Real Estate Investment Analysis and Business Opportunity Brokerage Flashcards

1
Q

An increase in value

A

appreciation

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2
Q

Anything of value

A

asset

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3
Q

A financial report that shows the company’s financial position at a stated moment in time.

A

balance sheet

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4
Q

The resulting amount when annual debt service, tax liability, and capital improvement costs are subtracted from net operating income.

A

cash flow

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5
Q

The risk that arises from the continual change in the business environment and therefore dynamic risk cannot be transferred to an insurer.

A

dynamic risk

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6
Q

The market value of a property less any debt against it; in a business entity, assets minus liabilities equals capital (owner’s equity); a system of legal rules administered by a court of chancery.

A

equity

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7
Q

The worth of a business, including real estate, goodwill, and earning capacity.

A

going concern value

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8
Q

An intangible asset (value) of a business.

A

goodwill

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9
Q

A summary of all income and expenses of a business for a stated period of time.

A

income statement

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10
Q

The outlay of money in anticipation of income or profit; the sum risked or the property purchased.

A

investment

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11
Q

The use of borrowed funds to finance the purchase of an asset; the use of another’s money to make more money.

A

leverage

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12
Q

An appraiser’s methodology and estimate of the value of a business that is being liquidated. An assessment of such factors as the ability of the firm to pay off short-term obligations, the value of the inventory on hand, and the liquidation value of preferred stock.

A

liquidation analysis

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13
Q

The ability to convert non cash assets into cash quickly; refers to a firm’s cash position and its ability to meet obligations.

A

liquidity

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14
Q

A method of pooling investment money using the trust form of ownership.

A

REIT

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15
Q

The chance of losing all or al part of an investment; the uncertainty of financial loss.

A

risk

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16
Q

Risk that can be transferred to an insurer such as the risk of vandalism, fire, and so fourth.

A

static risk

17
Q
  1. Investors who want to invest in office buildings and apartment complexes but want the advantages of liquidity and diversification often consider investing in a. a real estate investment trust. b. a large property management company. c. a mutual fund that invests in the broad stock market. d. none of the above.
A

A

18
Q
  1. A case in which the interest paid for borrowed funds is less than the overall rate of return to an investor is an example of a. loan-to-value ratio. b. positive leverage. c. negative leverage. d. yield.
A

B

19
Q
  1. Business risk (operating business risk) is chance of loss associated with the a. variance between projected and actual income and expenses. b. ability to pay all operating expenses from proceeds generated by the investment. c. increase in interest rates during the period of investment. d. effect of inflation on purchasing power.
A

A

20
Q
  1. Investment value is a. market value. b. effective gross income capitalized by an appropriate rate of capitalization. c. the worth of an investment property on the open market with no time constraints. d. the worth of an investment property to an individual investor based on the investor’s standards.
A

D

21
Q
  1. What should an investor consider in evaluating a real estate investment? a. Liquidity b. Tax considerations c. Stability of income d. All of the above
A

D

22
Q
  1. A phosphate mining facility would be regarded as a. a destination property. b. an origin property. c. a secondary industry. d. a commercial property.
A

B

23
Q
  1. For investment purposes, the value of an investment property should be based on the a. property’s return and the appreciation it will yield. b. cost to reproduce the property. c. prestige and appreciation the investment will afford. d. net income of the property capitalized by current market capitalization rates.
A

A

24
Q
  1. Intangible assets of a business do NOT include a. goodwill. b. customer loyalty. c. trademarks. d. improvements.
A

D

25
Q
  1. Which class of stock must all corporations have? a. Debenture bonds b. Preferred stock c. Convertible bonds d. Common stock
A

D

26
Q
  1. A firm’s working capital is customarily defined as the difference between the firm’s total a. current assets and total current liabilities. b. current liabilities and total cash on hand. c. short-term liabilities and total cash on hand. d. long-term liabilities and total accounts receivable.
A

A

27
Q
  1. How does business brokerage differ from real estate brokerage? a. There is usually the need for an appraisal. b. An interest in real property is involved. c. Intangible assets must be considered. d. A lease may be involved.
A

C

28
Q
  1. The financial report that indicates a firm’s financial position at a stated moment in time is the a. operating statement. b. balance sheet. c. working capital statement. d. statement of net earnings.
A

B

29
Q
  1. The value of an established business property, compared with the value of just the physical assets of a business that is NOT yet established, is referred to as a. going concern value. b. goodwill. c. business enterprise. d. tangible assets.
A

A

30
Q
  1. Reasons for appraising a business and its assets do NOT include a. to obtain financing. b. when a governmental unit intends to exercise its power of eminent domain over a business location. c. when a business has been destroyed by known or unknown causes. d. to ensure compliance with all pertinent state and federal securities laws.
A

D

31
Q
  1. A concise summary of all income and expenses of a business for a stated period of time is the a. balance sheet. b. income statement. c. cash flow statement. d. asset sheet.
A

B

32
Q
  1. All of the resources of a business, including tangibles and intangibles, are referred to as the a. net worth. b. capital. c. gross income. d. assets.
A

D

33
Q
  1. The cost to duplicate exactly the business or building being appraised is the a. replacement cost. b. benchmark. c. reproduction cost. d. liquidation analysis.
A

C

34
Q
  1. Investment in an apartment building is regarded as economically feasible if it a. shows an appropriate return on the investment within two years. b. shows an appropriate return on the investment and recovers the invested capital. c. does not show a negative cash flow. d. does not show a negative after-tax cash flow.
A

B

35
Q
  1. Which expense is NOT considered in a cash flow analysis of a manufacturing plant? a. Mortgage loan principal b. Depreciation of factory equipment c. Reserve for replacement of factory equipment d. Expense associated with making the plant energy efficient
A

B

36
Q
  1. The market value of an apartment building is $350,000. The investor has leveraged $300,000. What is the investor’s equity in the property? a. $50,000 b. $300,000 c. $350,000 d. $650,000
A

A