LGB524 Aims and Objectives 1. Sources of Funding: • Internal vs. External • Short-term and long-term 2. Stock Markets 3. The current Financial Crisis/climate. Link to Project and Financial Management UK Sport funding Sources of Funding Short-term External Finance Internal Finance – Retained profits, tighter credit control, reduce levels of inventories (just in time), delaying payment • Bank Overdrafts – most businesses have an to trade payables. account with a bank. Banks can make money from offering overdrafts. The business benefits as they can deal with cash flow External Finance - Ordinary shares, preference shares, borrowings, finance leases, hire purchase agreements. problems. • Debt Factoring (Another organisation taking Case Studies: over the debt management) Cash inflows to a Cash outflows from a • Invoice discounting – loan to the company business business Football clubs selling stadiums and raising capital, leasing the stadium for use for the club. based on the credit sales outstanding. • Trade credit – period of time given to a (Payment for raw (Revenue from sales, materials, stock, business to pay for its goods that they have loans, interest, sales of labour, insurance, received. Often 28 days but some might not assets etc rent, rates etc.) pay for 6 months. • Credit card – similar to trade credit but interest can be charged on top. Image By Werner100359 Long-term Finance Long Term Sources of Finance Maybe needed by the business to fund projects or expansion. • Shares move from a private limited Co. to a Public limited company. Merchant banks may underwrite the cost of the shares and help broker the share fund deal. E.g. Morgan Stanley, Rothschilds and Goldman Sachs. • Venture Capitalists – Dragons Den. • Government Grant – through Local authorities, national government initiatives. Film Schemes and The Theory behind Sports Management tax breaks. • Bank Loans – both short-term and long-term finance Available from options. Google Books • Mortgage – specific to buying properties. • Owners Capital • Retained profits • Selling assets • Lottery funding – mainly charities or charitable trusts. PROPERTIES Allow user to leave interaction: Anytime Show ‘Next Slide’ Button: Show upon completion Completion Button Label: Next Slide 1
The current Financial Climate: From 2008 onwards…. PROPERTIES Allow user to leave interaction: Anytime Show ‘Next Slide’ Button: Show upon completion Completion Button Label: Next Slide More on the current climate: Sport Specific Financing Just another angle on the Financial Climate: • Public and Voluntary sports Organisations • Sponsorship • Grants • Charitable Trusts (writing funding agreements) • The National Lottery • European Funding Sponsorship case study: http://news.bbc.co.uk/1/hi/business/8506885.stm National Lottery case study: http://www.lotterygoodcauses.org.uk/ Sports Business case study articles: http://www.sportbusiness.com/news/183989/adidas-extends-argentina-kit- partnership Sport England: Sportsmatch Funding Stock Markets What is the stock market and how does it raise capital for the organisations involved? Sportsmatch makes awards to not-for-profit organisations that have A stock market is a public trading area. Company stocks and shares are sold and bought at an agreed price secured sponsorship to deliver new community projects to grow or sustain and listed on the stock exchange. participation in sport. Companies float on the stock market to raise additional capital for expansion. In 1998 JJB floated on the London Stock market with already 120 stores open in the UK. The company had grown a lot since Dave The finance comes from the government to encourage new sponsorship to Whelan took over the Wigan based JJB store in 1971 deliver community projects. Priority funding goes to projects that are matched by commercial sector funding. Awards of between £1,000 and £100,000 can be awarded. There are strict criteria that has to be adhered to throughout the application process. Link to Sport England funding Image owned by Loughborough College 2
How Stock Markets Work Professional Sports finance Media – TV, internet and Radio pay huge sums of money for the rights to show major sporting events. They pay the governing bodies who use the money to promote and develop the sport. Sponsorship and merchandising – Big companies pay professional teams to put their names on their shirts, around the stadium, on the programme, and on the internet. Ticket sales – Big teams and events sell tickets to spectators that raise finance. If 80,000 people watch a football match and pay a minimum of £30 per ticket this raises £2,400,000. ‘Price discrimination’ means these clubs will differentiate the prices for those who can afford a higher price. Grants – The Sports Aid Foundation provide grants to up and coming sports people to help them train and compete. This is how less publicised athletes get finance. Competitions – entrance fees can make money for the organisers or the competitions can provide some of the biggest rewards, which draw the best players/teams in the world to compete at that level. 3
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