In calculating a league's salary cap, which component is multiplied by the revenue share percentage?

• A. The number of teams in the league
• B. Revenue generated by the league
• C. The league's annual profit
• D. The percentage of players' payroll

Answer: (B)

The key idea is that the salary cap is set by applying a fixed revenue share to the league’s total revenue. In this approach, the base amount is the league’s revenue generated, and the revenue share percentage determines how large the cap will be. So, multiplying the revenue the league brings in by the revenue share percentage yields the cap figure. This keeps the cap tied directly to actual league earnings, rather than to how many teams exist, the league’s profit, or a portion of players’ payroll. For example, if the league generates $1 billion and the revenue share is 50%, the cap would be $500 million (before any per-team distribution). The number of teams doesn’t change the base calculation, profits aren’t used as the base, and the payroll percentage isn’t the factor in this calculation; all of those would affect other aspects of structure, not the revenue-based cap formula.