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!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

What is a key benefit of calculating the Debt Coverage Ratio?

Assessing emotional factors in property value
Understanding property's legal obligations
Evaluating the ability to cover debt with income
Determining the market price of a property

The correct answer is: Evaluating the ability to cover debt with income

Calculating the Debt Coverage Ratio (DCR) is primarily beneficial for evaluating a property’s ability to generate enough income to cover its debt obligations. The DCR provides insight into the financial health of a property by comparing the property's net operating income to its total debt service. A higher DCR indicates a greater ability to pay off loans, reducing the risk for lenders and investors. This metric is crucial for property owners and managers, as it allows them to ascertain their operational efficiency and financial stability. Therefore, understanding how well a property can support its financial obligations is a vital aspect of investment and property management decision-making.