Sports Management Assignment (Solved)

SPORTS MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
Global business environment & its impact.................................................................................1
Finance of company from last three years..................................................................................3
CONCLUSION & RECOMMENDATIONS..................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Manchester United Plc is a UK based organization doing operations of a professional
football club and beside this the company also offers many auxiliary services across the globe.
Further, Operations of Manchester United Plc is divided in to three segments Commercial,
Broadcasting and Match day. In the commercial segment the company generates revenue by
selling sports apparel & leisure wear, Marketing & Sponsorship to various companies across the
world. Manchester United Plc is listed on NYSE which is also a source for the company to
generate revenue and increasing brand image. Manchester United Plc is a highly dominant
company because it is successful in selling its product at a high price after getting damage during
second world war.
TASK
Global business environment & its impact
Overview of Global Business Environment
Global business environment includes various micro & macro factors which affects
business of an organization and its decision making process. Various macro factors such as
economic, political, legal social & technological factors affects operations of firms. Analysis of
global environment of an organisation is done on the basis of these factors and this analysis also
helps company in analyzing market, industry and competitors of the company. Analysis of global
environment of Manchester United Plc is done through environmental scanning, monitoring,
forecasting & assessment. Operations of Manchester United Plc is highly affected by economic,
social & political factors. Where political factors includes change in regulations & guidelines of
government regarding sports which affects business of company, social factors includes change
in beliefs, opinions & attitude of society on sports and change in economic factors such as
interest rate, exchange rate, inflation and unemployment affects financial of Manchester United
Plc(Salvatore, 2015).
 Inflation- Inflation rate of country measures price of products & services of a particular
country. Inflation shows decrease in purchasing power of individual of a country and if
purchasing power of individuals decreases than demand for the goods & services for that
country also deceases. Inflation is an economic factor which affects profits &
productivity of Manchester United Plc.
1

 Exchange Rate- Exchange rate is defined as economic value of a country's currency with
respect to value of currency of another country. This is also an economic factor which
affects global business environment of a country such as market growth & GDP because
Manchester United Plc also does its business with other countries. Operations of
Manchester United Plc also get affected with the change in exchange rate of United
Kingdom.
 Interest Rate- Interest rate is a percentage charged on the amount of money borrowed or
lend and an amount charged on principal amount. Interest rate is decided for a period of 1
year.
Impact of Global Business Environment
Change in factors of Global business environment has a direct impact on the workings &
growth of organisation operating with in a country. Economic factors such as unemployment,
inflation, interest rate and exchange rate impacts on a country's economy and also operations &
profits of Manchester United Plc(Hamilton and Webster, 2018).
 Exchange Rate- Manchester United Plc. Deals with many countries so the changes in
exchange rate has also an impact on the demand & supply of its services. If exchange rate
of united kingdom increases than it affects exports & imports of Manchester United Plc.
It makes difficult for the company in exporting because it makes exports much costly. On
the other hand advantage of this for the company is now the company can import raw
materials and other services at a cheaper rate.
 Unemployment- A situation of high unemployment impacts tax collection of
government of that country and it also impacts Income of the individuals. If customers of
Manchester United Plc get unemployed than their purchasing power reduces which has a
direct effect on the profits & revenue of the company.
 Inflation- Situation of inflation in United States leads to rise in price of the goods &
services of the country and it also has an impact on cost of living of the citizens of the
country. Thus, Rise in price of services & goods of company impacted purchasing power
of customer of Manchester United Plc. Purchasing power of customers of the company
decreases which results in decrease in sales volume & profits of the company.
 Interest Rate- Change in interest rate also impacts finances of Manchester United Plc.
Because, it directly affects purchasing power of customers of the company. If there is a
2

rise in interest than purchasing power of customers who have borrowed money is
decreases and that leads to reduction in sales volume of Manchester United Plc. Thus,
profits of the company has an impact.
Brexit & Manchester United Plc
Emergence of Brexit highly impacted business of Manchester United Plc because exit
from the European market leads to decrease in sales revenue, market share and trade volume of
the company. Market & customer base of the company decreases because after Brexit company
has to operate its business in the single market. Due to Brexit expenditure of government of UK
also increases because government now have to pay more taxes.
Gross Domestic Product(GDP)
Economic situation of any country is measured by analysing GDP and Purchasing power
parity. Economic condition of UK is strong and it is the 5th largest developed economy in the
world and it includes 3.5% of worlds GDP. GDP of UK is increasing year by year which in turn
strengthen economy of the country.
Finance of company from last three years
Interpretation of Accounts- Interpretation of accounts is formation of rules & regulation which
is applied on any company as how to follow accounting standards. Interpretation of accounts &
financial statement helps in identifying profitability, liquidity and efficiency of Manchester
United Plc. There are various techniques used for analyzing & interpreting accounting &
financial statement of any company such as ratio analysis, cash flow analysis and fund flow
analysis. Manchester United Plc uses Ratio Analysis technique to check profitability, solvency
and efficiency of the company(Adekola and Sergi, 2016.).
Ratio analysis- Ratio analysis is comparing two items of financial statement of the company and
the difference between them is termed as ratio and comparing ratios of current year with past
year's ratio is known as ratio analysis. This analysis helps Manchester United Plc in measuring
trend of its profits & revenue. Different types of ratios and comparison of ratios of last three
years of Manchester United Plc is discussed below-
Profitability Ratios- Profitability ratio shows capacity of a company to generate revenue
& profits. Manchester United Plc use return on capital employed ratio to check profitability of
the company.
3

Profitability
ratio analysis
2016 2017 2018
Gross Profit 127.57 90.8 42.59
Net profit
Sales revenue 763.4 736.92 793.86
Earnings before
interest and tax or
operating profit
72.34 71.69 35.11
Capital employed 3.58 3.68 3.32
Net income 53.88 49.67 -50.15
Average total
assets
1940 1990 2040
GP ratio Gross profit /
sales * 100
67% 12% 5%
NP ratio Net profit / sales
* 100
0% 0% 0%
Return on capital
employed
EBIT / capital
employed
20.2067039106 19.4809782609 10.5753012048
Return on assets Net income /
avearge total
assets
0.0277731959 0.024959799 -0.0245833333
Return on capital employed show what company earned on its investment. If this ratio is high
than it indicates that company is earning high profits and vice a vice. Capital Employed Ratio of
last three years of Manchester United Plc is showing a decreasing trend which is not good for the
company. In 2016 capital employed ratio of Manchester United Plc is 20.20 million which is
4

reduced in 2017 to 19.48 million and in 2018 this ratio further declined to 10.57 million(Hill,
Liesch and MacKenzie, 2017).
Efficiency Ratios- Efficiency ratio is used by Manchester United Plc for analyzing its
capacity to use the assets & effective utilization of its liabilities. With the help of these ratios
company can find out turnover of its assets & receivable, repayment of liabilities and value of
stocks. Company uses Asset turnover ratio and Stock turnover ratio to find out its efficiency.
Efficiency ratio of Manchester United Plc for past three years id given below-
Efficiency ratio
analysis
2016 2017 2018
Cost of goods
sold
635.83 646.12 751.27
Average
Inventory
1.24 1.68 2.001
Turnover or sales
revenue
763.4 736.92 793.86
Average total
assets
1940 1990 2040
Average fixed
assets
Receivables or
debtors
Creditors or
payables
Cost of ggod sold
Stock turnover
ratio (In times)
512.7661290323 384.5952380952 375.4472763618
5

Efficiency ratio
analysis
Total assets
turnover ratio
0.3935051546 0.3703115578 0.3891470588
Stock Turnover Ratio- In 2016, Stock turnover ratio of the company was 512 times
which shows company has sufficient inventory to fulfil requirement of sale of its products &
services. But in 2017 STOR of Manchester United Plc is reduced to 384 times which is not good
for the company and in 2018 this ratio further decreased to 375 times(Uechi and Kenett, 2015.).
Total Asset Turnover Ratio- This ratio shows that if company is able to increase its
sales by using its assets or not. Asset turnover ratio of Manchester United Plc is also showing a
decreasing tend in last three years which shows companies financial are not good and company
is incurring losses from the last 3 years.
Liquidity Ratios- Liquidity ratio helps Manchester United Plc that the company is having
sufficient assets to pay all the liabilities of the company. It also helps the company in comparing
assets and liabilities of the firm. Manchester United Plc check its liquidity by calculating current
ratio & acid test ratio.
Acid Test Ratio- This ratio shows availability of short term funds or assets to recover
companies current liabilities. In 2016 Acid test ratio of Manchester United Plc is 0.9373 which is
decreased in 2017 to 0.9524 which means companies liquidity is reduced and this ratio is further
decreased in 2018 and that shows company does not have enough short term funds to pay its
liabilities(Zolfani, Yazdani and Zavadskas, 2018).
Current Ratio- Current ratio is calculated for determining difference between current
assets & current liabilities of Manchester United Plc. Current ratio of past three years of the
company is compared below-
Liquidity ratio
analysis
2016 2017 2018
6

Liquidity ratio
analysis
Current assets 508.62 518.09 386.36
Current liabilities 541.32 538.17 613.27
Inventory
Prepaid expenses
Quick assets 508.62 518.09 386.36
Current ratio Current assets /
current liabilities
0.9395921082 0.9626883698 0.6299998369
Quick ratio Current assets -
(stock + prepaid
expenses)
0.9395921082 0.9626883698 0.6299998369
In 2016 current ratio of Manchester United Plc is 0.9395 million which is in creased in 2017 to
0.9626 million. This indicate that value of current assets of the company in 2017 is increased and
it is sufficient to meet all the requirement of current liability. But, in 2018 current ratio of the
company is decreased to 0.6299 million which shows that company does not have sufficient
amount of assets to pay it liabilities and this also indicates that Manchester United Plc is in loss
in the financial year 2018-19(Salvatore, 2015).
CONCLUSION & RECOMMENDATIONS
This report outlined an ovUechi, L. and Kenett, D.Y., 2015.erview of global business
environment such as interest rate, exchange rate, unemployment and inflation. Further, this
report summaries impact of global business environment on the operations & financial position
of the company. Furthermore, this report outlined impact of Brexit and economic situation of
UK. At last, this report conclude efficiency, profitability & liquidity by showing financial's of
past three years.
Manchester United Plc does not achieve profits from the last two years Net Profits of the
company in 2016 was 53.88 million which was reduced to 49.67 million in 2017 and in the year
2018 companies financial position is at a loss of 50.15 million. So, it is recommended to the
7

company that it should focus on improving its financial condition by increasing its market and
company should follow low pricing strategy which attracts customers and it is also favorable for
Manchester United Plc in the worst economic situation. Company should also follow flexible
policies which helps the firm in changing situations.
8