Certified Apartment Portfolio Supervisor (CAPS) Practice Exam - Module 2

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Prepare for the CAPS Exam with a comprehensive study of Module 2. Utilize our practice resources filled with flashcards, multiple choice questions, and thorough explanations to ensure your success!

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What does the term 'annualizing' refer to in budgeting?

Estimating total yearly income
Multiplying monthly figures by 12
Calculating average annual expenses
Dividing total income by the number of months

The correct answer is: Multiplying monthly figures by 12

The term 'annualizing' in budgeting refers to the process of taking a figure that reflects a shorter time period, typically monthly, and extrapolating it to project the equivalent total for a year. By multiplying monthly figures by 12, one can estimate what that amount would represent over a full year under the assumption that there will be no significant changes in the figures throughout the months. This approach is particularly useful for budgeting because it allows for straightforward comparisons and projections over time. For instance, if a property manager knows the rent collected in one month, annualizing that figure gives a quick estimate of expected income for the year, assuming the same rent is collected each month. This method is efficient and simple, making it a common practice in financial planning and analysis to achieve an annual forecast based on available monthly data.