SPMA 2P27 SPORT FINANCE MIDTERM STUDY GUIDE
Operational budget - Answer -A short-term financial plan used to coordinate what is
needed to achieve the short-term goals of the company.
Capital Budget - Answer -budget for major capital, or investment, expenditures
Variable costs - Answer -the numbers of products that may be sold/consumed by
buyers (e.g., cost of materials)
If majority of expenses are variable costs, reducing cost per unit improves profitability
If majority of expenses are fixed costs, maximizing sales improves profitability
Fixed costs - Answer -Costs that do not vary with the quantity of output produced (e.g.
salaries, machinery)
If majority of expenses are variable costs, reducing cost per unit improves profitability
If majority of expenses are fixed costs, maximizing sales improves profitability
Incrimental Budgeting - Answer -Increasing budget based on expected changes
Decrement Budgeting - Answer -Reducing an existing budget based on expected lower
revenues to avoid a loss
Break-even analysis - Answer -a method of determining what sales volume must be
reached before total revenue equals total costs (when earnings before deductions are
0)
EBIT - Answer -Earnings Before Interest and Taxes
Steps in Planning Process - Answer -1. Gathering Information
2. Forecasting sales
3. Projecting profits and losses
4. Comparing to Industry norms
5. Determining Capital Needs
Operational budget - Answer -A short-term financial plan used to coordinate what is
needed to achieve the short-term goals of the company.
Capital Budget - Answer -budget for major capital, or investment, expenditures
Variable costs - Answer -the numbers of products that may be sold/consumed by
buyers (e.g., cost of materials)
If majority of expenses are variable costs, reducing cost per unit improves profitability
If majority of expenses are fixed costs, maximizing sales improves profitability
Fixed costs - Answer -Costs that do not vary with the quantity of output produced (e.g.
salaries, machinery)
If majority of expenses are variable costs, reducing cost per unit improves profitability
If majority of expenses are fixed costs, maximizing sales improves profitability
Incrimental Budgeting - Answer -Increasing budget based on expected changes
Decrement Budgeting - Answer -Reducing an existing budget based on expected lower
revenues to avoid a loss
Break-even analysis - Answer -a method of determining what sales volume must be
reached before total revenue equals total costs (when earnings before deductions are
0)
EBIT - Answer -Earnings Before Interest and Taxes
Steps in Planning Process - Answer -1. Gathering Information
2. Forecasting sales
3. Projecting profits and losses
4. Comparing to Industry norms
5. Determining Capital Needs
