10+ BuzibrAIns Interview Questions and Answers

I would choose a higher cap rate for potentially higher returns.

• Higher cap rate typically indicates higher potential returns on investment.

• Investors may choose a higher cap rate for riskier investments or properties with higher growth potential.

• Lower cap rate may be chosen for more stable and lower risk investments.

• Consider the market conditions, property type, and investment goals when deciding on cap rate.

The capitalization rate (cap rate) in real estate is a measure used to estimate the potential return on investment for a property.

• The cap rate is calculated by dividing the property's net operating income (NOI) by its current market value or acquisition cost.

• It is expressed as a percentage and is used by investors to compare different investment opportunities.

• A higher cap rate indicates a higher potential return, but may also come with higher risk.

• For example, a property with...read more

I would prefer a lower cap rate as it indicates higher potential returns on investment.

• Lower cap rate implies higher potential returns on investment

• Higher cap rate may indicate higher risk or lower potential returns

• Investors typically prefer lower cap rates for safer investments

• Example: A cap rate of 5% may be preferred over a cap rate of 10%

WACC stands for Weighted Average Cost of Capital and is used to determine the minimum return a company must earn on their investments to satisfy their shareholders and debt holders.

• WACC is calculated by taking the weighted average of the cost of equity and the cost of debt, with each component weighted by its respective proportion in the company's capital structure.

• In Real Estate, WACC is used to evaluate the feasibility of real estate projects by comparing the expected retur...read more

Unlevered IRR is the internal rate of return without considering debt, while levered IRR includes the impact of debt financing.

• Unlevered IRR is the return on an investment without taking into account the effects of financing, such as loans or debt.

• Levered IRR, on the other hand, considers the impact of debt on the investment's return.

• Unlevered IRR is useful for comparing investments on an equal footing, while levered IRR reflects the actual return to the investor after accoun...read more

IRR is the discount rate that makes the net present value of all cash flows from a particular investment equal to zero.

• IRR is used to evaluate the attractiveness of an investment or project.

• It represents the annualized rate of return of an investment.

• IRR is calculated by setting the net present value of cash flows equal to zero and solving for the discount rate.

• If the IRR is greater than the cost of capital, the investment is considered profitable.

• For example, if an investmen...read more

Cash on cash returns are calculated by dividing the annual pre-tax cash flow by the initial investment.

• Calculate the annual pre-tax cash flow from the investment property.

• Divide the annual pre-tax cash flow by the initial investment amount.

• Express the result as a percentage to get the cash on cash return.

• Formula: Cash on Cash Return = (Annual Pre-tax Cash Flow / Initial Investment) * 100%

The debt service coverage ratio is a financial metric used to measure a company's ability to cover its debt obligations.

• Calculates the ratio of a company's operating income to its debt payments

• A ratio above 1 indicates the company is generating enough income to cover its debt payments

• Used by lenders to assess the risk of lending to a company

Calculating IRR for a word problem

• Identify the initial investment and cash flows over time

• Use a financial calculator or Excel to calculate the IRR

• IRR is the discount rate that makes the net present value of all cash flows equal to zero

Contingent liabilities are potential liabilities that may arise in the future based on certain events. They are disclosed in the financial statements.

• Contingent liabilities are not recognized in the financial statements but are disclosed in the notes to the financial statements.

• They are potential obligations that depend on the outcome of future events, such as lawsuits, warranties, or guarantees.

• If the likelihood of the contingent liability is probable and the amount can be r...read more

Provisions and accruals are accounting concepts used to recognize expenses and liabilities in the appropriate accounting period.

• Provisions are recognized liabilities based on estimates of future obligations, such as warranties or legal claims.

• Accruals are expenses incurred but not yet paid, such as salaries or utilities.

• Both provisions and accruals ensure that expenses are matched with revenues in the correct accounting period.

• Provisions and accruals help in presenting a true...read more

Unlevered IRR is the internal rate of return without considering debt, while levered IRR includes the impact of debt.

• Unlevered IRR is the return on an investment without taking into account the effects of debt financing.

• Levered IRR is the return on an investment that includes the impact of debt financing.

• Unlevered IRR is used to evaluate the return on an investment solely based on its own merits, while levered IRR considers the cost of debt and its impact on returns.

• For examp...read more

Purchases with discount entry involves recording the purchase of goods or services at a reduced price.

• Record the full purchase amount as a debit to the Purchases account

• Record the discount amount as a credit to the Discounts account

• Calculate the net amount by subtracting the discount from the full purchase amount

• Record the net amount as a credit to the Accounts Payable account

Cap rate, or capitalization rate, is a measure used to evaluate the potential return on investment for a real estate property.

• Cap rate is calculated by dividing the property's net operating income (NOI) by its current market value.

• It is expressed as a percentage and is used by investors to compare different investment opportunities.

• A higher cap rate indicates a higher potential return, but may also come with higher risk.

• For example, if a property has an NOI of $100,000 and a ...read more

The golden rules of accounting are basic principles that guide the process of recording financial transactions.

• The golden rules include: Debit what comes in, Credit what goes out; Debit the receiver, Credit the giver; Debit expenses and losses, Credit income and gains.

• These rules help ensure accuracy and consistency in financial reporting.

• For example, when a company receives cash from a customer, the transaction would be recorded by debiting the cash account (what comes in) a...read more