Financial Management & Budgeting Flashcards
7 cards from real CRM 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 Management & Budgeting flashcards as text
Under accrual-basis accounting used in residential property management, rent revenue is recognized when:
Answer: It is earned (due), regardless of when collected
Accrual accounting records revenue when it is earned and expenses when incurred, not when cash changes hands.
A property manager is asked to calculate the Debt Service Coverage Ratio (DSCR). The NOI is $480,000 and annual debt service is $360,000. What is the DSCR?
Answer: 1.33
DSCR = NOI ÷ Debt Service = $480,000 ÷ $360,000 = 1.33, indicating the property generates 33% more income than needed to cover debt.
Which of the following is classified as a fixed operating expense for a residential property?
Answer: Property insurance premiums
Property insurance premiums are contractually set for the policy period and do not vary with occupancy or usage, making them fixed expenses.
A trust account for security deposits must be:
Answer: Kept separate and used only for purposes permitted by state law
State landlord-tenant laws require security deposits to be held in a separate trust account and used only for legally permitted purposes such as unpaid rent or damages.
When a property manager prepares a monthly owner's statement, which item represents funds NOT available for distribution to the owner?
Answer: Reserve contributions set aside for future capital repairs
Reserve contributions are withheld from distributions because they are earmarked for future capital expenditures, not current operating profit.
A 150-unit complex has a potential gross income of $2,400,000, a 6% vacancy rate, and $48,000 in other income. What is the Effective Gross Income?
Answer: $2,352,000
EGI = $2,400,000 − ($2,400,000 × 0.06) + $48,000 = $2,400,000 − $144,000 + $48,000 = $2,352,000.
Zero-based budgeting differs from incremental budgeting primarily because it:
Answer: Requires every expense to be justified from scratch each budget cycle
Zero-based budgeting requires each line item to be re-justified every period rather than simply adjusting historical figures, eliminating inherited inefficiencies.