BOMA BOMA Financial Management & Reporting 2

Question 1

What is a 'variance report' in property management financial reporting?

Accepted Answer

A report showing differences between budgeted and actual financial performance

Answer

A variance report compares budgeted figures to actual results, highlighting positive or negative differences that require management attention or explanation.

Question 2

What is a 'capital expenditure' (CapEx) as distinguished from an operating expense in building management?

Accepted Answer

An investment in a long-lived asset that extends useful life or adds value, capitalized and depreciated over time

Answer

CapEx refers to spending on assets that extend a building's useful life, improve functionality, or add value (like roof replacement or HVAC systems), which are capitalized on the balance sheet and depreciated over time.

Question 3

What financial statement shows a property's assets, liabilities, and equity at a specific point in time?

Accepted Answer

Balance sheet

Answer

The balance sheet (or statement of financial position) provides a snapshot of a property's or company's financial position at a specific date, listing all assets, liabilities, and owner's equity.

Question 4

In property management, what does 'economic occupancy' measure compared to 'physical occupancy'?

Accepted Answer

Economic occupancy measures rent actually collected as a percentage of potential rent while physical occupancy measures percentage of space that is leased

Answer

Physical occupancy is the percentage of total space that is leased, while economic occupancy measures actual rent collected as a percentage of potential gross rent, accounting for concessions and delinquencies.

Question 5

What is the purpose of a 'replacement reserve' in a property's operating budget?

Accepted Answer

Funds set aside to cover future major capital expenditures like roof replacement or HVAC systems

Answer

A replacement reserve is money set aside annually to fund future major capital replacements, ensuring sufficient funds are available when major building systems or components reach end of life.

BOMA - Building Owners & Managers Association Practice Test

BOMA - Building Owners & Managers Association Practice Test

BOMA BOMA Financial Management & Reporting 2