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CCIM 101 FINANCIAL ANALYSIS
QUESTIONS AND CORRECT
ANSWERS
Question 1: What are the four basic components of NOI?
CORRECT ANSWER : 1 - Potential rental income (PRI)
- - Vacancy and credit losses
- - Other income
- - Operating expenses
Question 2: What is used to determine a property's PRI
(Potential Rental Income)?
CORRECT ANSWER : Lease analysis
Question 3: PRI equals NOI in what property/tenant
scenario?
CORRECT ANSWER : If the property has one tenant
with a long-term absolute NNN lease.
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Question 4: What is PRI minus vacancy and collection
losses?
CORRECT ANSWER : ERI (Effective Rental Income)
Question 5: Name some items which are EXCLUDED
from Operating Expenses.
CORRECT ANSWER : Interest and principal on debt on
the property Depreciation (cost recovery) Capital Expenditures Income Taxes Reserves for Replacement Tenant Improvements
Question 6: True or False: Depreciation is included in Operating Expenses.
CORRECT ANSWER : False
Question 7: True or False: Principal and interest on debt financing is included in Operating Expenses.
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CORRECT ANSWER : False. This is an expense of
ownership, not an operating expense.
Question 8: True or False: Capital Expenditures are included in Operating Expenses.
CORRECT ANSWER : False. They are written off over
a period of years.
Question 9: True or False: Income Taxes are included in Operating Expenses.
CORRECT ANSWER : False
Question 10: True or False: Reserves for Replacement are included in Operating Expenses.
CORRECT ANSWER : False
Question 11: True or False: Tenant Improvements (TI) are included in Operating Expenses.
CORRECT ANSWER : False
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Question 12: True or False: Repairs and Maintenance are included in Operating Expenses.
CORRECT ANSWER : True
Question 13: True or False: Property insurance is included in Operating Expenses.
CORRECT ANSWER : True
Question 14: True or False: Utilities are included in Operating Expenses.
CORRECT ANSWER : True
Question 15: What's the biggest difference between cap
rate and yield?
CORRECT ANSWER : 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.