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20 Cards in this Set
- Front
- Back
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1. Investors who want to invest in office buildings and apartment complexes but want the advantages ofliquidity and diversification often consider investing in a. A real estate investment trust b. A large property management company c. A mutual fund that invest in the broad stock market d. None of these |
a. A real estate investment trust
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2. A case in which the interest paid for borrowed funds is less than overall rate of return to an investor inan example of a. Loan-to- value ratio b. Positive leverage c. Negative leverage d. Yield |
b. Positive leverage
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3. Business risk (operating business risk) is a 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. Variance between projected and actual income and expenses |
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4. Investment value is a. Market value b. Effective gross income capitalized by an appropriate rate of capitalization c. The worth of an investment property offered on the open market with no time constraints d. The worth of an investment property to an individual investor based on the investor’sstandards. |
d. The worth of an investment property to an individual investor based on the investor’s standards. |
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5. What should an investor consider in evaluating a real estate investment? a. Liquidity b. Tax considerations c. Stability of income d. All of these |
c. Stability of income
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6. A phosphate mining facility would be regarded as a. A destination property b. An origin property c. A secondary property d. A commercial property |
b. An origin property
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7. 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. Property’s return and the appreciation it will yield
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8. Intangible assets of a business do NOT include a. Goodwill b. Customer loyalty c. Trademarks d. Improvements |
d. Improvements
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9. Which class of stock must all corporation have? a. Debenture bonds b. Preferred stock c. Convertible bonds d. Common stock |
d. Common stock
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10. 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. Current assets and total current liabilities
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11. How does business brokerage differ from real estate brokerage? a. An appraisal is usually needed b. An interest in real property is involved c. Intangible assets must be considered d. A lease may be involved |
c. Intangible assets must be considered
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12. 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 |
b. Balance sheet
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13. The value of an established business property, compared with the value of just the physical assets of abusiness that is NOT yet established, is called a. Going-concern value b. Goodwill c. Business enterprise d. Tangible assets |
a. Going-concern value
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14. 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 |
d. To ensure compliance with all pertinent state and federal securities laws
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15. 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 |
b. Income statement
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16. All the resources of a business, including tangibles and intangibles, are called the a. Net worth b. Capital c. Gross income d. Asset |
d. Asset
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17. The cost to duplicate exactly the business or building being appraised is the
a. Replacement cost b. Benchmark c. Reproduction cost d. Liquidation analysis |
c. Reproduction cost
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18. 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 |
b. Shows an appropriate return on the investment and recovers the invested capital
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19. 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 |
b. Depreciation of factory equipment
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20. The market value of an apartment building is $350,000. The investor has leveraged $300,000. What isthe investor’s equity in the property? a. $50,000 b. $300,000 c. $350,000 d. $650,000 |
a. $50,000
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