FINC 10-24 (LIVE RECORDING)

These flashcards cover essential concepts from the lecture on real estate finance, focusing on profit calculations, operational costs, depreciation, and financial strategies in real estate investment.

What is the primary outcome that all business activities aim for according to the lecture?

Profit.

What are the three primary components mentioned for determining construction costs in real estate projects?

Building costs, land, and infrastructure.

What factors do leasing costs depend on?

Quality of the unit, size of the unit, floor height, and view.

What does OpEx stand for?

Operating expenditures.

How does capitalized interest get treated in relation to the principal?

It is treated as principal.

What is the basic formula for calculating revenues in real estate?

Rent times the utilization rate times the number of units.

What are interest expenses and taxes categorized as in relation to operating profit?

Financing charges and statutory charges.

What does EBITDA stand for and how is it calculated?

Earnings before interest, taxes, depreciation, and amortization; calculated by adding back depreciation and amortization to operating profit.

What principle requires that the economic usage of an asset matches the revenues it generates?

The matching principle.

What is the difference between cash flow and profit as discussed in the lecture?

Cash flow indicates actual cash made, while profit is an accrual-based number.

What are the two depreciation methods mentioned in the lecture?

Straight-line depreciation and double declining balance depreciation.

What financial strategy allows for a variable payment structure in leases?

Participatory lease structure.

What do you need to understand about the differences in tax purposes and cash tax?

The difference between book taxes and cash taxes, which can create deferred tax assets or liabilities.

Why is operating profit considered more important than net profit in assessing a business?

It reflects the operational efficiency without the effects of financing and statutory requirements.

What is the useful life of an asset in accounting?

The expected duration that an asset will be productive for its intended use.

What term describes the rights to the cash flows from a business in a participatory lease?

Equity stake.

How are taxes characterized in terms of management control?

They can be somewhat malleable and do not always reflect the performance of management.

What do capital expenditures (CapEx) typically refer to within a business?

Expenses incurred to acquire, upgrade, or maintain physical assets.

What is the concept of 'free cash flow'?

Cash generated by operations that is available for distribution to investors after necessary capital expenditures.