Chapter 17 keywords

Question 1

Appreciation

Answer 1

Appreciation is an increase in the value of an investment overtime. Investment property can appreciate value for many reasons, such as inflation, supply, and demand, and capital improvements.

Question 2

Asset

Answer 2

 Assets are items of value that are owned by a business. Assets include accounts and promissory notes, receivable, cash, inventory, production, machinery, real estate, personal property, patterns, trademarks, and goodwill.(the value of the name of the business in the marketplace.)

Question 3

Basis

Answer 3

Basis, or cost basis, is original value of an asset for tax purposes. When purchasing a home, the basis includes the purchase price and any associated acquisition cost. Basis is used to determine the gain or loss on the cell, exchange, or other disposition of a property.

Question 4

Capital gain/loss

Answer 4

A capital gain is increased in the value of an asset, such as personal or investment property, that gives it a higher value than the cost of purchasing the asset. If a property sells for more than the purchase costs, there is a capital gain. The capital loss is incurred when there is a decrease in the value of an asset that gives it a lower value than the cost of purchase in the asset.
The capital gain or loss is not realized until the property is sold

Question 5

Cash flow

Answer 5

Cash flow is the movement of money into or out of the business or investments, measured over a period of time. Generally, speaking, cash flow is the money that remains after all the income, such as rents, is collected, and all the day-to-day expenses as associated with owning the property are paid.

Question 6

Debt service

Answer 6

That Service is the principal on interest paid to service your property mortgage
Hi Lee, lovers investments, require cash flows from the property to make the mortgage payments, that service that is too high, may make that impossible

Question 7

Equity

Answer 7

Equity is the difference between the current market value of a property and the amount the owner still owes on the mortgage

Question 8

Going concern value

Answer 8

The appraisal of a profitable business presents a unique challenge. The value of the business is not just the value of any real estate owned, but rather a composite of the values of the real estate, personal property, and intangible access, such as licenses, franchisees, noncompetition contracts, and so on. When the value of all assets is combined, it creates what is known as going concerned value.

Question 9

Goodwill

Answer 9

Goodwill is the value of the name of the business in the marketplace

Question 10

Installment sale

Answer 10

Is on sale is a form of seller financing. No down payment is required to qualify as an installment cell. It qualifies as long as at least one payment is received in the tax year subsequent to the year of sale. And their installments cell treatment only the percentage of gain, received in any given year is taxable. Therefore, the gain can be spread over several years, thereby reducing the amount of tax due in any tax year.

Question 11

Leverage

Answer 11

Leverage is the use of borrowed funds to purchase assets. Most investors make real estate investments with borrowed money. Positive leverage allows an investor to earn a higher rate of return on funds invested by bar, and then they could earn by paying cash for the investment. Financial leverage can be either positive or negative.

Question 12

Like-kind exchange

Answer 12

And tax the first exchange and investment real estate that is exchange for other investment real estate is called a like-kind exchange

Question 13

Liquidation analysis

Answer 13

The comparable sales approach, cost, appreciation approach, and income approach. Can all be used to appraise a business. A fourth method, liquidation analysis, may be used. This method is unique to the valuation of a business.

Question 14

Liquidity

Answer 14

Liquidity refers to an assets ability to be easily converted through an act of buying or selling, without causing a significant movement in the price and with minimum loss of value. Cash is the most liquid asset.

Question 15

Profit

Answer 15

Calculating profit on investment, profits from investments are on the amount that is originally invested, not on the amount received one investment is sold or liquidated. The following formula is used to determine the profit based on the original investment amount paid:
Profit or loss %= Amount made/amount paid