READINGS - Analyzing Trends in Cash Flow Flashcards
What should be analyzed once actual income and expenses are known?
Actual income and expenses
What does trend analysis involve?
Comparing current income and expenses with amounts from past periods
What is the focus of trend analysis besides increases and decreases?
Changes in the NOI
What are the sources of information for trend analysis?
Cash-flow budget and operating budget
What should trend analysis have in common with the budgets?
The same line items
How can the results of trend analysis be entered?
On a form modeled after the budgets, including columns for dollar and percentage changes
How frequently can trend analysis be performed?
Yearly or quarterly
True or False: The dollar figures can be used to check the percentage changes.
True
What is Gross Possible Rent?
The total potential income that a property can generate if fully rented without any vacancies.
What does EGI stand for?
Effective Gross Income
What is the formula for Operating Expense Percentage?
New Period ÷ Base Period
How do trend percentages help in cash flow analysis?
They reveal trends that might otherwise be disguised.
What does NOI stand for?
Net Operating Income
True or False: A decline in NOI growth relative to EGI indicates that operating expenses are consuming a larger portion of income.
True
Fill in the blank: The trend percentages for the Windermere Building show that NOI grew more slowly than _______.
effective gross income (EGI)
What is the significance of comparing dollars per square foot in income and expense analysis?
It’s especially good for evaluating expenses and identifying controllable variable costs.
What does ‘Vacancy & Collec. Loss’ refer to?
The potential income lost due to vacancies and uncollected rents.
What can be inferred if expenses increase as a percentage of square feet?
These variable costs may be more controllable and cuttable compared to fixed costs.
What do the trend percentages indicate about the operating expenses in period 2 compared to period 1?
Operating expenses take up a larger portion of property income.
What is the base period’s amounts percentage set at for trend calculations?
100 percent
What is the purpose of calculating trend percentages?
To track the performance of income and expenses over time.
What is the effective rental income?
The rental income after accounting for vacancy and collection losses.
What does the term ‘Operating expenses’ encompass?
Costs associated with managing and maintaining a property.
What is the purpose of per square foot analysis?
To compare expenses for different complexes
