I received a very good response to the post "Sports World And Economy: 3 Basic Concepts" both inside and outside the Scorum community, so that encouraged me to write further about Economy/Finance within the Sports World. 


Juventus equity (value) rose because Ronaldo's operation generated a bigger amount of future revenue than the amount of cash used to acquire him and pay his salaries. That explains the stock market fluctuation, the market considers the equity of the operation will mean profits to Juve in the long run.

After reading over my own article many times I think what worked very well was the format I organized things, in concepts with respective examples and a conclusion. Considering the nature of a Scorum post, I believe my 2nd one should follow the idea. I'd like to highlight I'm not trying to teach economy or finance via Scorum, the main goal here is to perhaps "translate" what fans see in a Sports Media ecosystem into what Economists and other professionals "read" when analyzing a club's health, or perhaps even help the sports fans "think with the shoes of the administrator".

Let's have a look at the concepts and how they interact with each other. I will write another post about the "Trade Offs" that a club administration of any sport faces considering these topics, so there will be a follow up to this article. 

NOTE: These words may have slight differences in specific texts, I will use the definition that Robert Kiyosaki uses in his books such as "Rich Dad, Poor Dad" and "Cashflow Quadrant" which is the same that my Professors always used in college. 

ASSET: An asset is something of value that can either be sold or traded. In sports, a club's Stadium, the players the club can sell/trade (it's a very specific understanding of asset but it's not wrong, because players are effectively sold and bought, but generally the idea of an asset that can go away for free if not within a contract is kind of weird, but again, we are making an application of financials here)

Summarizing, the Assets are things a club can use to pay other clubs or banks, service  providers or goods providers. There are many different kinds of assets and even the way they should be disposed in a column of assets is object of study/law in accountancy. My main goal here is far from that one, let's just give examples in a more or less organized way (accountability-wise)

Asset examples: cash reserves, bank reserves, debt owed by other clubs, players that can be sold, season ticket money to be received, sponsors money to be received, TV rights to be received. (Usually, assets can be used to obtain credit in banks if they are future payments to be collected)

LIABILITIES: a Liability is the opposite of assets in the sense that they represent owed amounts of money/goods/services. Liabilities are used to improve the conditions of the institution (or person) to acquire anything needed. At times this can be far more complicated when you consider big business and the goverments/central banks lend money at small interest rates, but for a Sports World Analysis, we can consider it esentially debt, and this could be owed to the bank or to athletes, or even between clubs. 

Examples of Liabilities: Bank debt, owed amounts of salary, debt owed to another club. In Brazil for example it's very common to see clubs "withdrawing TV rights in advance" which means they make a contract with the bank receiving a big fraction of their original contract in advance, and in compensation they promise the bank that when the TV contractor or the intermediate of the operation pays this money, it goes straight to the bank and the liability is eliminated.

 EQUITY is the difference between assets and liabilities. It's the "true value" of an institution. This concept is perhaps easier because it's an equation (yeah I know it sounds weird). ASSETS MINUS LIABILITIES EQUALS EQUITY.

Below a very simplified an example of a football club (please for those who study finances/economy, I tried to make this as Sports Media Content as possible)


INCOME CONCEPT: As simple as it gets, money that COMES INTO the institution's pocket. Season tickets, TV Rights and Sponsors are the keenest examples. Selling a player sounds more like liquidating an asset, which is using some money/goods you already have, the distinction between income and liquidation is especially important to understand the concept of Cashflow.

EXPENSE CONCEPT: Any given expense of goods and services, such as Operating Costs of opening the Stadium, Salaries of Players amongst others.

CASHFLOW CONCEPT: The cashflow is the difference between money that comes in and out. In other words, the difference between Income and expenses. 

If a Sports Club is growing in terms of EQUITY, it means the assets proportion to Liabilities is growing. This could be because the intrinsic value of the assets is growing (e.g. a player is performing much better), because their income figues improved (for example, a new TV contract), or because they reorganized their liabilities (new contracts renegotiating debt dates and amounts to be payed, for example)