CAM Financial Analysis and Reporting 2 — Questions and Answers
Question 1: A property has a Gross Potential Rent (GPR) of $500,000 and collects $460,000 in actual rent. What is the collection loss percentage?
- 8% (Correct answer)
- 6%
- 4%
- 10%
Correct answer: 8%
Collection loss = (GPR - Actual Rent) / GPR = $40,000 / $500,000 = 8%.
Question 2: Which financial metric best measures how efficiently a property converts revenue into net operating income?
- Operating expense ratio (Correct answer)
- Cap rate
- Debt service coverage ratio
- Loan-to-value ratio
Correct answer: Operating expense ratio
The operating expense ratio (total expenses / gross income) measures how efficiently revenue is converted to NOI.
Question 3: On a property income statement, 'concessions' are best classified as:
- A reduction to gross potential rent (Correct answer)
- An operating expense
- A capital expenditure
- A liability
Correct 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.
Question 4: A manager notices the utility expense line is 20% over budget midyear. The FIRST corrective step should be to:
- Investigate the cause of the variance before taking action (Correct answer)
- Immediately reduce maintenance spending to offset the overage
- Notify ownership that the budget was set incorrectly
- Pass the cost increase to residents via a utility billing addendum
Correct 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.
Question 5: Which document provides a forward-looking projection of all expected income and expenses for a 12-month period?
- Annual operating budget (Correct answer)
- Income statement
- Balance sheet
- Cash flow statement
Correct answer: Annual operating budget
The annual operating budget projects anticipated income and expenses for the upcoming fiscal year.
Question 6: A property's NOI is $360,000 and the purchase price is $4,500,000. What is the cap rate?
- 8% (Correct answer)
- 10%
- 6%
- 12%
Correct answer: 8%
Cap rate = NOI / Value = $360,000 / $4,500,000 = 0.08 or 8%.
Question 7: When preparing a monthly owner's report, variance analysis compares actual results to:
- The approved budget for the same period (Correct answer)
- The prior year's actual results only
- Industry benchmark averages
- The property's pro forma at acquisition
Correct answer: The approved budget for the same period
Variance analysis measures actual performance against the approved budget to identify significant deviations.
CAM Financial Analysis and Reporting 2
A property has a Gross Potential Rent (GPR) of $500,000 and collects $460,000 in actual rent.
What is the collection loss percentage?