The Debt Coverage Ratio Is Used to Indicate How Much

question 36

Multiple Choice

The debt coverage ratio is used to indicate how much the NOI can decline before it will not cover the debt service on the property. While DCRs can vary based on competition within a particular market, lenders usually seek a minimum DCR of:

• A) 0.80
• B) 1.00
• C) 1.20
• D) 1.40

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Definitions:

Donated Land

This informs the recording of land gifted to an entity, valued at its fair market value at the time of donation as an asset on the balance sheet.

Donated Machinery

Assets received for free by an entity, where the fair market value of the machinery is recorded as both income and an asset on the balance sheet.

Volunteer Hours

The amount of time individuals spend performing unpaid services for nonprofit organizations or community projects.

Restricted Fund Method

An accounting practice where funds specified for certain purposes are kept separate in financial records to ensure their use only for those purposes.