Key Concept 7&8

Question 1

The revenue generated by corporate sales is called what

Answer 1

income

Question 2

The actual remaining cash after debt service is called what

Answer 2

cash flow

Question 3

The expenses over which the business has little control are known as what

Answer 3

fixed expenses

Question 4

A building that has been well maintained and has retained its value over the course of many years is considered a what?

Answer 4

a corporate asset

Question 5

What is the period of time called in which a piece of equipment retains some value?

Answer 5

economic life

Question 6

The difference between total assets and total liabilities is known as what

Answer 6

net worth

Question 7

The time it takes for an asset to decline from its maximum value to no value is called what

Answer 7

depreciation period

Question 8

goods and services with a short economic life

Answer 8

expensed goods

Question 9

Any asset that generates revenue is called what

Answer 9

capital asset

Question 10

What type of expense are lumber and paint for a major building renovation

Answer 10

capital cost or expense

Question 11

What are some ways to raise capital for a major corporate investment?

Answer 11

sell shares of stock, obtain a loan, and issue bonds

Question 12

The money you invest to start up and operate a business is usually what with regard to taxes?

Answer 12

usually nontaxable

Question 13

What are some examples of typical deductions

Answer 13

advertising, professional fees, vehicle expenses, building maintenance costs, utilities, etc.

Question 14

What can a business reduce if it can claim tax credits?

Answer 14

taxes

Question 15

The start-up phase in a business’s evolution tends to be what?

Answer 15

unprofitable

Question 16

What characterizes the growth and consolidation phase in a business’s evolution

Answer 16

greater capital investment

Question 17

During what stage will sales stabilize or continue to grow at a lower rate

Answer 17

maturity

Question 18

As a lessee/tenant, what should your priority be when renting space for your organization

Answer 18

to have physical flexibility of space

Question 19

When a large lending company acquires property through a foreclosure, what will its priority be?

Answer 19

to sell it quickly to minimize losses

Question 20

As a facilities manager, you convince your largest tenant to renew a five-year lease. This is an example of what type of income generation?

Answer 20

direct contribution to generating income

Question 21

Selling an older building at a profit and investing that money in a new building in a location with lower construction costs is an example of which type of financial contribution?

Answer 21

direct contribution to creating asset value

Question 22

Any cost-control measures, such as lease expense caps that limit corporate liability for utilities and taxes by obligating tenants to pay them, is considered what type of financial contribution?

Answer 22

indirect contribution to generating income

Question 23

The financial approach that entails finding the lowest-priced item that meets specifications at the time of need is known as what?

Answer 23

lowest first cost analysis

Question 24

What type of financial analysis accounts for all costs and returns associated with an item, including any salvage value after the asset is replaced

Answer 24

life cycle cost analysis

Question 25

Return on investment (ROI) is used to gauge financial performance of an investment using what criteria?

Answer 25

total money invested, direct capital contribution, qualitative factors, and borrowed funds

Question 26

What is the net profit after taxes divided by the net worth called

Answer 26

return on equity

Question 27

Payback is a form of breakeven analysis and is translated as what

Answer 27

net present value

Question 28

What can a facilities manager do to get included in the corporate officers’ inner circle of decision making?

Answer 28

informing customers about facilities services, networking with key managers, and intervening in the early stages of key projects

Question 29

Name some activities that are regulated or subject to contractual restrictions

Answer 29

zoning board approvals, environmental compliance inspections, requirements for strict contracting procedures, legal document reviews

Question 30

What is often the largest line item in the corporate operating budget

Answer 30

utility costs

Question 31

What should the corporate facilities budget be based on

Answer 31

facilities budgets should be based on both corporate business plans and the action plans devised to carry out the business objectives

Question 32

having as much control as possible over your funding and ability to juggle funds fromone cost center to another (within legal limits)

Answer 32

budget flexibility

Question 33

What becomes more critical as the churn rate increases within your building

Answer 33

physical and fiscal flexibility

Question 34

What makes facilities budgets more challenging than the budget for most other departments?

Answer 34

facilities budgets are often scattered among several departments

Question 35

Paying for operating costs with capital funds can do what

Answer 35

delay implementation of upcoming projects

Question 36

What are some things on which the facilities manager’s credibility is based

Answer 36

the ability to meet spending targets, the ability to anticipate user’s needs, and
sensitivity to a projected events

Question 37

the budgeting tool used to analyze all costs associated with a capital item over its expected life

Answer 37

life cycle cost analysis

Question 38

What are some corporate priorities for capital budgeting

Answer 38

complying with legal requirements, protecting corporate financial integrity, and maintaining worn-out equipment

Question 39

Developing funding requests for only those items that differ from the preceding year is called what?

Answer 39

incremental funding

Question 40

What is the safest assumption to make when developing a budget

Answer 40

budget reviewers know nothing about facilities

Question 41

What are the two main sources of unprogrammed expenses

Answer 41

equipment breakdowns and sudden corporate reorganizations

Question 42

Costs that can be tied to a project or cost center are called what

Answer 42

attributable costs

Question 43

What is a pass-through cost

Answer 43

costs, such as space improvement, that are paid by the facilities department, tied to a
project, and reimbursed from a customer’s cost center

Question 44

What are some examples of non-attributable costs

Answer 44

salaries of facilities department secretaries, insurance premiums, and salaries paid for
staff meeting times

Question 45

What are some methods of ensuring maximum cost control

Answer 45

a sound strategy, flexibility, and compartmentation

Question 46

What are some methods of accommodating reorganizations and reducing the cost of
churn?

Answer 46

keeping footprints to as few as possible, ensuring that phone numbers follow workers,
and accepting gradual project implementation

Question 47

What is included in basic rental costs

Answer 47

rental per square foot, alteration of the space to the building standard, and initial space
layout for standard alterations

Question 48

If a tenant wanted a large-capacity power source, uninterrupted power, and after-hours
operation capabilities, what type of costs would you charge?

Answer 48

space-associated operating costs