True or False: Net Operating Income (NOI) accounts for asset depreciation.

Net Operating Income (NOI) is a key metric used in real estate to assess the profitability of an income-generating property. It is calculated by taking the total revenue generated from the property (such as rent) and subtracting the total operating expenses (such as maintenance costs, property management fees, and property taxes).

One crucial aspect of NOI is that it excludes certain financial variables from its calculation, one of which is depreciation. Depreciation is an accounting method used to allocate the cost of a tangible asset over its useful life. Since NOI focuses on the property's income and expenses directly related to its operation, it does not take into account non-cash items like depreciation. Therefore, the statement that NOI accounts for asset depreciation is false. This makes the correct answer B.

Understanding this distinction is important for real estate investors, as NOI serves as a more direct measure of a property's cash flow performance, without the influence of accounting methods that can vary widely across different property valuation approaches or jurisdictions.