Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

When appraisers use the Gross Rent Multiplier (GRM), what are they primarily estimating?

The capitalization rate for a commercial property

The depreciation expense of a property over its useful life

The net operating income after deducting all expenses

The value of an income-producing property based on its gross rental income

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Verified step by step guidance

Understand the concept of Gross Rent Multiplier (GRM): GRM is a valuation method used by appraisers to estimate the value of an income-producing property based on its gross rental income. It is a simple ratio that compares the property's price to its annual gross rental income.

Recognize the formula for GRM: The formula is \( \text{GRM} = \frac{\text{Property Price}}{\text{Annual Gross Rental Income}} \). This formula helps appraisers determine the relationship between the property's price and its rental income.

Identify the purpose of GRM: GRM is primarily used to estimate the value of a property. It does not directly calculate the capitalization rate, depreciation expense, or net operating income. Instead, it focuses on the gross rental income as the basis for valuation.

Apply GRM in practice: To use GRM, appraisers typically compare the GRM of similar properties in the market to determine a reasonable multiplier. Then, they multiply the annual gross rental income of the subject property by the GRM to estimate its value.

Clarify the correct answer: Based on the explanation, the correct answer is that appraisers use GRM to estimate 'The value of an income-producing property based on its gross rental income.'