L04 Financial Statements & Ratios

L04 Financial Statements & Ratios - Financial...

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Financial Statements Financial Ratios Accounting and Decision Making
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Financial Statements Review  Financial Statements Provide:  current and historical information to owners and  creditors  a convenient way for owners and creditors to  set performance targets a convenient standard template for financial  planning
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Overview Basic Income Statements Budgets Accounting Concepts Balance Sheets Data Entry (T- accounts)
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Income Statements The firm’s  income statement  shows  income earned (profit) over a given time  period –usually one year (flow variable). Income (profits):   Revenue  minus  Expenses * What is the difference between an  expense and a debt?
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The Income Statement Summarizes the profitability of a company  during a time period Major Divisions: Revenue & cost of goods sold  Gross margin General administrative and selling expenses  (GS&A)  Operating income Debt service  Taxable income Corporate Taxes  Net income
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Revenues Money inflows to the firm  (gross  income) Typical firm:  Revenues are generated from sales of  the firm’s product Sports franchises are no exception Sales of tickets are the largest revenue  source in most cases
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Revenues: Other Sources Revenue is also generated by interest  income from savings and from  investment dividends and sales Sports teams may also receive shared  revenues collected and redistributed by  their league.
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Sports Revenues Admissions (the gate, ticket sales) Premium seating Concessions and Parking Broadcast Revenues Local Share of National Advertising Royalties, Licensing
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Expenses Expenses represent the  costs  incurred during  the period Typical firm: Wages of workers Other production costs Advertising and Promotion Maintenance of facilities Taxes and Insurance Cost of goods to sell (inventory) Travel Debt service
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Sports Expenses Sports franchises spend a much higher  percentage on salaries than a typical  firm.
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