So you're saying that longer-term sales are the aim, not immediate sales. So sales are the metric then?
Massive over simplification.
+ Goodwill is paramount on a balance sheet (relating to brand awareness). Banks determine solvency in the event of potentially borrowing, allowing the company to grow & raise capital.
+ As Dan suggested, sponsorship is an instant expense, providing tax relief if required.
+ Brand awareness = more cash = reduction in inventory days, potentially decreasing payable in days, potentially improving supplier terms, potentially improving cash position. This leads to improved Net Cash After Operations (NCAO). That's what a Bank would determine loan approvals from (NOT profit, like most people would think).
+ Sponsorships can have an immediate affect on many different facets of a business (including negative in the club is seen in a negative light)
You also asked:
So why would a company in this circumstance incur a cost (make a loss) to earn a tax write off for only part of that loss? I don't get the logic.
+ The company isn't making a loss, they are claiming an expense to reduce tax payable, but receiving the benefits I have listed above, plus many more. If your making large profits, it makes all the sense in the world. I only listed SOME of the positive affects.
