JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS

JAIIB – AFB (ACCOUNTING & FINANCE FOR BANKERS)

You are given a balance sheet of a business firm with following particulars. Work out the
ratios given at the end......
Liabilities 1st yr 2nd yr
Capital 40 40
Reserves 15 20
Debentures 70 60
Other Current Liabilities 18 24
Bank Working Capital Limits 37 36
Total Liabilities 180 180
Assets 1st yr 2nd yr
Fixed Assets 32 33
Advance for fixed assets 5 -
Security Deposits 4 6
Stocks 66 81
Book Debts 49 30
Sundry Debtors 16 24
Preliminary Expenses 8 6
Total Assets 180 180
Sales 312 390
Profits 8 9
Depreciation 3 3
1. The short term sources of funds and short term uses of funds during the first year
was......
a. 55 and 131
b. 37 and 131
c. 55 and 105
d. 37 and 105
Ans - a
.............................................
2. The long term sources of funds and long term use of funds during the 2nd year
was......
a. 120 and 45
b. 100 and 45
c. 120 and 39
d. 112 and 39
Ans - d
.............................................
3. The short term sources of funds during the 2nd year, compared to the 1st year
have......
a. shown increase
b. shown decline
c. shown no change
d. none of the above
Ans - a
.............................................
4. The long term of use of funds during the 2nd year, compared to the 1st year has ......
a. shown increase
b. shown decline
c. shown no change
d. none of the above
Ans - b
.............................................
5. Current Ratio and Quick Ratio for the 2nd year are respectively......
a. 2.20:1 and 0.8:1
b. 2.42:1 and 0.9:1
c. 2.25:1 and 0.9:1
d. 2.22:1 and 0.8:1
Ans - c
.............................................
6. What is the Debt-equity ratio for the 1st and 2nd year?
a. 1.11:1 and 1.49:1
b. 1.49:1 and 1.11:1
c. 1.32:1 and 1.11:1
d. 1.98:1 and 1.73:1
Ans - d
.............................................
7. Cash accrual for 1st and 2nd year respectively is......
a. 8 and 9
b. 9 and 8
c. 11 and 12
d. 12 and 11
Ans - c
.............................................
8. Net Working Capital of 2nd year, over the 1st year has shown......
a. no change
b. deterioration
c. increase
d. decline and improvement
Ans - b
.............................................
9. Net profit to sales ratio for the 1st year has been......
a. 2.3%
b. 2.5%
c. 2.9%
d. 3.4%
Ans - b
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
Cost of asset = 1,00,000
Estimated residual value = 10,000
Estimated useful life of asset = 5 years
Find the book value at the end of 2nd year using double declining balance method.
a. 24000
b. 36000
c. 40000
d. 64000
Ans - b
Explanation
Depreciation rate = (1/useful life) x 200%
= 1/5 x 200% = 20% x 2 = 40%
(*) depreciation stops when book value = residual value
[Year 1]
Depreciation amount for year 1
= beginning book value x depreciation rate
= 1,00,000 x 40% = 40,000
Accumulated depreciation at the end of year 1 = 40,000
Book value at the end of year 1
= 1,00,000 - 40,000 = 60,000
[Year 2]
Depreciation amount for year 2
= beginning book value x depreciation rate
= 60,000 x 40% = 24,000
Accumulated depreciation at the end of year 2
= 40,000 + 24,000 = 64,000
Book value at the end of year 2
= 1,00,000 - 64,000 = 36,000
[Year 3]
Depreciation amount for year 3
= beginning book value x depreciation rate
= 36,000 x 40% = 14,400
Accumulated depreciation at the end of year 3
= 40,000 + 24,000 + 14,400 = 78,400
Book value at the end of year 3
= 1,00,000 - 78,400 = 21,600
[Year 4]
Depreciation amount for year 4
= beginning book value x depreciation rate
= 21,600 x 40% = 8,640
Accumulated depreciation at the end of year 4
= 40,000 + 24,000 + 14,000 + 8,640 = 87,040
Book value at the end of year 4
= 1,00,000 - 87,040 = 12,960
[Year 5]
Depreciation amount for year 5
= beginning book value x depreciation rate
= 12,960 x 40% = 5,184
[NOTE]
For year 5, depreciation amount will not be 5,184.
If 5,184 is depreciated,
--> book value = 12,960 - 5,184 = 7,776
--> book value < residual value
Depreciation stops when book value = residual value
--> depreciation amount for year 5 = 2,960
--> book value = 12,960 - 2,960 = $10,000
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
Cost of asset = 8,00,000
Estimated residual value = 10% of the cost
Estimated useful life of asset = 5 years
Find the book value at the end of 1st year using double declining balance method.
a. 240000
b. 320000
c. 480000
d. 660000
Ans - c
Explanation
Depreciation rate = (1/useful life) x 200%
= 1/5 x 200% = 20% x 2 = 40%
[Year 1]
Depreciation amount for year 1
= beginning book value x depreciation rate
8,00,000 x 40% = 3,20,000
Accumulated depreciation at the end of year 1 = 3,20,000
Book value at the end of year 1
8,00,000 - 3,20,000 = 4,80,000
.............................................
Cost of asset = 8,00,000
Estimated residual value = 10% of the cost
Estimated useful life of asset = 5 years
Find the accumulated depreciation for the 2nd year using double declining balance
method.
a. 312000
b. 424000
c. 512000
d. 604000
Ans - c
Explanation
Depreciation rate = (1/useful life) x 200%
= 1/5 x 200% = 20% x 2 = 40%
[Year 1]
Depreciation amount for year 1
= beginning book value x depreciation rate
8,00,000 x 40% = 3,20,000
Accumulated depreciation at the end of year 1 = 3,20,000
Book value at the end of year 1
8,00,000 - 3,20,000 = 4,80,000
[Year 2]
Depreciation amount for year 2
= beginning book value x depreciation rate
4,80,000 x 40% = 1,92,000
Accumulated depreciation at the end of year 2
3,20,000 + 1,92,000 = 5,12,000
.............................................
Cost of asset = 8,00,000
Estimated residual value = 10% of the cost
Estimated useful life of asset = 5 years
Find the book value at the end of 1st year using double declining balance method.
a. 240000
b. 320000
c. 480000
d. 660000
Ans - c
Explanation
Depreciation rate = (1/useful life) x 200%
= 1/5 x 200% = 20% x 2 = 40%
[Year 1]
Depreciation amount for year 1
= beginning book value x depreciation rate
8,00,000 x 40% = 3,20,000
Accumulated depreciation at the end of year 1 = 3,20,000
Book value at the end of year 1
8,00,000 - 3,20,000 = 4,80,000
[Year 2]
Depreciation amount for year 2
= beginning book value x depreciation rate
4,80,000 x 40% = 1,92,000
Accumulated depreciation at the end of year 2
3,20,000 + 1,92,000 = 5,12,000
Book value at the end of year 2
8,00,000 - 5,12,000 = 2,88,000
2,88,000 x 40% = 1,15,200
5,12,000 + 1,15,200 = 6,27,200
8,00,000 - 6,27,000 = 1,72,800
1,72,800 x 40% = 69,120
6,27,200 + 69,120 = 6,96,320
8,00,000 - 6,96,320 = 1,03,680
1,03,680 - 80,000 = 23,680
6,96,320 + 23,680 = 7,20,000
8,00,000 - 7,20,000 = 80,000
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
Sahil took a loan for 6 years at the rate of 5% per annum on Simple Interest, If the total
interest paid was Rs. 1230, the principal was
A. 4100
B. 4200
C. 4300
D. 4400
Ans - A
Explanation:
S.I.=P*R*T/100
=>P=S.I.*100/R/T
By applying above formula we can easily solve this question, as we are already having
the simple interest.
P = 1230*100/6/5
= 4100
.............................................
There was simple interest of Rs. 4016.25 on a principal amount at the rate of 9%p.a. in
5 years. Find the principal amount
A. Rs 7925
B. Rs 8925
C. Rs 7926
D. Rs 7925
Ans - B
Explanation:
S.I.=P*R*T/100
=>P=S.I.*100/R/T
P = 4016.25*100/9/5
= 8925
.............................................
Effective annual rate of interest corresponding to nominal rate of 6% per annum
compounded half yearly will be
A. 6.09%
B. 6.10%
C. 6.12%
D. 6.14%
Ans - A
Explanation:
Let the amount Rs 100 for 1 year when compounded half yearly, n = 2, Rate = 6/2 =
3%
Amount=100(1+3/100)^2=106.09
Effective rate = (106.09 - 100)% = 6.09%
.............................................
A sum of money invested at compound interest to Rs. 800 in 3 years and to Rs 840 in 4
years. The rate on interest per annum is.
A. 4%
B. 5%
C. 6%
D. 7%
Ans - B
Explanation:
S.I. on Rs 800 for 1 year = 40
Rate = (100*40)/(800*1) = 5%
.............................................
Find the rate at Simple interest, at which a sum becomes four times of itself in 15 years.
A. 10%
B. 20%
C. 30%
D. 40%
Ans - B
Explanation:
Let sum be x and rate be r%
then, (x*r*15)/100 = 3x [important to note here is that simple interest will be 3x not 4x,
beause 3x+x = 4x]
=> r = 20%
.............................................
At 5% per annum simple interest, Rahul borrowed Rs. 500. What amount will he pay to
clear the debt after 4 years ?
A. 750
B. 700
C. 650
D. 600
Ans - D
Explanation:
We need to calculate the total amount to be paid by him after 4 years, So it will be
Principal + simple interest. So,
=>500+500*5*4/100
=>Rs.600
.............................................
A sum of money amounts to Rs 9800 after 5 years and Rs 12005 after 8 years at the
same rate of simple interest. The rate of interest per annum is ......
a. 9%
b. 10%
c. 11%
d. 12%
Ans - d
Explanation:
We can get SI of 3 years = 12005 - 9800 = 2205
SI for 5 years = (2205/3)*5 = 3675 [so that we can get principal amount after deducting
SI]
Principal = 12005 - 3675 = 6125
So Rate = (100*3675)/(6125*5) = 12%
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
A man saves Rs 200 at the end of each year and lends the money at 5% compound
interest. How much will it become at the end of 3 years?
a. Rs 660
b. Rs 662
c. Rs 664
d. Rs 666
Ans- b
Explanation:
= [200(2120×2120×2120)+200(2120×2120)+200(2120)]
= 662

.............................................
Find the compound interest on Rs.16,000 at 20% per annum for 9 months, compounded
quarterly.
a. Rs 2520
b. Rs 2521
c. Rs 2522
d. Rs 2523
Ans - c
Explanation:
Please remember, when we have to calculate C.I. quarterly then we apply following
formula if n is the number of years
Amount=P(1+R4100)4n
Amount=P(1+R4100)4n
Principal = Rs.16,000;
Time=9 months = 3 quarters;
Rate = 20%, it will be 20/4 = 5%
So lets solve this question now,
Amount=16000(1+5100)3=18522C.I=18522−16000=2522
.............................................
At what rate percent per annum will the simple interest on a sum of money be 2/5 of the
amount in 10 years?
a. 1%
b. 2%
c. 3%
d. 4%
Ans - d
Explanation:
Let sum = x
Time = 10 years.
S.I = 2x /5, [as per question]
Rate =( (100 * 2x) / (x*5*10))%
=> Rate = 4%
.............................................
Rs. 800 becomes Rs. 956 in 3 years at a certain rate of simple interest. If the rate of
interest is increased by 4%, what amount will Rs. 800 become in 3 years.
a. Rs 1052
b. Rs 1152
c. Rs 1252
d. Rs 1352
Ans - a
Explanation:
S.I. = 956 - 800 = Rs 156
R=156∗100800∗3R=612% New Rate = 612+4=212% New S.I. = 800×212×3100=252
R=156∗100800∗3R=612% New Rate = 612+4=212% New S.I. = 800×212×3100=252
Now amount will be 800 + 252 = 1052
.............................................
What will the ratio of simple interest earned by certain amount at the same rate of
interest for 6 years and that for 9 years.
a. 1:2
b. 2:1
c. 2:2
d. 2:3
Ans- d
Explanation:
Let the principal be P and rate be R
then
Ratio = [(P∗R∗6100):(P∗R∗9100)]
=6PR:9PR
=2:3
.............................................
A certain amount earns simple interest of Rs. 1750 after 7 years. Had the interest been
2% more, how much more interest would it have earned?
A. Rs. 35
B. Rs. 245
C. Rs. 350
D. Cannot be determined
Ans - d
Explanation:
We need to know the S.I., principal and time to find the rate.
Since the principal is not given, so data is inadequate.
.............................................
Ram borrows Rs. 5000 for 2 years at 4% p.a. simple interest. He immediately lends
money to Rahul at 25/4% p.a. for 2 years. Find the gain of one year by Ram.
A. 110.50
B. 111.50
C. 112.50
D. 113.50
Ans - c
Explanation:
Two things need to give attention in this question, First we need to calculate gain for 1
year only.
Second, where we take money at some interest and lends at other, then we use to
subtract each other to get result in this type of question.
Lets solve this Simple Interest question now.
Gain in 2 year = [(5000×254×2100)-(5000×4×2100)]
= (625-400)
= 225
So gain for 1 year = 225/2 = 112.50
.............................................
If A lends Rs. 3500 to B at 10% p.a. and B lends the same sum to C at 11.5% p.a., then
the gain of B (in Rs.) in a period of 3 years is …
A. Rs. 154.50
B. Rs. 155.50
C. Rs. 156.50
D. Rs. 157.50
Ans - d
Explanation:
We need to calculate the profit of B.
It will be,
SI on the rate B lends - SI on the rate B gets
Gain of B = 3500*11.5/100*3-3500*10/100*3
= 1207.50 - 1050
= 157.50
.............................................
What is the present worth of Rs. 132 due in 2 years at 5% simple interest per annum ?
A. 110
B. 120
C. 130
D. 140
Ans - b
Explanation:
Let the present worth be Rs.x
Then,S.I.= Rs.(132 - x)
=› (x*5*2/100) = 132 - x
=› 10x = 13200 - 100x
=› 110x = 13200
x= 120
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
The present worth of Rs.169 due in 2 years at 4% per annum compound interest is ......
Rs 155.25
Rs 156.25
Rs 157.25
Rs 158.25
Ans - b
Explanation:
In this type of question we apply formula
Amount=P(1+R100)nAmount=169(1+4100)2Amount=169∗25∗2526∗26Amount=156.25
.............................................
What will be the compound interest on Rs. 25000 after 3 years at the rate of 12 % per
annum?
a. Rs 10123.20
b. Rs 10123.30
c. Rs 10123.40
d. Rs 10123.50
Ans - a
Explanation:
= (25000×(1+12/100)^3)
= 25000×(28/25)^3
= 35123.20
So Compound interest will be 35123.20 - 25000
= Rs 10123.20
.............................................
A sum of money at simple interest amounts to Rs. 2240 in 2 years and to Rs. 2600 in 5
years. What is the principal amount?
a. 1000
b. 1500
c. 2000
d. 2500
Ans - c
Explanation:
SI for 3 year = 2600-2240 = 360
SI for 2 year 360/3 * 2 = 240
principal = 2240 - 240 = 2000
.............................................
A financier claims to be lending money at simple interest, But he includes the interest
every six months for calculating the principal. If he is charging an interest of 10%, the
effective rate of interest becomes......
a. 10.25%
b. 10%
c. 9.25%
d. 9%
Ans - a
Explanation:
Let the sum is 100.
As financier includes interest every six months, then we will calculate SI for 6 months,
then again for six months as below:
SI for first Six Months = (100*10*1)/(100*2) = Rs. 5
Important: now sum will become 100+5 = 105
SI for last Six Months = (105*10*1)/(100*2) = Rs. 5.25
So amount at the end of year will be (100+5+5.25)
= 110.25
Effective rate = 110.25 - 100 = 10.25
.............................................
A person invested Rs. 100000 in a bank FDR @ 6% p.a. for 1 year. If interest is
compounded on yearly basis, the amount payable shall be ......
a. 100300
b. 100600
c. 103000
d. 106000
Ans - d
Solution:
P = 100000
R = 6% yearly
T = 1 yr
Since compounding is annualy and its only 1-time investment, the formula to be used:
-----------------------
FV = P * (1+R)^T
-----------------------
So,
FV = 100000 * (1+0.06)^1
= 106000 Ans.
.............................................
A person invested Rs. 100000 in a bank FDR @ 6% p.a. for 1 year. If interest is
compounded on half-yearly basis, the amount payable shall be ......
a. 100390
b. 100690
c. 103090
d. 106090
Ans - d
Solution:
P = 100000
R = 6% / 2 = 3% (since compounding is semi-annually, rate is divided by 2
T = 1 *2 = 2 (since compounding is semi-annually, time is multiplied by 2)
Since compounding is semi-annually and its only 1-time investment, the formula to be
used:
-----------------------
FV = P * (1+R)^T
-----------------------
So,
FV = 100000 * (1+0.03)^2
= 106090 Ans.
.............................................
A person invested Rs. 100000 in a bank FDR @ 6% p.a. for 1 year. If interest is
compounded on quarterly basis, the amount payable shall be ......
a. 101360
b. 106136
c. 106316
d. 103613
Ans - c
Solution:
P = 100000
R = 6% / 4 = 0.015 (since compounding is quarterly, rate is divided by 4)
T = 1 *4 = 4 (since compounding is quarterly, time is multiplied by 4)
Since compounding is quarterly and its only 1-time investment, the formula to be used:
-----------------------
FV = P * (1+R)^T
-----------------------
So,
FV = 100000 * (1+0.015)^4
= 106136 (paise rounded) Ans.
............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
The present worth of Rs.169 due in 2 years at 4% per annum compound interest is ......
Rs 155.25
Rs 156.25
Rs 157.25
Rs 158.25
Ans - b
Explanation:
In this type of question we apply formula
Amount=P(1+R100)nAmount=169(1+4100)2Amount=169∗25∗2526∗26Amount=156.25
.............................................
What will be the compound interest on Rs. 25000 after 3 years at the rate of 12 % per
annum?
a. Rs 10123.20
b. Rs 10123.30
c. Rs 10123.40
d. Rs 10123.50
Ans - a
Explanation:
= (25000×(1+12/100)^3)
= 25000×(28/25)^3
= 35123.20
So Compound interest will be 35123.20 - 25000
= Rs 10123.20
.............................................
A sum of money at simple interest amounts to Rs. 2240 in 2 years and to Rs. 2600 in 5
years. What is the principal amount?
a. 1000
b. 1500
c. 2000
d. 2500
Ans - c
Explanation:
SI for 3 year = 2600-2240 = 360
SI for 2 year 360/3 * 2 = 240
principal = 2240 - 240 = 2000
.............................................
A financier claims to be lending money at simple interest, But he includes the interest
every six months for calculating the principal. If he is charging an interest of 10%, the
effective rate of interest becomes......
a. 10.25%
b. 10%
c. 9.25%
d. 9%
Ans - a
Explanation:
Let the sum is 100.
As financier includes interest every six months, then we will calculate SI for 6 months,
then again for six months as below:
SI for first Six Months = (100*10*1)/(100*2) = Rs. 5
Important: now sum will become 100+5 = 105
SI for last Six Months = (105*10*1)/(100*2) = Rs. 5.25
So amount at the end of year will be (100+5+5.25)
= 110.25
Effective rate = 110.25 - 100 = 10.25
.............................................
A person invested Rs. 100000 in a bank FDR @ 6% p.a. for 1 year. If interest is
compounded on yearly basis, the amount payable shall be ......
a. 100300
b. 100600
c. 103000
d. 106000
Ans - d
Solution:
P = 100000
R = 6% yearly
T = 1 yr
Since compounding is annualy and its only 1-time investment, the formula to be used:
-----------------------
FV = P * (1+R)^T
-----------------------
So,
FV = 100000 * (1+0.06)^1
= 106000 Ans.
.............................................
A person invested Rs. 100000 in a bank FDR @ 6% p.a. for 1 year. If interest is
compounded on half-yearly basis, the amount payable shall be ......
a. 100390
b. 100690
c. 103090
d. 106090
Ans - d
Solution:
P = 100000
R = 6% / 2 = 3% (since compounding is semi-annually, rate is divided by 2
T = 1 *2 = 2 (since compounding is semi-annually, time is multiplied by 2)
Since compounding is semi-annually and its only 1-time investment, the formula to be
used:
-----------------------
FV = P * (1+R)^T
-----------------------
So,
FV = 100000 * (1+0.03)^2
= 106090 Ans.
.............................................
A person invested Rs. 100000 in a bank FDR @ 6% p.a. for 1 year. If interest is
compounded on quarterly basis, the amount payable shall be ......
a. 101360
b. 106136
c. 106316
d. 103613
Ans - c
Solution:
P = 100000
R = 6% / 4 = 0.015 (since compounding is quarterly, rate is divided by 4)
T = 1 *4 = 4 (since compounding is quarterly, time is multiplied by 4)
Since compounding is quarterly and its only 1-time investment, the formula to be used:
-----------------------
FV = P * (1+R)^T
-----------------------
So,
FV = 100000 * (1+0.015)^4
= 106136 (paise rounded) Ans.
............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
A person borrowed Rs. 10000 from the bank @ 12% p.a. for 1 year, payable on EMI
basis. What is the amount of EMI?
a. 848.88
b. 884.48
c. 884.88
d. 888.48
Ans - d
Solution:
P = 10000
R = 12% / 12 = 0.01% (In EMI or Equated Monthly Instalment), we need to find
monthly rate, so we divide rate by 12)
T = 1 *12 = 12 (In EMI or Equated Monthly Instalment, we multiply time with 12)
The formula of EMI =
--------------------------------------------------
P * R * (1 + R)^T ÷ { (1 + R)^T - 1 }
--------------------------------------------------
So,
EMI = 10000*0.01*(1+0.01)^12 ÷ {(1+0.01)^12 – 1}
= 888.48 Ans
.............................................
A person raised a house loan of Rs. 10 lac @ 12% ROI repayable in 10 years. Calculate
EMI.
a. 13447
b. 14347
c. 14743
d. 14437
Ans - b
Solution:
P = 10 lac
R = 12% / 12 = 0.01% (In EMI or Equated Monthly Instalment), we need to find
monthly rate, so we divide rate by 12)
T = 10 *12 = 120 (In EMI or Equated Monthly Instalment, we multiply time with 12)
The formula of EMI =
--------------------------------------------------
P * R * (1 + R)^T ÷ { (1 + R)^T - 1 }
--------------------------------------------------
So,
EMI = 1000000*0.01*(1+0.01)^120 ÷ {(1+0.01)^120 – 1}
= 14347 Ans
.............................................
A person borrowed an amount of Rs. 50000 for 8 years @ 18% ROI. What shall be
monthly payment?
a. 689
b. 869
c. 896
d. 986
Ans - d
Solution:
P = 50000
R = 18 % ÷ 12 = 0.015% (In EMI, divide rate by 12)
T = 8 *12 = 96 (In EMI, multiply time with 12)
The formula of EMI =
--------------------------------------------------
P * R * (1 + R)^T ÷ { (1 + R)^T - 1 }
--------------------------------------------------
So,
EMI = 50000 * 0.015 * 1.015^96 ÷ (1.015^96 – 1)
= 986 Ans
.............................................
Mr. X wants to receive a fixed amount for 15 years by investing Rs. 9 lacs @ 9% ROI.
How much he will receive annually?
a. 115613
b. 116513
c. 111563
d. 111653
Ans - d
Solution:
P = 9 lac
R = 9% p.a.
(Note: SINCE HERE PAYMENT IS TO BE RECEIVED ANNUALY, NOT Monthly, Rate IS
NOT divided by 12)
T = 15 yrs
(Note: SINCE HERE PAYMENT IS TO BE RECEIVED ANNUALY, NOT Monthly, Time IS
NOT multiplied with 12)
So, we can well use EMI formula in this question as we did in questions no 4, 5 & 6.
The formula of EMI =
--------------------------------------------------
P * R * (1 + R)^T ÷ { (1 + R)^T - 1 }
--------------------------------------------------
So,
EMI = 900000 * 0.09 * 1.09^15 ÷ (1.09^15 – 1)
= 111653 Ans
.............................................
Mr. X obtained a loan of Rs. 92820 @ 10%, which he has to pay in 4 equal annual
installments. Calculate the amount of installment?
a. 22298
b. 28292
c. 29282
d. 29822
Ans - c
Solution:
P = 92820
R = 10% p.a.
(Note: SINCE HERE PAYMENT IS TO ANNUALY, NOT Monthly, Rate IS NOT divided by
12)
T = 4 yrs
(Note: SINCE HERE PAYMENT IS TO BE ANNUALY, NOT Monthly, Time IS NOT multiplied
with 12)
So, we can well use EMI formula in this question as we did in questions no 4, 5, 6 & 7
The formula of EMI =
--------------------------------------------------
P * R * (1 + R)^T ÷ { (1 + R)^T - 1 }
--------------------------------------------------
EMI = 92820 × 0.1 × 1.1^4 ÷ (1.1^4– 1)
= 29282 Ans
.............................................
You will be receiving Rs. 204000 at the end of each year for the next 20 years. If the
current discount rate for such a stream of cash is 10%, find the present value of cash
flow.
a. 1776363
b. 1763767
c. 1736767
d. 1766737
Ans - c
Solution:
Since 204000 is like EMI. So, to find P, we use the formula of EMI
The formula of EMI =
--------------------------------------------------
P * R * (1 + R)^T ÷ { (1 + R)^T - 1 }
--------------------------------------------------
204000 = P × 0.1 × 1.1^20 ÷ (1.1^20 – 1)
204000 = P × 0.1174596
P = 1736767 Ans
This can be done with PV (OA) Present Value Ordinary Annuity too.
.............................................
A loan of Rs. 1 lac is paid back in 5 equal annual installments. The ROI charged is 20%
annually. Find the amount of each loan?
a. 33348
b. 33438
c. 34338
d. 34348
Ans - b
Solution:
P = Rs. 100000
T = 5 years
R = 20% p.a. = 0.2%
The formula of EMI =
--------------------------------------------------
P * R * (1 + R)^T ÷ { (1 + R)^T - 1 }
--------------------------------------------------
So,
EMI = 100000 × 0.2 × 1.2^5 ÷ (1.2^5– 1)
= 33438 Ans
We can also solve using PV (OA), Present Value Ordinary Annuity formula as shown in
the formula in pic comment
100000 = P × (1.2^5– 1) ÷ (0.2 ×1.2^5)
100000 = P × 2.9906
P = 33438 Ans
.............................................
Mr. X is to invest Rs. 100000 by end of each year for 5 years @ 5% ROI. How much
amount he will receive at the end of 5 years?
a. 525563
b. 552563
c. 555263
d. 556523
Ans - b
Solution:
P = 1000000
R = 5% p.a.
T = 5 Y
This ques asks the FUTURE VALUE OF INVESTMENT AT THE END OF PERIOD, so, FVOA
(Future Value of Ordinary Annuity) is applied.
The formula of FVOA =
--------------------------------------------------
FVOA = (C ÷ R) x { (1 + R)^T - 1 }
--------------------------------------------------
So,
FVOA = (100000÷0.05) * {{1+0.05}^5 – 1}
= 552563 Ans
............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
Mr. X is to invest Rs. 100000 every year for the next 5 years (at the beginning of the
period) @ 5%. How much he would have at the end of the 5-year period?
a. 580191
b. 581091
c. 581901
d. 589101
Ans - a
Solution:
P = 1000000
R = 5% p.a.
T = 5 Y
This ques asks the FUTURE VALUE OF INVESTMENT AT THE BEGINNING OF PERIOD,
so, FVAD (Future
Value of Annuity Due) is applied.
The formula of FVAD =
------------------------------------------------------------
FVAD = (C ÷ R) x { (1 + R)^T - 1 } x (1 + R)
------------------------------------------------------------
So,
FVAD = (100000÷0.05) x {{1+0.05}^5 – 1} x (1 + 0.05)
= 552563 × 1.05 = 580191 Ans
.............................................
Mr. X is to receive Rs. 100000, as interest on bonds by end of each year for 5 years @
5% ROI. Calculate the present value of the amount he is to receive.
a. 423498
b. 423948
c. 432498
d. 432948
Ans - d
Solution:
P = 10000
R = 5% p.a.
T = 5 Y
This ques asks the PRESENT VALUE OF INVESTMENT AT THE END OF PERIOD, so, PVOA
(Present
Value of Ordinary Annuity) is applied.
The formula of PVOA =
--------------------------------------------------------------------
PVOA = (C ÷ R) x { (1 + R)^T - 1 } ÷ (1 + R)^T
--------------------------------------------------------------------
So,
PVOA = (100000÷0.05) x {(1+0.05)^5 – 1} ÷ (1+0.05)^5
= 432948 Ans
.............................................
Mr. X is to receive Rs. 100000, as interest on bonds at the beginning of each year for 5
years @ 5% ROI. Calculate the present value of the amount he is to receive.
a. 445596
b. 454596
c. 456496
d. 446596
Ans - b
Solution:
P = 10000
R = 5% p.a.
T = 5 Y
---------------------------------------------------------------------------------
PVAD = (C ÷ R) x { (1 + R)^T - 1 } x (1 + R) ÷ (1 + R)^T
---------------------------------------------------------------------------------
So,
PVAD = (100000÷0.05) x {(1+0.05)^5 – 1} x (1+0.05) ÷ (1+0.05)^5
= 454596 Ans
.............................................
Rajesh borrowed Rs. 50000 from the bank @ 12% p.a. for 1 year, payable on EMI basis.
The amount of EMI will be?
a. 4424.24
b. 4244.24
c. 4424.44
d. 4442.44
Ans - d
Solution:
P = 50000
R = 12% / 12 = 0.01% (In EMI or Equated Monthly Instalment, we need to find monthly
rate, so we divide rate by 12)
T = 1*12 = 12 (In EMI or Equated Monthly Instalment, we multiply time with 12)
The formula of EMI =
--------------------------------------------------
P * R * (1 + R)^T ÷ { (1 + R)^T - 1 }
--------------------------------------------------
So,
EMI = 50000*0.01*(1+0.01)^12 ÷ {(1+0.01)^12 – 1}
= (50000*0.01*1.126825) ÷ 0.126825
= 563.4125 / 0.126825
= 4442.44
.............................................
Ram availed a house loan of Rs. 20 lac @ 12% ROI repayable in 15 years. Calculate EMI.
a. 23004
b. 23404
c. 24003
d. 24303
Ans - c
Solution:
P = 10 lac
R = 12% / 12 = 0.01% (In EMI or Equated Monthly Instalment), we need to find
monthly rate, so we divide rate by 12)
T = 12*15 = 180 (In EMI or Equated Monthly Instalment, we multiply time with 12)
The formula of EMI =
--------------------------------------------------
P * R * (1 + R)^T ÷ { (1 + R)^T - 1 }
--------------------------------------------------
So,
EMI = 2000000*0.01*(1+0.01)^180 ÷ {(1+0.01)^180 – 1}
= (2000000*0.01*5.9958) ÷ 4.9958
= 119916 / 4.9958
= 24003
.............................................
Anita borrowed an amount of Rs. 500000 for 10 years @ 9% ROI. What shall be monthly
payment?
a. 8445
b. 8454
c. 8545
d. 8554
Ans - a
Solution:
P = 500000
R = 9 % ÷ 12 = 0.0075% (In EMI, divide rate by 12)
T = 10*12 = 120 (In EMI, multiply time with 12)
The formula of EMI =
--------------------------------------------------
P * R * (1 + R)^T ÷ { (1 + R)^T - 1 }
--------------------------------------------------
So,
EMI = 500000 * 0.0075 * 1.0075^120 ÷ (1.0075^120 – 1)
= (500000*0.0075*2.4514) ÷ 1.4514
= 12257 / 1.4514
= 8445
............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
Anvita wants to receive a fixed amount for 10 years by investing Rs. 10 lacs @ 12% ROI.
How much he will receive annually?
a. 167894
b. 176984
c. 187964
d. 196874
Ans - b
Solution:
P = 10 lac
R = 12% p.a.
(SINCE PAYMENT IS TO BE RECEIVED ANNUALY, NOT Monthly, Rate IS NOT divided by
12)
T = 10 yrs
(SINCE PAYMENT IS TO BE RECEIVED ANNUALY, NOT Monthly, Time IS NOT multiplied
with 12)
So, we can well use simple EMI formula in this question.
The formula of EMI =
--------------------------------------------------
P * R * (1 + R)^T ÷ { (1 + R)^T - 1 }
--------------------------------------------------
So,
EMI = 1000000 * 0.12 * 1.12^10 ÷ (1.12^10 – 1)
= (1000000*0.012*3.1058) ÷ 2.1058
= 372702 / 2.1058
= 176984
.............................................
Madhu had availed a loan of Rs. 120000 @ 12%, which she has to pay in 6 equal annual
installments. Calculate the amount of installment?
a. 21897
b. 27897
c. 28197
d. 29187
Ans - d
Solution:
P = 120000
R = 12% p.a.
(SINCE PAYMENT IS TO ANNUALY, NOT Monthly, Rate IS NOT divided by 12)
T = 6 yrs
(SINCE PAYMENT IS TO BE ANNUALY, NOT Monthly, Time IS NOT multiplied with 12)
So, we can well use EMI formula in this question as we did in questions no 4, 5, 6 & 7
The formula of EMI =
--------------------------------------------------
P * R * (1 + R)^T ÷ { (1 + R)^T - 1 }
--------------------------------------------------
EMI = 120000 × 0.12 × 1.12^6 ÷ (1.12^6 – 1)
= (120000*0.012*1.9738) ÷ 0.9738
= 28423 / 0.9738
= 29187
.............................................
You will be receiving Rs. 100000 at the end of each year for the next 15 years. If the
current discount rate for such a stream of cash is 9%, find the present value of cash
flow.
a. 800669
b. 806069
c. 860609
d. 866009
Ans - b
Solution:
Since 100000 is like EMI. So, to find P, we use the formula of EMI
The formula of EMI =
--------------------------------------------------
P * R * (1 + R)^T ÷ { (1 + R)^T - 1 }
--------------------------------------------------
100000 = P × 0.09 × 1.09^15 ÷ (1.09^15 – 1)
100000 = P × 0.09 x 3.64248 ÷ 2.64248
264248 = P x 0.32782
P = 806069
This can be done with PV (OA) Present Value Ordinary Annuity too.
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
Sales during the year is Rs 1,00,000, gross profits is 25% on cost. Find out the amount
of gross profit.
a. Rs 20,000
b. Rs 25,000
c. Rs 30,000
d. Rs 35,000
Ans - a
.............................................
Calculate sales if cost of sales is Rs 1,60,000 and the gross loss is Rs 68,000.
a. Rs 2,28,000
b. Rs 92,000
c. Rs 2,52,00
d. RS 1,42,000
Ans - b
.............................................
Find out net profit from the following figures. Cash sale = Rs. 70,000, Credit sales = Rs.
80,000, Cost of goods = Rs. 1,04,000 Selling expenses = Rs. 13,400
a. Rs 34,000
b. Rs 24,000
c. Rs 32,600
d. RS 46,000
Ans - c
.............................................
What will be the capital of the proprietor if his/her assets are Rs. 1,90,00 and liabilities
Rs. 1,25,000
a. Rs 55,000
b. Rs 65,000
c. RS 75,000
d. Rs 1,90,000
Ans - b
.............................................
Merchandise costs - Rs. 250000, Gross Profit - Rs. 23000, Net Profit - Rs. 15000. Find
the amount of sales.
a. 227000
b. 235000
c. 265000
d. 273000
Ans - d
.............................................
Sales - Rs. 90000, Gross profit - Rs. 30000, Net Profit - Rs. 18000. Find Operating
expenses.
a. 12000
b. 18000
c. 42000
d. 60000
Ans - a
.............................................
Credit sale of Rs. 50000 to Anand wrongly debited to Ramesh's account. Trial balance
Crebit side presently shows a total of Rs. 2458650. Actually it should be ......
a. 2408650
b. 2508650
c. 2458650
d. None of the above
Ans - c
.............................................
Find out net profit from the following figures. Cash sale = Rs. 70,000, Credit sales = Rs.
80,000, Cost of goods = Rs. 1,04,000 Selling expenses = Rs. 13,400
a. Rs 34,000
b. Rs 24,000
c. Rs 32,600
d. RS 46,000
Ans - c
.............................................
A company had selling price per unit of Rs.100. Its Break even point units are 2000. If
variable cost is Rs.60, what is the fixed cost?
a. Rs. 50000
b. Rs. 60000
c. Rs. 70000
d. Rs. 80000
Ans - d
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
A company is forced to sell its product at Rs. 90 due to competition, which it had been
selling at Rs.100 earlier. There is no change in the variable cost. Previously the Break
even point units were 2000 and now 2667. What is the variable cost, if fixed cost is Rs.
80000/-?
a. Rs 60
b. Rs 50
c. Rs.40
d. Rs.30
Ans - a
.............................................
A firm sells 4000 units and earns profit of Rs. 80000. If fixed cost is Rs. 60000, what is
the break even no. of units?
a. 2000
b. 2500
c. 3000
d. 3500
Ans - c
.............................................
In a Balance Sheet amount of total assets is Rs. 10 lac, current liabilities Rs. 5 lac and
capital and reserves Rs. 2 lac. What is thefunded debt equity ratio......
a. 1:1
b. 1.5:1
c. 2:1
d. None of the above
Ans - b
.............................................
Funded Debt equity ratio is 3:1 and the amount of total assets Rs. 20 lac, Current Rtio is
1.5:1 and owned funds Rs. 3 lac. What is amount of current assets?
a. Rs. 5 lac
b. Rs. 3 lac
c. Rs. 12 lac
d. None of the above
Ans - c
.............................................
Profit to sales is 2% and amount of profits is Rs. 5 lac. What is the amount of sales?
a. Rs. 200 lac
b. Rs. 250 lac
c. Rs. 270 lac
d. Rs. 300 lac
Ans - b
.............................................
In respect of a firm having fixed cost of Rs. 160000 and variable cost Rs. 20 per unit,
what is the amount of selling price, if break even no. of units is 4,000?
a. Rs. 20
b. Rs. 40
c. Rs. 60
d. Rs. 80
Ans - c
.............................................
Funded Debt equity ratio is 2:1 and owned funds Rs. 2 lac. Amount of total assets Rs. 10
lac. What is current ratio if the fixed assets are of Rs. 4 lac?
a. 1:1
b. 1.9:1
c. 1.5:1
d. None of the above
Ans - c
.............................................
Sales - Rs. 110000, Gross profit - Rs. 35000, Net loss - Rs. 7500. Find Operating
expenses.
a. 27500
b. 42500
c. 68500
d. 75000
Ans - b
.............................................
Amount of sales is Rs. 50 lac and stock turnover is 10. Amount of opening stock is Rs. 4
lac. What will be amount of closing stocks?
a. Rs. 3 lac
b. Rs. 6 lac
c. Rs. 9 lac
d. None of the above
Ans - b
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
Amount of sales is Rs. 100 lac and profit before tax 6% and amount of tax paid Rs. 2
lac. Rest of the amount is given as dividend on capital of Rs. 10 lac. What is rate of
dividend?
a. 10%
b. 20%
c. 25%
d. 40%
Ans - d
.............................................
Current Ratio is 1.2:1 and amount of current liabilities Rs. 10 lac. Total of Balance Sheet
being Rs. 22 lac, what is amount of fixed assets?
a. Rs. 5 lac
b. Rs. 10 lac
c. Rs. 15 lac
d. None of the above
Ans - b
.............................................
Current assets are Rs. 10 lac, current liabilities Rs. 6 lac, balance sheet total Rs. 16 lac
and debt equity ratio 2:1. What is the fixed assets/owned funds ratio?
a. 1:1
b. 1.5:1
c. 1.8:1
d. None of the above
Ans - c
.............................................
Total liabilities of a Balance Sheet of a firm are Rs. 80 lac and Current Ratio 1.5:1. If its
fixed assets and assets other than current assets are Rs.50 lacs and debt equity ratio 3:1
what is the amount of long term liabilities?
a. Rs. 20 lac
b. Rs. 45 lac
c. Rs. 15 lac
d. Rs. 10 lac
Ans - b
.............................................
Current Assets of a firm as per its Balance Sheet are Rs. 60 lac and debt equity ratio 2:1.
If net working capital is Rs. 20 lac and total liabilities of Rs.100 lac, what is the amount
of net worth?
a. Rs. 20 lac
b. Rs. 18 lac
c. Rs. 15 lac
d. Rs. 25 lac
Ans - a
.............................................
Current Assets of a firm increase from Rs. 60 lac to Rs. 90 lac but there is no change in
the current ratio of 1.5:1. What is the increase in the current liabilities?
a. Rs. 25 lac
b. Rs. 20 lac
c. Rs. 18 lac
d. Rs. 15 lac
Ans - b
.............................................
With 25% margin on stocks, a firm's drawing power for its cash credit account with the
bank increased from Rs. 4.50 lac to Rs. 7.50 lac. What is the change in stock level?
a. Rs. 2 lac
b. Rs. 3 lac
c. Rs. 4 lac
d. Rs. 5 lac
Ans - c
.............................................
The loss shown by a unit at the end of the year is Rs 50,000/- . The Depreciation for the
year is Rs 80,000/-. The unit hasa.
Cash loss of Rs 30,000/-
b. Cash loss of Rs 1,30,000/-
c. Cash profit of Rs 30,000/-
d. Cash profit of Rs 1,30,000/-
Ans - c
.............................................
The total sale made during the year is Rs 10 lacs, Opening stock of raw material is Rs 2
lacs , raw material purchased during the year is Rs 5 lacs and closing stock of raw
material is Rs 1 lacs. If the manufacturing expenses is Rs 3 lacs the unit is in net profit of
......
a. Rs 2 lacs
b. Nil
c. Rs 1 lacs
d. None of the above
Ans - c
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
A Balance sheet shows total liabilities at Rs. 10 lac, current liabilities at Rs. 5 lac and long
term debt Rs. 2 lac and debit balance of profit and Loss account at Rs. 1 lac. The net
worth is......
a. Rs. 2 lac
b. Rs. 4 lac
c. Rs. 3 lac
d. None of the above
Ans - a
.............................................
A Balance sheet shows fixed assets and non-current assets at Rs. 6 lac and long term
liabilities at Rs. 8 lac. What is the net working capital......
a. Rs. 2 lac
b. Rs.0.75 lac
c. Rs. 14 lac
d. None of the above
Ans - a
.............................................
In a Balance Sheet amount of total assets is Rs. 10 lac, current liabilities Rs. 5 lac and
capital and reserves Rs. 2 lac. What is thefunded debt equity ratio......
a. 1:1
b. 1.5:1
c. 2:1
d. None of the above
Ans - b
.............................................
Funded Debt equity ratio is 3:1 and the amount of total assets Rs. 20 lac, Current Rtio is
1.5:1 and owned funds Rs. 3 lac. What is amount of current assets?
a. Rs. 5 lac
b. Rs. 3 lac
c. Rs. 12 lac
d. None of the above
Ans - c
.............................................
Profit to sales is 2% and amount of profits is Rs. 5 lac. What is the amount of sales?
a. Rs. 200 lac
b. Rs. 250 lac
c. Rs. 270 lac
d. Rs. 300 lac
Ans - b
.............................................
Funded Debt equity ratio is 2:1 and owned funds Rs. 2 lac. Amount of total assets Rs. 10
lac. What is current ratio if the fixed assets are of Rs. 4 lac?
a. 1:1
b. 1.9:1
c. 1.5:1
d. None of the above
Ans - c
.............................................
Amount of sales is Rs. 50 lac and stock turnover is 10. Amount of opening stock is Rs. 4
lac. What will be amount of closing stocks?
a. Rs. 3 lac
b. Rs. 6 lac
c. Rs. 9 lac
d. None of the above
Ans - b
.............................................
Amount of sales is Rs. 100 lac and profit before tax 6% and amount of tax paid Rs. 2
lac. Rest of the amount is given as dividend on capital of Rs. 10 lac. What is rate of
dividend?
a. 10%
b. 20%
c. 25%
d. 40%
Ans - d
.............................................
Current Ratio is 1.2:1 and amount of current liabilities Rs. 10 lac. Total of Balance Sheet
being Rs. 22 lac, what is amount of fixed assets?
a. Rs. 5 lac
b. Rs. 10 lac
c. Rs. 15 lac
d. None of the above
Ans - b
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
Current assets are Rs. 10 lac, current liabilities Rs. 6 lac, balance sheet total Rs. 16 lac
and debt equity ratio 2:1. What is the fixed assets/owned funds ratio?
a. 1:1
b. 1.5:1
c. 1.8:1
d. None of the above
Ans - c
.............................................
In a Balance Sheet the amount of fixed assets is Rs. 1 lac, that of non-current assets Rs.
1 lac and total liabilities Rs. 4 lac. Which of the following statements is correct?
a. Net worth is Rs. 2 lac
b. Net worth is Rs. 1 lac
c. Current assets are Rs. 2 lac
d. None of the above
Ans - c
.............................................
A joint stock company's total assets are Rs.45 crore which include intangible assets
worth Rs.2 cr. Its liabilities other than share capital and reserves are Rs. 40 cr. What is
the tangible net worth?
a. 3 cr
b. 7 cr
c. 5 cr
d. 2 cr
Ans - a
.............................................
Total liabilities of a Balance Sheet of a firm are Rs. 80 lac and Current Ratio 1.5:1. If its
fixed assets and assets other than current assets are Rs.50 lacs and debt equity ratio 3:1
what is the amount of long term liabilities?
a. Rs. 20 lac
b. Rs. 45 lac
c. Rs. 15 lac
d. Rs. 10 lac
Ans - b
.............................................
Current Assets of a firm as per its Balance Sheet are Rs. 60 lac and debt equity ratio 2:1.
If net working capital is Rs. 20 lac and total liabilities of Rs.100 lac, what is the amount
of net worth?
a. Rs. 20 lac
b. Rs. 18 lac
c. Rs. 15 lac
d. Rs. 25 lac
Ans - a
.............................................
Current Assets of a firm increase from Rs. 60 lac to Rs. 90 lac but there is no change in
the current ratio of 1.5:1. What is the increase in the current liabilities?
a. Rs. 25 lac
b. Rs. 20 lac
c. Rs. 18 lac
d. Rs. 15 lac
Ans - b
.............................................
With 25% margin on stocks, a firm's drawing power for its cash credit account with the
bank increased from Rs. 4.50 lac to Rs. 7.50 lac. What is the change in stock level?
a. Rs. 2 lac
b. Rs. 3 lac
c. Rs. 4 lac
d. Rs. 5 lac
Ans - c
.............................................
A company reported sales of Rs.100 lac and net profit after tax, of Rs. 4 lac. If stock
turnover ratio is 10 and other current assets of Rs. 5 lac, what is the amount of total
current assets?
a. Rs. 20 lac
b. Rs. 18 lac
c. Rs. 15 lac
d. Rs. 13 lac
Ans - c
.............................................
A company invested Rs. 5 lac from its liquid assets of the business in an associate firm,
due to which its current ratio came down from 2:1 to 1.5:1. What is the amount of
current assets after this investment?
a. Rs. 15 lac
b. Rs. 12 lac
c. Rs. 10 lac
d. Rs. 5 lac
Ans - a
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
You are given a balance sheet of a business firm with following particulars. Work out the
ratios given at the end......
Liabilities 1st yr 2nd yr
Capital 40 40
Reserves 15 20
Debentures 70 60
Other Current Liabilities 18 24
Bank Working Capital Limits 37 36
Total Liabilities 180 180
Assets 1st yr 2nd yr
Fixed Assets 32 33
Advance for fixed assets 5 -
Security Deposits 4 6
Stocks 66 81
Book Debts 49 30
Sundry Debtors 16 24
Preliminary Expenses 8 6
Total Assets 180 180
Sales 312 390
Profits 8 9
Depreciation 3 3
1. The short term sources of funds and short term uses of funds during the first year
was......
a. 55 and 131
b. 37 and 131
c. 55 and 105
d. 37 and 105
Ans - a
.............................................
2. The long term sources of funds and long term use of funds during the 2nd year
was......
a. 120 and 45
b. 100 and 45
c. 120 and 39
d. 112 and 39
Ans - d
.............................................
3. The short term sources of funds during the 2nd year, compared to the 1st year
have......
a. shown increase
b. shown decline
c. shown no change
d. none of the above
Ans - a
.............................................
4. The long term of use of funds during the 2nd year, compared to the 1st year has ......
a. shown increase
b. shown decline
c. shown no change
d. none of the above
Ans - b
.............................................
5. Current Ratio and Quick Ratio for the 2nd year are respectively......
a. 2.20:1 and 0.8:1
b. 2.42:1 and 0.9:1
c. 2.25:1 and 0.9:1
d. 2.22:1 and 0.8:1
Ans - c
.............................................
6. What is the Debt-equity ratio for the 1st and 2nd year?
a. 1.11:1 and 1.49:1
b. 1.49:1 and 1.11:1
c. 1.32:1 and 1.11:1
d. 1.98:1 and 1.73:1
Ans - d
.............................................
7. Cash accrual for 1st and 2nd year respectively is......
a. 8 and 9
b. 9 and 8
c. 11 and 12
d. 12 and 11
Ans - c
.............................................
8. Net Working Capital of 2nd year, over the 1st year has shown......
a. no change
b. deterioration
c. increase
d. decline and improvement
Ans - b
.............................................
9. Net profit to sales ratio for the 1st year has been......
a. 2.3%
b. 2.5%
c. 2.9%
d. 3.4%
Ans - b
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
The loss shown by a unit at the end of the year is Rs 50,000/- . The Depreciation for the
year is Rs 80,000/-. The unit hasa.
Cash loss of Rs 30,000/-
b. Cash loss of Rs 1,30,000/-
c. Cash profit of Rs 30,000/-
d. Cash profit of Rs 1,30,000/-
Ans - c
.............................................
The total sale made during the year is Rs 10 lacs, Opening stock of raw material is Rs 2
lacs, raw material purchased during the year is Rs 5 lacs and closing stock of raw
material is Rs 1 lacs. If the manufacturing expenses is Rs 3 lacs, the unit is in net profit
of -
a. Rs 2 lacs
b. Nil
c. Rs 1 lacs
d. None of the above
Ans - c
.............................................
If the Current Assets and Current Liabilities of a concern are Rs.4,00,000 and
Rs.2,00,000 respectively, Find the Current Ratio.
a. 1:2
b. 1:1.5
c. 2:1
d. 2:1.5
Ans - c
Explanation :
Rs.4,00,000/Rs.2,00,000 = 2 : 1
The ideal Current Ratio preferred by Banks is 1.33 : 1
.............................................
Cost of the goods - Rs. 99000, Opening Stock - Rs. 13500, Purchases - Rs. 75000, Sales
- Rs. 112500. Find other expenses.
a. 10000
b. 10500
c. 13500
d. 24000
Ans - b
Explanation :
Cost of the goods = Opening Stock + Purchases + Other expenses
So, Other expenses = Cost of the goods - Opening Stock - Purchases
= 99000 - 13500 - 75000
= 99000 - 88500
= 10500
.............................................
A firm has been producing 4000 units of an item with its break even at 2000 units. Now
it increases the no. of units produced to 5000. What is the change in the break even no.
of units ?
a. 3000
b. 2000
c. 1000
d. nil
Ans - d
.............................................
Sales - Rs. 85000, Operating expenses - Rs. 20000, Net Profit - Rs. 15000. Find gross
profit.
a. 5000
b. 20000
c. 35000
d. 50000
Ans - c
.............................................
At 40%, the capacity utilization break even point, the total no. of units produced is 5000.
What is the no. of break even units?
a. 1500
b. 1800
c. 2000
d. 2500
Ans - c
.............................................
Cash - 50,000, Debtors - 1,00,000, Inventories - 1,50,000, Current Liabilities - 1,00,000,
Total Current Assets - 3,00,000. Find the Current Ratio.
a. 1:1.5
b. 1:3
c. 1.5:1
d. 3:1
Ans - d
Explanation :
3,00,000/1,00,000 = 3 : 1
The ideal Current Ratio preferred by Banks is 1.33 : 1
.............................................
Profit to sales is 2% and amount of profit is say Rs.5 Lac. Find the amount of Sales.
a. 50 lac
b. 150 Lac
c. 250 Lac
d. 350 lac
Ans - c
Explanation :
Net Profit Ratio = (Net Profit / Sales ) x 100
2 = (5 x100) / Sales
Sales = 500/2
= Rs.250 Lac
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
A firm has been producing 4000 units of an item with its break even at 2000 units. Now
it increases the no. of units produced to 5000. What is the change in the break even no.
of units ?
a. 3000
b. 2000
c. 1000
d. nil
Ans - d
.............................................
A firm has been producing 4000 units of an item with its break even at 2000 units. Now
it increases the no. of units produced to 5000. 5000 units are 90% of plant capacity,
what is the increase in capacity utilization in percentage?
a. 15%
b. 20%
c. 25%
d. 18%
Ans - d
.............................................
A company had selling price per unit of Rs.100. Its Break even point units are 2000. If
variable cost is Rs.60, what is the fixed cost?
a. Rs. 50000
b. Rs. 60000
c. Rs. 70000
d. Rs. 80000
Ans - d
.............................................
A company is forced to sell its product at Rs. 90 due to competition, which it had been
selling at Rs.100 earlier. There is no change in the variable cost. Previously the Break
even point units were 2000 and now 2667. What is the variable cost, if fixed cost is Rs.
80000/-?
a. Rs 60
b. Rs 50
c. Rs.40
d. Rs.30
Ans - a
.............................................
At 40%, the capacity utilization break even point, the total no. of units produced is 5000.
What is the no. of break even units?
a. 1500
b. 1800
c. 2000
d. 2500
Ans - c
.............................................
The selling price of a product is Rs. 90 and contribution Rs. 20 with fixed cost of Rs.
40000. What is the total variable cost of BEP?
a. Rs. 80000
b. Rs. 120000
c. Rs. 130000
d. Rs. 140000
Ans - d
.............................................
A firm sells 4000 units and earns profit of Rs. 80000. If fixed cost is Rs. 60000, what is
the break even no. of units?
a. 2000
b. 2500
c. 3000
d. 3500
Ans - c
.............................................
In respect of a firm having fixed cost of Rs. 160000 and variable cost Rs. 20 per unit,
what is the amount of selling price, if break even no. of units is 4,000?
a. Rs. 20
b. Rs. 40
c. Rs. 60
d. Rs. 80
Ans - c
.............................................
Annual sales Rs 95 lacs, Annual Raw material Consumption Rs 45 lacs, Manufacturing
Expenses during the year Rs 15 lacs. Administrative & Selling expenses Rs 10 lacs,
Opening and closing stock of the work-in-process is same. Opening & closing stock of
finished goods is Rs 1 lac and Rs 2 lacs. From these data answer the followinga.
Cost of production is____
b. Cost of Sales is________
c. Cross Profit is_________
d. Operating Profit is______
e. Net Profit is___________
Ans - A - 60, B – 59, C – 36, D – 26, E - 26
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
Assets
Net Fixed Assets - 400
Inventories - 150
Cash - 50
Receivables - 150
Goodwill - 50
Total Assets - 800
Liabilities
Capital - 180
Reserves - 20
Term Loan - 300
Bank C/C - 200
Trade Creditors - 50
Provisions - 50
Total Liabilities - 800
1. Net Worth = ?
a. 180
b. 200
c. 250
d. 300
Ans - b
Explanation :
Net Worth = Capital + Reserve
= 180 + 20
= 200
2. Tangible Net Worth = ?
a. 100
b. 150
c. 180
d. 200
Ans - b
Explanation :
Tangible Net Worth = Net Worth - Goodwill
= 200 - 50
= 150
3. Outside Liabilities = ?
a. 200
b. 400
c. 600
d. 800
Ans - c
Explanation :
Outside Liabilities = TL + CC + Creditors + Provisions
= 300 + 200 + 50 + 50
= 600
4. Net Working Capital = ?
a. 50
b. 100
c. 150
d. 200
Ans - a
Explanation :
Net Working Capital = CA - CL
= 350 - 250
= 50
5. Current Ratio = ?
a. 1:1.33
b. 1:1.17
c. 1.33:1
d. 1.17:1
Ans - d
Explanation :
Current Ratio = CA / CL
= 350 / 300
= 1.17 : 1
6. Quick Ratio = ?
a. 0.33:1
b. 0.66:1
c. 1:0.33
d. 1:0.66
Ans - b
Explanation :
Quick Ratio = Quick Assets / CL
= 200/300
= 0.66 : 1
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
Sales - Rs. 150000, Operating expenses - Rs. 30000, Net Loss - Rs. 10000. Find gross
profit.
a. 10000
b. 20000
c. 40000
d. 110000
Ans - b
Explanation :
Net Profit = Gross Profit - Operating expenses
Gross Profit = Operating expenses + Net Profit
Here, Net Profit = - 10000
So, Gross Profit = 30000 - 10000
= 20000
.............................................
Cash - 50,000, Debtors - 1,00,000, Inventories - 1,50,000, Current Liabilities - 1,00,000,
Total Current Assets - 3,00,000. Find the Current Ratio.
a. 1:1.5
b. 1:3
c. 1.5:1
d. 3:1
Ans - D
Explanation :
Current Ratio = Current Assets : Current Liabilities
= 3,00,000 : 1,00,000
= 3 : 1
.............................................
Cost of the goods - Rs. 89000, Opening Stock - Rs. 13500, Purchases - Rs. 75000, Sales
- Rs. 112500. Find the gross profit.
a. 10000
b. 23500
c. 24000
d. 37500
Ans - b
Explanation :
Gross profit = Sales - Cost of goods sold
= 112500 - 89000
= 23500
.............................................
A company reported sales of Rs.100 lac and net profit after tax, of Rs. 4 lac. If stock
turnover ratio is 10 and other current assets of Rs. 5 lac, what is the amount of total
current assets?
a. Rs. 20 lac
b. Rs. 18 lac
c. Rs. 15 lac
d. Rs. 13 lac
Ans - c
.............................................
Mr. Vinod started a business for buying and selling of stationery with Rs. 5,00,000 as an
initial investment. Of which he paid Rs.1,00,000 for furniture, Rs. 2,00,000 for buying
stationery items. He employed a sales person and clerk. At the end of the month he paid
Rs.5,000 as their salaries. Out of the stationery bought he sold some stationery for
Rs.1,50,000 for cash and some other stationery for Rs.1,00,000 on credit basis to
Mr.Ravi. Subsequently, he bought stationery items of Rs.1,50,000 from Mr. Peace. In the
first week of next month there was a fire accident and he lost Rs. 30,000 worth of
stationery. A part of the machinery, which cost Rs. 40,000, was sold for Rs. 45,000.
1. What is the amount of capital with which Mr. Vinod had started business?
2. What is the value of the fixed assets he bought?
3. What is the value of the goods purchased?
4. Who is the creditor and state the amount payable to him.
5. What are the expenses?
6. What is the gain he earned?
7. What is the loss he incurred?
8. Who is the debtor? What is the amount receivable from him?
9. What is the total amount of expenses and losses incurred?
10. Determine if the following are assets, liabilities, revenues, expenses or none of the
these:
sales, debtors, creditors, salary to manager, discount to debtors, Drawings by the owner.
Answers :
1. Rs. 5,00,000
2. Rs. 1,00,000
3. Rs. 2,00,000
4. Mr. Reace, Rs. 1,50,000
5. Rs. 5,000
6. Rs. 5,000
7. Rs. 30,000
8. Mr. Ravi, Rs. 1,00,000
9. Rs. 35,000
10. Assets : debtors;
Liabilities : creditors; drawings;
Revenues : sales expenses,discount, salary.
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
Assets
Net Fixed Assets - 800
Inventories - 300
Preliminary Expenses - 100
Receivables - 150
Investment In Govt. Secu - 50
Total Assets - 1400
Liabilities
Equity Capital - 200
Preference Capital - 100
Term Loan - 600
Bank C/C - 400
Sundry Creditors - 100
Total Liabilities - 1400
1. Debt Equity Ratio = ?
a. 1:1
b. 1:2
c. 2:1
d. 2:3
Ans - c
Explanation :
600 / (200+100) = 2 : 1
2. Tangible Net Worth = ?
a. 100
b. 200
c. 300
d. 400
Ans - b
Explanation :
Only equity Capital i.e. = 200
3. Total Liabilities to Tangible Net Worth Ratio = ?
a. 7:2
b. 11:2
c. 13:2
d. 15:2
Ans - b
Explanation :
Total Outside Liabilities / Total Tangible Net Worth : (600+400+100) / 200 = 11 : 2
4. Current Ratio = ?
a. 1:1
b. 1:2
c. 2:1
d. 3:1
Ans - a
Explanation :
(300 + 150 + 50 ) / (400 + 100 ) = 1 : 1
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
Assets
Net Fixed Assets - 265
Cash - 1
Receivables - 125
Stocks - 128
Prepaid Expenses - 1
Intangible Assets - 30
Total - 550
Liabilities
Capital + Reserves - 355
P & L Credit Balance - 7
Loan From S F C - 100
Bank Overdraft - 38
Creditors - 26
Provision of Tax - 9
Proposed Dividend - 15
Total - 550
1. Current Ratio = ?
= (1+125 +128+1) / (38+26+9+15)
= 255/88
= 2.89 : 1
2. Quick Ratio = ?
(125+1)/88
= 1.43 : 11
3. Debt Equity Ratio = ?
= LTL / Tangible NW
= 100 / (362 – 30)
= 100 / 332
= 0.30 : 1
4. Proprietary Ratio = ?
= (T NW / Tangible Assets) x 100
= [(362 - 30 ) / (550 – 30)] x 100
= (332 / 520) x 100
= 64%
5. Net Working Capital = ?
= CA - CL
= 255 - 88
= 167
6. If Net Sales is Rs.15 Lac, then What would be the Stock Turnover Ratio in Times ?
= Net Sales / Average Inventories/Stock
= 1500 / 128
= 12 times approximately
7. What is the Debtors Velocity Ratio if the sales are Rs. 15 Lac?
= (Average Debtors / Net Sales) x 12
= (125 / 1500) x 12
= 1 month
8. What is the Creditors Velocity Ratio if Purchases are Rs.10.5 Lac?
= (Average Creditors / Purchases ) x 12
= (26 / 1050) x 12
= 0.3 months
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
Current Ratio of a firm is 1 : 1. What will be the Net Working Capital ?
a. 0
b. 1
c. 100
d. 200
Ans - a
Explanation :
It suggest that the Current Assets is equal to Current Liabilities hence the NWC would be
0
(since NWC = C.A - C.L)
.............................................
Suppose Current Ratio is 4 : 1. NWC is Rs.30,000/-. What is the amount of Current
Assets ?
a. 10000
b. 30000
c. 40000
d. 50000
Ans - c
Explanation :
Let Current Liabilities = a
4a - 1a = 30,000
a = 10,000 i.e. Current Liabilities is Rs.10,000
Hence Current Assets would be
4a = 4 x 10,000 = Rs.40,000/-
.............................................
The amount of Term Loan installment is Rs.10000/ per month, monthly average interest
on TL is Rs.5000/-. If the amount of Depreciation is Rs.30,000/- p.a. and PAT is
Rs.2,70,000/-. What would be the DSCR ?
a. 1
b. 1.5
c. 2
d. 2.5
Ans - C
Explanation :
DSCR = (PAT + Depr + Annual Intt.) / Annual Intt + Annual Installment
= (270000 + 30000 + 60000 ) / 60000 + 12000
= 360000 / 180000
= 2
.............................................
A Company has Net Worth of Rs.5 Lac, Term Liabilities of Rs.10 Lac. Fixed Assets worth
RS.16 Lac and Current Assets are Rs.25 Lac. There is no intangible Assets or other Non
Current Assets. Calculate its Net Working Capital.
a. 1 lac
b. 2 lac
c. - 1 lac
d. - 2 lac
Ans - c
Explanation :
Total Assets = 16 + 25 = Rs. 41 Lac
Total Liabilities = NW + LTL + CL = 5 + 10 + CL = 41 Lac
Current Liabilities = 41 – 15 = 26 Lac
Therefore Net Working Capital = CA – CL = 25 – 26 = (-) 1 Lac
.............................................
Merchandise costs - Rs. 250000, Gross Profit - Rs. 23000, Net Profit - Rs. 15000. Find
the amount of sales.
a. 227000
b. 235000
c. 265000
d. 273000
Ans - d
Explanation :
Amount of sales = Merchandise costs + Gross Profit
= 250000 + 23000
= 273000
.............................................
Total Liabilities of a firm is Rs.100 Lac and Current Ratio is 1.5 : 1. If Fixed Assets and
Other Non Current Assets are to the tune of Rs. 70 Lac and Debt Equity Ratio being 3 :
1. What would be the Long Term Liabilities?
a. 40 Lacs
b. 60 Lacs
c. 80 Lacs
d. 100 Lacs
Ans - b
Explanation :
Total Assets = Total Liabilities = 100 Lac
Current Asset = Total Assets - Non Current Assets
= Rs. 100 L - Rs. 70 L
= Rs. 30 L
If the Current Ratio is 1.5 : 1
then Current Liabilities works out to be Rs. 20 Lac.
That means, Net Worth + Long Term Liabilities = Rs. 80 Lacs.
If the Debt Equity Ratio is 3 : 1,
then Debt works out to be Rs. 60 Lacs and equity Rs. 20 Lacs.
Therefore the Long Term Liabilities would be Rs.60 Lac.
.............................................
Current Ratio = 1.2 : 1.
Total of balance sheet being Rs.22 Lac.
The amount of Fixed Assets + Non Current Assets is Rs. 10 Lac.
What would be the Current Liabilities?
a. 10 Lacs
b. 12 Lacs
c. 16 Lacs
d. 22 Lacs
Ans - a
Explanation :
Total Assets is Rs.22 Lac.
Fixed Assets + Non Current Assets is Rs. 10 Lac
Then Current Assets = 22 – 10 = Rs. 12 Lac.
Current Ratio = 1.2 : 1
Current Liabilities = Rs. 10 Lac
.............................................
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS-BALANCE
SHEET
Balance Sheet
A balance sheet is a statement of a business’s assets, liability and net worth. It is
normally laid out according to the Companies Act formats although some bookkeeping
and accounting systems produce documents in alterative layouts.
The purpose of a balance sheet is to show the type of assets a business has and then to
describe how these have been financed.
Fixed Assets
Assets shown on a balance sheet can be sub-divided in to intangible and tangible
groupings. The former category contains items such as goodwill, trademarks and
research and development expenditure.
The valuation of these items is subjective as their true worth can only be known
following a successful sale of either the asset separately or the business as a whole.
Prudence and caution in assigning amounts to intangible assets might result in the
balance sheet displaying them with conservative valuations, far removed from what they
are actually worth.
Tangible assets typically attract far more objective valuations as they exist usually as a
result of a measurable transfer or exchange on which a monetary value can be assigned.
Items within the category include furniture, machinery, computers and other assets
which are typically used in a business for a number of years.
Depreciation and Amortisation
Both intangible and tangible assets are usually subject to depreciation or amortisation
which represents the usage of those items during the year.
Different classes of assets may have varying periods over which they can be used, for
example, a building will be capable of serving the business for a longer time than a
desktop computer would.
The depreciation of the computer would therefore be faster than the amortisation of the
building. The reduction in the asset’s value shown of the balance sheet would therefore
reflect the expected useful life over and benefit which would typically accrue to the
business.
Current Assets
The term current assets is used to describe items which are held in cash or which have a
high liquidity rate, for example, shares and trade debtors.
This class of assets are shown below fixed items on the balance sheets and represent
the working capital of the business. Cash and other current assets are used to pay
suppliers and other short term creditors so that the operations remain solvent.
Where current assets are not available for this purpose, the business will be forced to
liquidate some from the fixed category which may in turn significantly curtain its ability
to conduct its operations in the longer term.
Liabilities
For the purposes of this article liabilities will be used to describe all items involved in
financing the business including shareholders funds.
In order for the business to have commenced its operations it would have had to have
received an injection of funds from some source. This might have been from the
entrepreneur’s own savings or alternatively from an external body such as a bank or
suppliers in the form of credit.
At any one time, it is likely that the business owes money to creditors for purchases it
has made and perhaps to other financiers of its operations. These amounts are depicted
either current or long term liabilities.
Generally, those amounts form any source which are repayable within one year will be
shown as current and those which are due after this period will be described as long
term.
Some money might be owed to the shareholders, partners or sole trader who provided
the business with its initial financing and expansion capital.
The distinction between owner liabilities and those which are owed to third parties in
reality show the amounts which the business has some discretion over. It is unlikely that
the owners would demand repayment of the sums of owed to them to the detriment of
the operations.
Other third party creditors however would more likely be driven by self interest and
would not have the long term future of the business at the forefront of the decision of
whether to claim payments for amounts owed to them.
Fixed Assets are the assets of permanent nature that a business acquires. Examples
include machinery and equipment, building, furniture, vehicles etc. These assets are not
sold or purchased occasionally and therefore considered fixed. You usually get them
when starting your business and retain them for the life-time of your business or
company (but it depends on the asset life, too). However, these assets have more life
than the long-term assets that usually last for a year or more.
Current Assets are the receivables that are expected to be received within a year as per
balance sheet. These include any assets that are to be converted into cash within a
financial year. Examples include cash, accounts receivables, short-term investments, and
other cash-equivalents.
Current Liabilities are the liabilities (or the business obligations/debts) that are payable
within a year as per balance sheet. These are the payments that are to be paid by a
company within a financial year. Examples include accounts payable, and short-term
debts.
Tax Liability is the amount of tax payable on your annual income, sale of an asset etc.
and is different from other types of liabilities. Fixed assets have no direct influence on
tax liability but if planned properly can reduce the overall tax liability of a firm. If this
liability is payable in a year, then tax liability is a current liability.
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS
Some of these Formulas may not be applicable for AFB, but I request all of you to go
through all of them to understand the concepts clear.
1. CR = CA : CL
2. Net Worth = CA - CL
3. DER = TL/TNW or debt/equity or TL/equity
4. Price Elasticity of Supply = (% change in quantity supplied/(% change in price)
5. PV = P / R * [(1+R)^T - 1]/(1+R)^T
6. PV = P / (1+R)^T
7. FV = P * (1 + R)^T
8. FV = P*(1-R)^T
9. FV = P / R * [(1+R)^T - 1]
10. FV = P / R * [(1+R)^T - 1] * (1+R)
11. EMI = P * R * [(1+R)^T/(1+R)^T-1)]
12. FV of annuity = A/r ×{(1+r)^n-1}
13. Bond Price = (1/(1+R)^t)((coupon*((1+R)^t-1)/R)+Face Value)
SUMMARY OF ANNUITIES FORMULAS (Thanks Alind)
--------------------------------------------
1. If the question asks the FUTURE VALUE OF INVESTMENT AT THE END OF PERIOD,
FVOA (Future Value of Ordinary Annuity) is applied.
FVOA = (C ÷ R) x { (1 + R)^T - 1 }
2. If the question asks the FUTURE VALUE OF INVESTMENT AT THE BEGINNING OF
PERIOD, FVAD (Future Value of Annuity Due) is applied.
FVAD = (C ÷ R) x { (1 + R)^T - 1 } x (1 + R)
3. If the question asks the PRESENT VALUE OF INVESTMENT AT THE END OF PERIOD,
PVOA (Present Value of Ordinary Annuity) is
applied.
PVOA = (C ÷ R) x { (1 + R)^T - 1 } ÷ (1 + R)^T
4. If the question asks the PRESENT VALUE OF INVESTMENT AT THE BEGINNING OF
PERIOD, PVAD (Present Value of Annuity Due) is
applied.
PVAD = (C ÷ R) x { (1 + R)^T - 1 } x (1 + R) ÷ (1 + R)^T
-----------------------------------------
1. Raw material Turnover Ratio = Cost of RM used / Average stock of R M
2. SIP Turnover = Cost of Goods manufactured / Average stock of SIP
3. Debt Collection period = No. days or months or Weeks in a year/Debt Turnover Ratio.
4. Average Payment Period = No. days or months or Weeks in a year/Creditors Turnover
Ratio.
5. Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory.
6. Debtors Turnover Ratio = Net Credit Sales / Average Debtors.
7. Creditors Turnover Ratio = Net Credit Purchases / Average Credits.
8. Defensive Interval Ratio = Liquid Assets / Projected Daily Cash Requirement
9. Projected daily cash requirement = Projected operating cash expenses / 365.
10. Debt Equity Ratio = Long Term Debt / Equity.
11. Debt Equity Ratio = Total outside Liability / Tangible Net Worth.
12. Debt to Total Capital Ratio = Total Debts or Total Assets/(Permanent Capital +
Current Liabilities)
13. Interest Coverage Ratio = EBIT / Interest.
14. Dividend Coverage Ratio = N. P. after Interest & Tax / Preferential dividend
15. Gross Profit Margin = Gross Profit / Net Sales * 100
16. Net Profit Margin = Net Profit / Net Sales * 100
17. Cost of Goods Sold Ratio = Cost of Goods Sold / Net Sales * 100.
18. Operating Profit Ratio = Earnings Before Interest Tax / Net Sales * 100
19. Expenses Ratio or Operating Ratio = Expenses / Net Sales * 100
20. Net Profit Ratio = Net Profit After interest and Tax / Net Sales * 100
21. Operating Expenses Ratio = (Administrative + Selling expenses) / Net Sales * 100
22. Administrative Expenses Ratio =(Administrative Expenses / Net Sales ) * 100
23. Selling Expenses Ratio =(Selling Expenses / Net Sales ) * 100
24. Financial Expenses Ratio = ( Financial Expenses / Net Sales ) * 100
25. Return on Assets = Net Profit After Tax / Total Assets.
26. Total Assets = Net Fixed Assets + Net Working Capital.
27. Net Fixed Assets = Total Fixed Assets – Accumulated Depreciation.
28. Net Working Capital = ( CA –CL ) – ( Intangible Assets + Fictitious Assets + Idle
Stock + Bad Debts )
29. Return on Capital Employed = Net Profit Before Interest and Tax / Average Capital
Employed.
30. Average Capital employed = Equity Capital + Long Term Funds provided by Owners
& Creditors at the beginning & at the end of the accounting period divided by two.
31. Return on Ordinary Share Holders Equity = (NPAT – Preferential Dividends) /
Average Ordinary Share Holders Equity or Net Worth.
32. Earnings Per Share = Net Profit After Taxes and Preferential dividends / Number of
Equity Share.
33. Dividend per Share = Net Profit After Taxes and distributable dividend / Number of
Equity Shares.
34. Dividend Pay Out Ratio = Dividend per Equity Share / Earnings per Equity Share.
35. Dividend Pay Out Ratio = Dividend paid to Equity Share holders / Net Profit available
for Equity Share Holders.
36. Price Earning Ratio = Market Price per equity Share / Earning per Share.
37. Total Asset Turnover = Cost of Goods Sold / Average Total Assets.
38. Fixed Asset Turnover = Cost of Goods Sold / Average Fixed Assets.
39. Capital Turnover = Cost of Goods Sold / Average Capital employed.
40. Current Asset Turnover = Cost of Goods Sold / Average Current Assets.
41. Working Capital Turnover = Cost of Goods Sold / Net Working Capital.
42. Return on Net Worth = ( Net Profit / Net Worth ) * 100
43. DSCR = Profit after Tax & Depreciation + Int. on T L & Differed Credit + Lease
Rentals if any divided by Repayment of Interest & Installments on T L & Differed Credits
+ Lease Rentals if any.
44. Factory Cost = Prime cost + Production Overheads.
45. Cost of Goods Sold = Factory Cost + Selling, distribution & administrative overheads
46. Contribution = Sales – Marginal Costs.
47. Percentage of contribution to sales = ( Contribution / Sales ) * 100
48. Break Even Analysis = F / ( 1 – VC / S )
F = Fixed costs, VC = Total variable operating costs & S = Total sales revenue
49. Break Even Margin or Margin of Safety = Sales – Break Even Point / Sales.
50. Cash Break Even = F – N / P – R or F – N / 1 – ( VC / S )
51. BEP = Fixed Costs / Contribution per unit.
52. Sales volume requires = Fixed cost + Required profit / Contribution per unit.
53. BEP in Sales = ( Fixed Costs / Contribution per unit ) * Price per unit.
54. Contribution Sales Ratio = ( Contribution per unit / Sale price per unit ) * 100
55. Level of sales to result in target profit after Tax = (Target Profit) / (1 – Tax rate /
Contribution per unit)
56. Level of sales to result in target profit = (Fixed Cost + Target profit) * sales price per
unit Contribution per unit.
57. Net Present Value = - Co + C1 / (1 + r)
58. Future expected value of a present cash flow = Cash Flow ( 1 + r ) ^ t
59. Present value of a simple future cash flow = Cash Flow / (1 + r) ^ t
60. The Discount Factor = 1 / (1 + r) ^ t
61. Notation used internationally for PV of an annuity is PV ( A, r, n )
62. Notation used internationally for FV of an annuity is FV ( A, r, n )
63. The effective annual rate = ( 1 + r ) ^ t – 1 or (1 + (r / N) ) – 1 )
N = Number of times compounding in a year
64. PV of end of period Annuity = A { (1- (1 / (1+r) ^ n) / r
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS-QUESTIONS
ON RATIO ANALYSIS
M/s Raj&co's balance sheet included the following accounts:
Cash: 10,000
Accounts Receivable: 5,000
Inventory: 5,000
Stock Investments: 1,000
Prepaid taxes: 500
Current Liabilities: 15,000
Find the Quick Ratio
Quick Ratio = Cash + Cash Equivalents + Short Term Investments + Marketable
Securities + Accounts Receivable) / Current Liabilities
= (10000+5000+1000) / 15000
= 16000 / 15000
= 1.07
.................................
M/s Raj&co's balance sheet included the following accounts:
Inventory : 5,000
Prepaid taxes : 500
Total Current Assets : 21,500
Current Liabilities : 15,000
Find the Quick Ratio
Quick Ratio = (Current assets – Inventory - Advances - Prepayments Current Liabilities) /
Current Liabilities
= (21500 - 5000 - 500) / 15000
= 16000 / 15000
= 1.07
.................................
XYZ Pvt Ltd has the following assets and liabilities as on 31st March 2015 (in Lakhs) :
Non Current Assets
Goodwill 75
Fixed Assets 75
Current Assets
Cash in hand 25
Cash in bank 50
Short term investments 45
Inventory 25
Receivable 100
Current Liabilities
Trade payables 100
Income tax payables 60
Non Current Liabilities
Bank Loan 50
Deferred tax payable 25
Find the Quick Ratio
Quick Ratio = (Cash in hand + Cash at Bank + Receivables + Marketable Securities) /
Current Liabilities
= (25+50+45+100) / 160
= 220 / 160
= 1.375
.................................
XYZ shoes sells shoes. It is applying for loans to help fund to increase the inventory. The
bank asks for its balance sheet so they can analysis the current debt levels. According to
XYZ shoes's balance sheet it reported 10,00,000 of current liabilities and only 2,50,000 of
current assets. Will the loan get approved?
Current Ratio = Current Assets / Current Liabilities
= 250000 / 1000000
= 0.25
XYZ shoes only has enough current assets to pay off 25 percent of his current liabilities.
This shows that XYZ shoes is highly leveraged and highly risky. Banks would prefer a
current ratio of at least 1 or 2, so that all the current liabilities would be covered by the
current assets. Since XYZ shoes's ratio is so low, it is unlikely that it will get approved for
his loan.
.................................
Ms. Ankita Agency has several loans from banks for equipment they purchased in the
last five years. All of these loans are coming due which is decreasing their working
capital. At the end of the year, they had 1,00,000 of current assets and 1,25,000 of
current liabilities. Find out its Working Capital Ratio.
The working capital ratio is calculated by dividing current assets by current liabilities.
WC Ratio = CA/CL
= 100000 / 125000
= 0.80
.................................
Ravi's income statement shows that he made 5,00,000 of income before interest
expense and income taxes. Ravi's overall interest expense for the year was only 50,000.
Ravi's time interest earned ratio would be ......
Times Interest Earned Ratio or Interest Coverage Ratio = Income before interest and
taxes / Interest Expense
= 500000 / 50000
= 10 Times
.................................
A company has 1,00,000 of bank lines of credit and a 5,00,000 mortgage on its property.
The shareholders of the company have invested 12,00,000. Calculate the debt to equity
ratio.
DER = TL / Total Equity
= (100000+500000) / 1200000
= 600000 / 1200000
= 0.5
.................................
A company has total assets at 1,50,000 and its total liabilities are 50,000. Based on the
accounting equation, we can assume the total equity is 1,00,000. Find the Equity Ratio.
ER = Total Equity / TA
= 100000 / 150000
= 0.67
.................................
A company has total assets at 1,50,000 and its total liabilities are 50,000. Based on the
accounting equation, we can assume the total equity is 1,00,000. Find the Debt Ratio.
DR = TL / TA
= 50000 / 150000
= 0.33
.................................
Babu's Ski Shop is a retail store that sells outdoor skiing equipment. Babu offers
accounts to all of his main customers. At the end of the year, Babu's balance sheet
shows 20,000 in accounts receivable, 75,000 of gross credit sales, and 25,000 of returns.
Last year's balance sheet showed 10,000 of accounts receivable. Find the Accounts
Receivable Turnover Ratio.
The first thing we need to do in order to calculate Babu's turnover is to calculate net
credit sales and average accounts receivable. Net credit sales equals gross credit sales
minus returns (75,000 – 25,000 = 50,000). Average accounts receivable can be
calculated by averaging beginning and ending accounts receivable balances ((10,000 +
20,000) / 2 = 15,000).
Accounts Receivable Turnover Ratio = Net Credit Sales / Average Accounts Receivable
= 50000 / 15000
= 3.33
.................................
Seela's Tech Company is a tech start up company that manufactures a new tablet
computer. Seela is currently looking for new investors and has a meeting with an angel
investor. The investor wants to know how well Seela uses her assets to produce sales, so
he asks for her financial statements.
Here is what the financial statements reported:
Beginning Assets: 50,000
Ending Assets: 1,00,000
Net Sales: 25,000
The total asset turnover ratio is ......
Asset Turnover Ratio or Total Asset Turnover Ratio = Net Sales / Average Total Assets
= 25000 / ((50000+100000)/2)
= 25000 / (150000/2)
= 25000 / 75000
= 0.33
As you can see, Seela's ratio is only 0.33. This means that for every Rupee in assets,
Sally only generates 33 Paisa. In other words, Seela's start up is not very efficient with
its use of assets.
.................................
Govind's Furniture Company sells industrial furniture for office buildings. During the
current year, Govind reported cost of goods sold on its income statement of 10,00,000.
Govind's beginning inventory was 30,00,000 and its ending inventory was 40,00,000.
Govind's turnover is ......
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
= 1000000 / ((3000000+4000000)/2)
= 1000000 / (7000000/2)
= 1000000 / 3500000
= 0.29 Times
This means that Govind only sold roughly a third of its inventory during the year. It also
implies that it would take Govind approximately 3 years to sell his entire inventory or
complete one turn. In other words, Govind does not have very good inventory control.
.................................
Ambica's Furniture Company's management have been extremely happy with their sales
staff because they have been moving more inventory this year than in any previous year.
At the end of the year, Ambica's financial statements show an ending inventory of
50,000 and a cost of good sold of 1,50,000. Ambica's days sales in inventory is ......
Days' sales in Inventory Ratio = (Ending Inventory / Cost of Goods Sold) * 365
= (50000/150000) * 365
= 122
This means Ambica has enough inventories to last the next 122 days or Ambica will turn
his inventory into cash in the next 122 days.
JAIIB-AFB-CASE STUDIES/NUMERICAL QUESTIONS-MEAN,
MEDIAN, MODE, RANGE
The daily salaries of six employees are 140, 220, 90, 180, 140, 200. For these six salaries,
find: (a) the mean (b) the median (c) the mode
First, list the data in order: 90, 140, 140, 180, 200, 220
Mean : (90 + 140 + 140 + 180 + 200 + 220) / 6 = 161.66
Median: 90,140,(140,180),200,220
The two numbers that fall in the middle need to be averaged.
(140 + 180) / 2 = 160
Mode: The number that appears the most is 140
.............................................
In January of 2013, your family moved to a tropical climate. For the year that followed, you
recorded the number of rainy days that occurred each month. Your data contained 14, 14,
10, 12, 11, 13, 11, 11, 14, 10, 13, 8.
a. Find the mean, mode, median and range for your data set of rainy days.
b. If the number of rainy days doubles each month in the year 2014, what will be the mean,
mode, median and range for the 2014 data?
c. If, instead, there are three more rainy days per month in the year 2014, what will be the
mean, mode, median and range for the 2014 data?
mean mode median range
a. 11.75 11, 14 11.5 8 - 14
b. 23.25 22, 28 23 16 - 28
Notice that if you double each data entry, you double the mean, mode, median and range.
c. 14.75 14, 17 14.5 11 - 17
Notice that if you add three to each data entry, you add three to the mean, mode, median
and range.
.............................................
30 couples were asked how many children they have. The results are shown below.
Value Frequency Total
0 3 0
1 7 7
2 10 20
3 8 24
4 1 4
5 1 5
30 60
Mean - 2. The total of the 30 data is 60. So, mean = 60/30 = 2
Median - 2. Counting up, both 15th and 16th value are 2
Mode - 2. The value of 2 has the heighest frequency
Range - 5. The highest is 5 and the smallest is 0. So, range = 5 - 0 = 5
.............................................
A class collected data on their shoe sizes and presented it in the table below:
Size Freq Total
3 2 6
4 7 28
5 6 30
6 5 30
7 3 21
8 2 16
25 131
Mean - 5.24. The total of the 25 data is 131. So, mean = 131/25 = 5.24
Median - 5. Counting up, the 13th value is 5
Mode - 4. The value of 4 has the heighest frequency
Range - 5. The highest is 8 and the smallest is 3. So, range = 8 - 3 = 5
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