Practice Test Geeks(CGA) Certified General Appraiser Practice Test
← All CGA Flashcard Decks

Financial Analysis & Reporting Flashcards

7 cards from real CGA 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 & Reporting flashcards as text

  1. An appraiser is analyzing a retail property's income statement. Which adjustment is most critical when converting accounting net income to Net Operating Income (NOI)?

    Answer: Add back depreciation and remove mortgage interest

    NOI excludes financing costs (mortgage interest) and non-cash accounting charges (depreciation) to reflect property-level operating performance.

  2. A property has Potential Gross Income of $500,000, vacancy and collection loss of 8%, and operating expenses of $180,000. What is the NOI?

    Answer: $280,000

    Effective Gross Income = $500,000 × 0.92 = $460,000; NOI = $460,000 − $180,000 = $280,000.

  3. Which ratio measures a property's ability to service debt from its operating income?

    Answer: Debt Coverage Ratio

    The Debt Coverage Ratio (DCR) equals NOI divided by annual debt service, indicating how many times income covers the mortgage payment.

  4. When preparing a reconstructed operating statement, which item would a general appraiser EXCLUDE from operating expenses?

    Answer: Mortgage principal and interest payments

    Debt service (mortgage payments) is a financing cost, not an operating expense, and is excluded from the reconstructed operating statement.

  5. A net lease requires the tenant to pay base rent plus taxes, insurance, and maintenance. What financial reporting advantage does this structure provide to an appraiser?

    Answer: Expenses are predictable and landlord expense exposure is minimal

    In a net lease, operating expense risk shifts to the tenant, making the landlord's net cash flow more predictable and easier to analyze.

  6. Which financial statement provides the most direct input for income capitalization in a property appraisal?

    Answer: Reconstructed operating statement showing stabilized NOI

    The reconstructed operating statement normalizes income and expenses to a stabilized level, providing the NOI used in capitalization.

  7. An operating expense ratio (OER) of 55% for an apartment complex most likely indicates:

    Answer: Expenses consume 55% of Effective Gross Income

    OER = Total Operating Expenses ÷ EGI × 100, so 55% means over half of collected income is consumed by operating costs.