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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

  1. A residential property's capitalization rate is 7% and its NOI is $350,000. What is the estimated market value using direct capitalization?

    Answer: $5,000,000

    Value = NOI ÷ Cap Rate = $350,000 ÷ 0.07 = $5,000,000.

  2. Which internal control best reduces the risk of embezzlement of rental payments in a residential management office?

    Answer: Separating the duties of cash collection, accounting entry, and bank deposit

    Segregation of duties ensures no single employee controls an entire transaction, making fraud significantly harder to commit and conceal.

  3. A property manager is evaluating whether to replace aging HVAC units now or defer replacement two years. Which financial tool is MOST appropriate for this decision?

    Answer: Net present value (NPV) analysis

    NPV analysis discounts future cash flows to present value, allowing a direct comparison of the cost of acting now versus deferring the capital expenditure.

  4. Which expense is typically excluded when calculating Net Operating Income (NOI)?

    Answer: Mortgage interest payments

    NOI is calculated before debt service (mortgage interest and principal), making it a property-level metric independent of financing structure.

  5. A property manager discovers that the operating expense ratio (OER) has climbed from 42% to 51% over three years. This trend MOST likely indicates:

    Answer: Rising expenses relative to income, reducing NOI margin

    A rising OER means expenses are growing faster than income, compressing the NOI margin and signaling potential financial stress.

  6. When an owner requests a pro-forma budget for a value-add acquisition, the manager's revenue projections should be based on:

    Answer: Market rents achievable after planned renovations, with a realistic stabilization timeline

    A value-add pro-forma must reflect stabilized market rents post-renovation while accounting for lease-up period and timing of rent increases.

  7. A residential manager is asked to explain 'straight-line depreciation' on a property. Which statement is MOST accurate?

    Answer: It spreads the cost of the asset evenly over its useful life

    Straight-line depreciation allocates an equal deduction each year over the IRS-defined useful life (27.5 years for residential property).