- | P a g e
CCIM 101 - FINANCIAL ANALYSIS UPDATED
EXAM QUESTIONS AND CORRECT ANSWERS
Question: What are the four basic components of NOI?
The correct answer is 1 - Potential rental income (PRI), 2 - Vacancy and credit losses, 3 - Other income, 4 - Operating expenses.
Question: [XXXX] is used to determine a property's PRI
(Potential Rental Income.) The correct answer is Lease analysis.
Question: PRI equals NOI in what property/tenant scenario?
The correct answer is If the property has one tenant with a long- term absolute NNN lease.
Question: [XXXX] is PRI minus vacancy and collection losses.
The correct answer is ERI (Effective Rental Income).
Question: Name some items which are EXCLUDED from
Operating Expenses.
- | P a g e
The correct answer is Interest and principal on debt on the property, Depreciation (cost recovery), Capital Expenditures, Income Taxes, Reserves for Replacement, Tenant Improvements.
Question: True or False: Depreciation is included in Operating Expenses.The correct answer is False.
Question: True or False: Principal and interest on debt financing is included in Operating Expenses The correct answer is False. This is an expense of ownership, not an operating expense.
Question: True or False: Capital Expenditures are included in Operating Expenses.The correct answer is False. They are written off over a period of years.
Question: True or False: Income Taxes are included in Operating Expenses The correct answer is False.
- | P a g e
Question: True or False: Reserves for Replacement are included in Operating Expenses The correct answer is False.
Question: True or False: Tenant Improvements (TI) are included in Operating Expenses The correct answer is False.
Question: True or False: Repairs and Maintenance are included in Operating Expenses The correct answer is True.
Question: True or False: Property insurance is included in Operating Expenses The correct answer is True.
Question: True or False: Utilities are included in Operating Expenses The correct answer is True.
Question: What's the biggest difference between cap rate and
yield?
- | P a g e
The correct answer is Cap rate does not factor in eventual sale proceeds - yield does. If there is a profit on the sale then yield will be higher than cap rate.
Question: Cap rate + growth = [XXXX]?
The correct answer is Yield.
Question: True or False: Leasing commissions are included in Operating Expense?The correct answer is False - they are included in Cash Flow Before Taxes.
Question: What is Net Present Value?
The correct answer is NPV is the difference between the present value of cash inflows and the present value of cash outflows over time.
Question: True or False: For commercial and investment properties, loan costs paid at time period zero are deducted in full in the year they are paid.The correct answer is False - they are amortized over the full term of the loan. Any unamortized costs are expensed in the year the loan is paid off.