ASC Debt and Financing Analysis Flashcards
6 cards from real ASC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 ASC Debt and Financing Analysis flashcards as text
When modeling construction financing in ARGUS, draw schedules are used to:
Answer: Manage the timing of loan disbursements during construction
Draw schedules in ARGUS track when construction loan funds are disbursed incrementally over the development timeline.
In ARGUS, an interest reserve in a construction loan is used to:
Answer: Pay interest during construction before the property generates income
An interest reserve is set aside to pay loan interest during construction when the property has no operating income to service the debt.
What is the effect of increasing leverage (higher LTV) on equity returns in an ARGUS model, assuming positive leverage?
Answer: Equity returns increase
With positive leverage (loan rate below cap rate), higher LTV amplifies equity returns by deploying more borrowed capital at a lower cost than the asset yields.
A recourse loan in ARGUS modeling means:
Answer: The borrower is personally liable beyond the collateral property
A recourse loan allows the lender to pursue the borrower's personal assets beyond the collateral property in the event of default.
In ARGUS, what is the purpose of modeling a lock-out period on a loan?
Answer: It restricts the borrower from prepaying the loan during that period
A lock-out period prohibits the borrower from prepaying the loan for a defined timeframe, protecting the lender's expected interest income.
In ARGUS debt modeling, what does a loan constant represent?
Answer: The ratio of annual debt service to the original loan amount
The loan constant is the ratio of annual debt service (principal plus interest) to the original loan balance, expressing the total annual cost as a percentage.