CPM Financial Management 2

Question 1

What does 'capitalization rate' (cap rate) represent?

Accepted Answer

NOI divided by property value, expressing the unleveraged return

Answer

The mortgage interest rate

Answer

Cash flow divided by equity

Answer

Gross income divided by purchase price

Question 2

In property budgeting, what is a 'variance'?

Accepted Answer

The difference between budgeted and actual figures

Answer

The annual increase in rent

Answer

The difference between two comparable properties' rents

Answer

The gap between gross and net income

Question 3

Which budget type projects expected income and expenses for a forthcoming 12-month period?

Accepted Answer

Operating budget

Answer

Capital budget

Answer

Cash flow budget

Answer

Retrospective budget

Question 4

What is a 'reserve fund' in property management?

Accepted Answer

Money set aside from operations for future major repairs or replacements

Answer

Emergency line of credit from the bank

Answer

The owner's personal savings account

Answer

Funds held in escrow for tenant deposits

Question 5

Which method of accounting records revenue and expenses when cash is actually received or paid?

Accepted Answer

Cash-basis accounting

Answer

Accrual accounting

Answer

Modified accrual accounting

Answer

Double-entry accounting

Question 6

What does a 'proforma' financial statement represent in real estate?

Accepted Answer

Projected future income and expenses used to evaluate investment potential

Answer

Audited historical financial results

Answer

Year-end tax filing for the property

Answer

A statement of actual cash collected