Financial Analysis and Reporting Flashcards

Which of the following is NOT included when calculating Effective Gross Income (EGI)?

Answer: Mortgage principal payments

Mortgage payments are a below-the-line financing cost and are never part of EGI calculation.

A property's debt service is $200,000 annually and its NOI is $260,000. What is the Debt Service Coverage Ratio (DSCR)?

Answer: 1.30

DSCR = NOI / Debt Service = $260,000 / $200,000 = 1.30.

In apartment accounting, a security deposit held in trust is recorded on the balance sheet as:

Answer: A liability

Security deposits belong to residents until forfeited, so they are recorded as a liability (obligation to return).

Which budgeting method requires every expense to be justified from zero each budget cycle rather than basing it on the prior year?

Answer: Zero-based budgeting

Zero-based budgeting starts from a 'zero base' each cycle, requiring justification for every line item.

An apartment property has 100 units at $1,000/month market rent and runs 5% vacancy. What is the annual EGI before other income?

Answer: $1,140,000

GPR = 100 × $1,000 × 12 = $1,200,000; minus 5% vacancy ($60,000) = $1,140,000 EGI.

The break-even occupancy ratio tells a manager:

Answer: The minimum occupancy needed to cover all operating expenses and debt service

Break-even occupancy = (Operating Expenses + Debt Service) / GPR, showing the floor needed to avoid losses.

Replacement reserves on an operating budget represent funds set aside for:

Answer: Major capital items that will eventually need replacement, such as HVAC or roofs

Replacement reserves fund the eventual replacement of long-lived capital items like roofs, HVAC, and appliances.