Chapter 17: Real Estate Investments, Business Brokerage and Auctioning (MC) Flashcards

1
Q

The process of real estate investment analysis is important to an investor as it

a. helps an investor select properties that meet personal objectives.
b determines the amount of taxes due on income-producing property.
c. determines the exact cash flow from an investment property.
d. makes possible the best use for a property based on zoning.

A

a. helps an investor select properties that meet persona objectives.

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2
Q

Fixed expenses typically include

a. real estate taxes and hazard insurance.
b. management fees and depreciation.
c. utilities and repairs.
d. mortgage payments and income taxes.

A

a. real estate taxes and hazard insurance.

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3
Q

Reserves for replacements

a. are a cash expense.
b. should not be considered in a residential income property.
c. are used to pay for normal maintenance of the property.
d. are a noncash expense used to replace short-lived components that wear out from time to time.

A

d. are a noncash expense used to replace short-lived components that wear out from time to time.

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4
Q

The correct formula for loan-to-value ratio is

a. loan times value.
b. value divided by loan.
c. loan divided by value.
d. value times loan.

A

c. loan divided by value.

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5
Q

What type of risk is caused by changes in general business conditions?

a. dynamic
b. operating
c. capital
d. static

A

a. dynamic

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6
Q

If an investor earns a lower rate of return on capital invested that the rate paid on borrowed funds, what type of leverage is indicated?

a. positive
b. neutral
c. negative
d. cumbersome

A

c. negative

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7
Q

John purchased his home for $328,000 with 95% financing. Calculate the down payment required.

a. $16,400
b. $32,800
c. $295,200
d. $311,600

A

a. $16,400

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8
Q

When estimating the value of a business, which item is NOT relevant?

a. personal property owned
b. short-term liabilities
c. business goodwill
d. personal income taxes

A

d. personal income taxes

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9
Q

Which document indicates the financial condition of a business as of a particular time?

a. operating statement
b. profit and loss statement
c. balance sheet
d. bank statement

A

c. balance sheet

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10
Q

Business brokerage

a. should not be conducted by real estates licensees.
b. cannot be conducted by real estate licensees until they also possess a mortgage broker’s license.
c. consists primarily of analyzing financial statements.
d. would rarely involve securities transactions.

A

c. consists primarily of analyzing financial statements.

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11
Q

Real estate licensees that are engaged in business brokerage might need to have a securities license if the transaction involves

a. negotiation of a new mortgage loan.
b. an analysis of financial statements.
c. renegotiation of an existing lease.
d. transferring shares of stock or limited partnership interests.

A

d. transferring shares of stock or limited partnership interests.

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12
Q

The document used to secure financing of personal property under the Uniform Commercial Code is a

a. deed.
b. bill of sale.
c. security agreement.
d. trust agreement.

A

c. security agreement.

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13
Q

The assets of a business do NOT include

a. goodwill
b. notes payable.
c. accounts receivable.
d. furniture and equipment.

A

b. notes payable.

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14
Q

Which document most closely resembles a deed?

a. bill of sale
b. security agreement
c. balance sheet
d. operating statement

A

a. bill of sale

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15
Q

The use of “by-bidders” in the auctioning of property is

a. a common practice
b. required under Florida Statute 475
c. not allowed.
d. used in the sale of personal property only.

A

c. not allowed.

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