share, sells for $90, and pays a $6 per share dividend. The stock is split two for one and a $3 per share cash dividend is declared.a. What will be the new price of the
Calculate earnings per share, earnings per preferred share, and times-preferreddividend-earned.
Enumerate the features of convertible securities.
Compute rates of return.
Determine a fund's net asset value.
Enumerate the sources of return from an investment company.
Calculate the break-even level of output.
Determine an investment's payback period.
Compute the cost of capital.
Explain why a firm's cost of capital changes with changes in its capital structure.
Determine the firm's optimal capital structure.
Calculate an investment's net present value and internal rate of return.
Use regression analysis to forecast assets and liabilities that change with sales.
Add the impact of changes in any assets that do not spontaneously change with sales.
Contrast the cash budget with the income statement.
Construct a cash budget.
Interpret a cash budget's bottom line.
Differentiate earnings from cash.
Calculate the economic order quantity.
Enumerate the components of credit policy.
Construct a repayment schedule.
Contrast operating and financial leases.
Explain the relationship between the market price of a stock and the prices of put and call options.
Define money and determine how the money supply is measured.
Develop a yield curve and contrast positive and negative yield curves.
Differentiate the direct and indirect transfer of savings to users of funds.
Enumerate the primary assets and liabilities of a commercial bank,
Describe several regulations that apply to the banking system.
Differentiate required and excess banks reserves.
Explain the role of FDIC.
Compare the assets of life insurance companies and commercial banks.

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