READINGS - Budgeting the Flow of Cash Flashcards
(17 cards)
What is the purpose of budgeting for cash flow?
To determine how much actual cash will be generated and how much cash will be needed for operations and debt service.
What does preparing a cash-flow budget force a real estate manager to do?
Plan ahead.
What is the primary purpose of the operating budget?
To forecast annual NOI
NOI stands for Net Operating Income.
How does the time span of a cash-flow budget compare to an operating budget?
The cash-flow budget focuses on a shorter time span, usually month-by-month.
What advantage does a cash-flow budget provide to a real estate manager?
It allows identification of problems earlier and facilitates quicker development of plans.
What do the cash-flow and operating budgets have in common?
They have the same line items.
What does the cash-flow budget forecast?
Actual cash income and outlays.
Provide an example of how cash-flow budgeting differs from operating budgeting.
Operating budget may show total window washing fee as $12,000 a year; cash budget reflects actual payment timing.
When is the cash-flow budget prepared in relation to the operating budget?
The cash-flow budget is prepared after the operating budget.
What must be projected before forecasting cash flow?
Rents, vacancy, and operating expenses for the year.
What types of activities can the cash-flow budget show cash flows for?
Operating, investing, and financing activities.
What do budgeted figures in the cash-flow budget represent?
Targets set before the month in question.
What do actual results in the cash-flow budget represent?
Receipts and disbursements for various categories of cash.
What do variances in the cash-flow budget indicate?
Differences between expected and actual outcomes.
True or False: The cash-flow budget is less critical for REITs than the operating budget.
False
Why is accurate budgeting crucial for REITs?
Major financial decisions are based on projections and their accuracy.
Fill in the blank: The importance of _______ in today’s marketplace makes accurate budgeting crucial.
REITs
