Financial Analysis and Reporting Flashcards

A property has a Gross Potential Rent (GPR) of $500,000 and collects $460,000 in actual rent. What is the collection loss percentage?

Answer: 8%

Collection loss = (GPR - Actual Rent) / GPR = $40,000 / $500,000 = 8%.

Which financial metric best measures how efficiently a property converts revenue into net operating income?

Answer: Operating expense ratio

The operating expense ratio (total expenses / gross income) measures how efficiently revenue is converted to NOI.

On a property income statement, 'concessions' are best classified as:

Answer: A reduction to gross potential rent

Concessions (e.g., free rent periods) reduce effective gross income and are recorded as a deduction from GPR.

A manager notices the utility expense line is 20% over budget midyear. The FIRST corrective step should be to:

Answer: Investigate the cause of the variance before taking action

Investigating the root cause first ensures the correct corrective action is taken rather than masking the problem.

Which document provides a forward-looking projection of all expected income and expenses for a 12-month period?

Answer: Annual operating budget

The annual operating budget projects anticipated income and expenses for the upcoming fiscal year.

A property's NOI is $360,000 and the purchase price is $4,500,000. What is the cap rate?

Answer: 8%

Cap rate = NOI / Value = $360,000 / $4,500,000 = 0.08 or 8%.

When preparing a monthly owner's report, variance analysis compares actual results to:

Answer: The approved budget for the same period

Variance analysis measures actual performance against the approved budget to identify significant deviations.