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Funds from Operations (FFO)

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Funds from Operations (FFO)

A widely accepted metric used to analyze the performance of a REIT. Funds from Operations, or FFO, accounts for the fact that net income on a REIT’s income statement may be an inaccurate representation of the REIT’s true performance. As such, net income is adjusted as follows to arrive at FFO:

FFO = Net Income + Depreciation + Amortization – Gain/Loss on Sale of Properties.

Funds from Operations is comparable to the Cash Flow from Operations metric, used in analyzing individual properties.

Related Content:
  • Glossary: Adjusted Funds from Operations (AFFO)
  • Glossary: Real Estate Investment Trust (REIT)
  • Modeling Operating Cash Flow (Negative and Positive)
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