BOMA BOMA Financial Management & Reporting

Question 1

Which financial metric measures a property's ability to generate income relative to its total value, calculated as NOI divided by property value?

Accepted Answer

Capitalization rate (cap rate)

Answer

Cash-on-cash return

Answer

Internal rate of return

Answer

Debt service coverage ratio

Question 2

What does Net Operating Income (NOI) represent in commercial property analysis?

Accepted Answer

Effective gross income minus total operating expenses, before debt service

Answer

Total revenue minus all expenses including debt service

Answer

Net income after taxes and depreciation

Answer

Revenue minus vacancy loss only

Question 3

In property budgeting, what is a 'zero-based budget' approach?

Accepted Answer

A budget built from scratch each year justifying every expense rather than adjusting prior year figures

Answer

A budget that assumes no revenue growth year over year

Answer

A budget that targets zero variance between actual and projected costs

Answer

A budget used only for new building construction projects

Question 4

What is the 'debt service coverage ratio' (DSCR) and what does a ratio below 1.0 indicate?

Accepted Answer

NOI divided by annual debt service; below 1.0 means the property cannot cover its mortgage payments from operations

Answer

Total revenue divided by debt balance; below 1.0 means the property is overleveraged

Answer

Operating expenses divided by debt service; below 1.0 means expenses are well managed

Answer

Gross income divided by equity; below 1.0 means the property is undervalued

Question 5

Which accounting method records revenue when earned and expenses when incurred, regardless of when cash is received or paid?

Accepted Answer

Accrual basis accounting

Answer

Cash basis accounting

Answer

Modified cash basis accounting

Answer

Fund accounting

Question 6

What does 'straight-line rent' reporting require for long-term commercial leases under GAAP?

Accepted Answer

Averaging total lease payments evenly over the lease term regardless of actual payment schedule

Answer

Recording rent at the actual cash received each period

Answer

Adjusting rent for inflation using published indices

Answer

Recording rent only when legally earned after tenant occupancy