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Whether you're walking a tightrope or scribbling in your checkbook, balance is a good thing. And, one of the best ways to evaluate a company is to glance at its balance sheet to see what it owns with what it owes.
The balance sheet is a paragon of simplicity and is made up of three components: assets (the stuff it owns), liabilities (the money it owes), and shareholders' equity (the company's value to its shareholders).
Assets take two forms: short-term (or current) assets and long-term assets. Under short-term, there¿s good ol' hard cash. Then, there¿s something called "cash equivalents," which are assets like short-term bonds that can be sold so quickly, they might as well be cash. There you factor in inventory, which (if you're a reasonably competent business owner) you can sell to customers in return for--you guessed it--cash. (The raw materials a company owns to make that inventory also falls under this category.)
Long-term assets are things that are harder to convert into cash. (Think real estate and equipment.) Long-term assets depreciate, meaning they lose some value over time. Also under the long-term category are what's called intangible assets: things like patents and brands, that are important, but hard to quantify. Accountants earn their stripes figuring out the real overall value of these assets.
Once you know your assets, it's time for liabilities. As with assets, liabilities are separated into short-term or current, and long-term. Current liabilities are what a company owes in that year: Things like payments to employees or accounts payable to suppliers. Long-term liabilities are debts paid over several years.
Shareholders' equity is determined by subtracting the liabilities from the assets. That number represents the value of the company after all its bills are paid.
Obviously, investors should pay close attention to balance sheets. Spikes in the amount of debt carried, or a reduction in shareholders' equity, are usually red flags.
Home / Personal Finance / On Topic / Sports
Sunday, February 03, 2008
The Suite Seats Have Changed the Game
Matt Egan
FOXBusiness
In just the past two decades luxury suites and other premium seating have transformed the way franchises make money and
build venues.
Luxury suites, often incorrectly referred to as “sky boxes,” are exclusive, enclosed areas
within a sports venue that offer the latest amenities and top of the line service for a hefty price. In major markets such
as New York and Los Angeles, suites in prime locations (think 50-yard line in the NFL) go for about $400,000 a season -- a
price that is likely to keep going higher.
Premium seating, which also includes club seating, courtside seating and
party suites, first became prevalent around 1990 at the Palace of Auburn Hills, home of the Detroit Pistons. At that time,
premium seating accounted for just 3% of the seats in a given building.
Today, premium seating accounts for almost
25% of seats in new buildings and often goes for double or triple the cost of their less luxurious counterparts. In fact,
now franchises can project nearly half of all ticket revenue from premium seating
This source of revenue
is so vital that many buildings have been torn down or renovated on the sole reason that they didn’t have enough premium seating.
“The entire market was built out on the fact that you need the revenue from premium seating,” said Bill Dorsey, executive
director of luxury suite directors, a trade group that represents 1,000 minor and pro league members.
“It wouldn’t be economically viable to build a venue without a mix of premium seats -- even minor league or secondary market
venues,” said Marshall Glickman, former president of the NBA’s Portland Trailblazers and now CEO of consulting firm G2 Strategic.
Originally, luxury suites were primarily looked at as a way to secure the financing necessary to build new venues, which
today can cost in upward of $1 billion. Luxury suite money is considered contractually obligated income because individuals
and corporations sign leases for an 8-to-10-year period. Since a team can’t guarantee a bank it will sell out every single
game, this is a way to show its minimum ticketing revenue.
While it still serves a financing role, premium seating
has become a major source of revenue for franchises and a form of business entertainment for corporations. Businesses use
suites to entertain potential clients, retain current ones and recruit future employees.
“Premium spaces
are things that companies tend to covet. The suite option has always provided a unique venue for corporations to have access
to entertaining clients,” said Paul Swangard, managing director of the Charles Lundquist College of Business at the University
of Oregon.
While luxury suites have been around for about two decades, the business model behind them
is still evolving.
The prices have gone up while the number of suites has been flat or declined in some
markets. For example, The Dallas Cowboys’ new stadium is expected to have 300 suites at $300,000 each, giving the city a $90
million marketplace. That’s nearly 10 times the market Dallas had just ten years ago, Dorsey said.
Experts
said they are seeing a shift away from traditional luxury suites and a move toward more club seating and other premium seats
because people like to be in a more social atmosphere.
Also, teams have been experimenting with the
location of luxury suites, which are no longer just found above the first level of seating. Today, the suites are being placed
closer to the playing field and even in some cases below it. Several NBA venues have built suites beneath the court with the
option for several occupants to sit courtside.
Given the hefty price tags that accompany premium seats, franchises
are expected to give customers the best accommodations, including the latest high-definition televisions, top-notch service
and plush seating areas.
“The challenge is to make the suite experience more than just a place to watch the
game,” said Jim Grinstead, publisher of Revenues from Sports Venues.
Experts said franchises must be
ready to adapt to the ever-changing desires of premium seat holders.
“We in our industry need to do
a better job of designing the venues to have a lot more flexibility,” said Glickman.
This means creating
suites that can easily be converted to other types of premium seating. Glickman knows fist-hand, as he said his team didn’t
have enough foresight when it built the Rose Garden, the current home of the Blazers.
Customization
is another key in the current premium seating market, with leaseholders now having the ability to put their mark on their
suites. Some businesses choose to put their logo on the walls or in various other areas of a suite – something that adds value
to the investment.
“One size does not fit all. Everything is now customized, and it should be,” said
Glickman.
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