Financial Analysis for Properties Flashcards
7 cards from real CCS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Analysis for Properties flashcards as text
What is the primary purpose of an independent financial audit for a condominium association?
Answer: To provide an objective opinion on whether financial statements fairly present the association's financial position
An independent audit by a CPA provides assurance that financial statements are free from material misstatement and comply with generally accepted accounting principles.
When comparing two condominium investments, a lower cap rate generally implies:
Answer: Lower risk and higher value
Lower cap rates signal that investors accept less income relative to value because they perceive lower risk and expect appreciation, driving up prices.
A condominium association's operating fund deficit occurs when:
Answer: Current-year operating expenses exceed operating revenues collected
An operating deficit arises when the association spends more on day-to-day expenses than it collects in assessments and other operating income.
Which metric best measures the return an investor earns relative to cash invested after financing costs?
Answer: Cash-on-cash return
Cash-on-cash return divides annual pre-tax cash flow by the total cash invested (down payment + closing costs), reflecting leveraged investment performance.
In a condominium operating budget, a 'contingency line item' is best described as:
Answer: A reserve for unanticipated operating expenses during the fiscal year
An operating contingency is a budget cushion—typically 3–10%—set aside to absorb unexpected routine expenses without requiring a special assessment.
Fannie Mae's project eligibility guidelines restrict single-entity ownership of condominium units within a project to no more than:
Answer: 10%
Fannie Mae generally limits a single investor to owning no more than 10% of total units to reduce concentration risk in a condominium project.
Which financial statement shows an association's assets, liabilities, and fund balances at a specific point in time?
Answer: Balance sheet
The balance sheet (statement of financial position) is a snapshot of what the association owns, owes, and retains at the reporting date.