CAIIB Exam – Most Important Formulas of ABM

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Nov 2

Advanced Bank Management Important Formula for CAIIB Exam

CAIIB Exam Formulas : CAIIB exam conducted by IIBF twice in a year. CAIIB exam is a certification exam for those who want to grow in Banking sector in India. here in this article we are providing the Most important formula of Advanced Bank Management (ABM) subjects.

Go through all the formulas carefully provided in this article which will help you to boost your score for CAIIB ABM exam.

Unit 02 – Supply and Demand

CR = CA : CL
Net Worth = CA – CL
DER = TL/TNW or debt/equity or TL/equity
Price Elasticity of Supply = (% change in quantity supplied/(% change in price)

Unit 03 - Money Supply & Inflation

Narrow Money ( M1)= Currency with public + Demand deposits with banking system + ' other deposits with RBI
M2=M1+ Savings deposits of post office savings banks
M3=M1+ Time deposits with banking system
M4=M3+ All deposits with post office savings banks (Excluding National savings
certificate )
Inflation =( Price index in current year- Price index in base year)*100

Unit 9 - GDP Concepts

GDP= C+I+G+(X-M)
GNP = GDP+ NR (net income from assets abroad(net income receipts ))
GDP at factor cost= GDP at market price – (Indirect taxes- Subsidies)
Total revenue receipts= Net tax revenue + Total Non-Tax revenue

Unit 12 - Time Value of Money

Present value(PV)=Discount factor × C n
Cash flow for n period =Cn= PV(1+r)^n where r = interest rate
Discount factor =1/(1+r)^n Where r = interest rate , n = period in year
Effective interest rate (EIR)=(1+r/n)^n -1
Current yield on coupon =(coupon or nominal yield)× 100 / (current market price of coupon)
Rate of return =(coupon+ price change)/investment
PV = P / R * [(1+R)^T - 1]/(1+R)^T
PV = P / (1+R)^T
FV = P * (1 + R)^T
FV = P*(1-R)^T
FV = P / R * [(1+R)^T - 1]
FV = P / R * [(1+R)^T - 1] * (1+R)
EMI = P * R * [(1+R)^T/(1+R)^T-1)]
Net Present Value = - Co + C1 / (1 + r)
Future expected value of a present cash flow = Cash Flow ( 1 + r ) ^ t
Present value of a simple future cash flow = Cash Flow / (1 + r) ^ t
The Discount Factor = 1 / (1 + r) ^ t
Notation used internationally for PV of an annuity is PV ( A, r, n )
Notation used internationally for FV of an annuity is FV ( A, r, n )
The effective annual rate = ( 1 + r ) ^ t – 1 or (1 + (r / N) ) – 1 ) , N = Number of times compounding in a year
PV of end of period Annuity = A { (1- (1 / (1+r) ^ n) / r

Unit 13 – Sampling method

If S is the sample space & E is the even of occurrence
Then Probability of occurrence of even E for n time = P(E) = n(E)/n(S)

Unit 14 - Co-efficient of co-relation:

If x and Y are the two variables then correlation of coefficient 'r'

r = cov{(x,y)/▲x▲y}

Equation of estimating of straight line Y^ = a+bx

Where Y^ = estimating value of dependent variable

x = is an independent variable

a = y intercept when x=0

b = the slop of trend line

Unit 17 - Bond Investment

YTM =[ C+ ( A-P)/n ] × 100 / ( A + P)/2 Where C- Coupon

A- Face value/ Maturity value of bond

P- Price paid for bond

n – term to maturity

conversely to find out the yield from a discounted instrument, the following formula can be derived from the above one

r = ( F- D ) / D × 365/ n × 100

Where D = Discounted value of the instrument

F = Maturity value

r = Effective rate of interest per annum

n = Tenure of the instrument (in days)

Yield on discounted instruments:- The issue price of a discounted instrument can be calculated by using formula D = F / 1+ { (r×n) / 36500 }

Where D = Discounted value of the instrument

F = Maturity Value

r = Effective rate of return per annum

n = Tenure of the investment in days.

When you invest in a bond, you receive a regular coupon payment. As bond prices change, you may also make a capital gain or loss. The Rate of Return can be calculated using ROR = (Coupon income + Price change ) ÷ Investment
Zero coupon bond is a long term bond that pays no interest. This bond is sold at discount. This can be calculated by using formula ZC = FV / ( 1+r )^n

Where FV = Face value of bond

r = return required

n = Maturity period

Future Value of an annuity(End of period) =A/r × [( 1+r)^n – 1]
Present Value of an annuity ( End of period )=A/r ×[ ( 1+r)^n-1] /(1+r)^n
FV ( at the beginning )=A/r×(1+r)[( 1+r)^n -1]
¤ Value of Bond =PV( Coupon)+ PV( Face value )

¤ PV( A, r, n)+ PV(Face value

Standard error of the mean= � x = � / sqrt ( n)

48.PV of perpetuity = A/r

Where A = Annuity

r = interest rate

FV of annuity = A/r ×{(1+r)^n-1}
Bond Price = (1/(1+R)^t)((coupon*((1+R)^t-1)/R)+Face Value)

Unit -18 – Linear Programming

Break Even Analysis = F / ( 1 – VC / S )

F = Fixed costs, VC = Total variable operating costs & S = Total sales revenue

Break Even Margin or Margin of Safety = Sales – Break Even Point / Sales.
Cash Break Even = F – N / P – R or F – N / 1 – ( VC / S )
BEP = Fixed Costs / Contribution per unit.

Unit 27 – Ratio Analysis – Analysis of Financial Statements

Raw material Turnover Ratio = Cost of RM used / Average stock of R
SIP Turnover = Cost of Goods manufactured / Average stock of SIP
Debt Collection period = No. days or months or Weeks in a year/Debt Turnover Ratio.
Average Payment Period = No. days or months or Weeks in a year/Creditors Turnover Ratio.

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory.
Debtors Turnover Ratio = Net Credit Sales / Average Debtors.
Creditors Turnover Ratio = Net Credit Purchases / Average Credits.
Defensive Interval Ratio = Liquid Assets / Projected Daily Cash Requirement
Projected daily cash requirement = Projected operating cash expenses / 365.
Debt Equity Ratio = Long Term Debt / Equity.
Debt Equity Ratio = Total outside Liability / Tangible Net Worth.
Debt to Total Capital Ratio = Total Debts or Total Assets/(Permanent Capital + Current Liabilities)
Interest Coverage Ratio = EBIT / Interest.
Dividend Coverage Ratio = N. P. after Interest & Tax / Preferential dividend
Gross Profit Margin = Gross Profit / Net Sales * 100
Net Profit Margin = Net Profit / Net Sales * 100
Cost of Goods Sold Ratio = Cost of Goods Sold / Net Sales * 100.
Operating Profit Ratio = Earnings Before Interest Tax / Net Sales * 100
Expenses Ratio or Operating Ratio = Expenses / Net Sales * 100
Net Profit Ratio = Net Profit After interest and Tax / Net Sales * 100
Operating Expenses Ratio = (Administrative + Selling expenses) / Net Sales * 100
Administrative Expenses Ratio =(Administrative Expenses / Net Sales ) * 100
Selling Expenses Ratio =(Selling Expenses / Net Sales ) * 100
Financial Expenses Ratio = ( Financial Expenses / Net Sales ) * 100
Dividend Pay Out Ratio = Dividend per Equity Share / Earnings per Equity Share.
Dividend Pay Out Ratio = Dividend paid to Equity Shareholders / Net Profit available for

Equity Share Holders.

Price Earning Ratio = Market Price per equity Share / Earning per Share.

Unit 31 – Credit control and monitoring

Net worth = A) Excess of assets over liabilities(for individual)
B) Capitals + Reserve (for company)
Networking Capital = A) Total of current asset-Total of current liability
B) Difference b/w long term source and long term use
Debt Equity ratio (DER) = A) Term loan/Tangible net worth
B) Long term debt/Share holders equity
C) Total liability/Share holders equity
DSCR = A) Total cash flow before interest/Total repayment obligation
B) ( Net profit + Depreciation + Interest on long term liability )/ (Instalment + interest on long term liability)
Return on asset =Operating profit/(Total asset-intangible asset)
ICR(Interest coverage ratio )=EBIT / Interest on long term borrowings, Where EBIT = Earning before interest and taxes

Unit – 28 Working Capital Finance

88.Total outside liabilities= current liability + long term liability

Total tangible asset =CA + Fixed asset+ other non currrent asset
Tangible net worth =Net worth – intangible asset
Current Ratio =CA:CL
Quick Ratio =( CA – Inventories )/ CL
Quick asset =CA – Inventory
Heads come under current asset→

Inventory
Preliminary Expenses/prepaid expenses
Cash and bank balance
Sundry debtors/Bill receivables
Investment in Quoted securities such as Govt securities , FDR

Heads that come under liabilities

Sundry creditors/Bills payable
Installment of term loan payable in a year
preferential capital
Provisions to paid in a year
WCTL( Working capital term loan )

Return on capital employed (ROCE)=( Net profit after tax × 100)/ total capital
employed

Unit 31 – Credit Control and Monitoring

Return on Assets = Net Profit After Tax / Total Assets.
Total Assets = Net Fixed Assets + Net Working Capital.
Net Fixed Assets = Total Fixed Assets – Accumulated Depreciation.
Net Working Capital = ( CA –CL ) – ( Intangible Assets + Fictitious Assets + Idle Stock

+ Bad Debts )

Return on Capital Employed = Net Profit Before Interest and Tax / Average Capital Employed.
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.

Return on Ordinary Share Holders Equity = (NPAT – Preferential Dividends) / Average Ordinary Share Holders Equity or Net Worth.
Earnings Per Share = Net Profit After Taxes and Preferential dividends / Number of Equity Share.
Dividend per Share = Net Profit After Taxes and distributable dividend / Number of Equity Shares.
Total Asset Turnover = Cost of Goods Sold / Average Total Assets.
Fixed Asset Turnover = Cost of Goods Sold / Average Fixed Assets.
Capital Turnover = Cost of Goods Sold / Average Capital employed.
Current Asset Turnover = Cost of Goods Sold / Average Current Assets.
Working Capital Turnover = Cost of Goods Sold / Net Working Capital.
Return on Net Worth = ( Net Profit / Net Worth ) * 100
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.
Factory Cost = Prime cost + Production Overheads.
Cost of Goods Sold = Factory Cost + Selling, distribution & administrative overheads
Contribution = Sales – Marginal Costs.
Percentage of contribution to sales = ( Contribution / Sales ) * 100
Sales volume requires = Fixed cost + Required profit / Contribution per unit.
BEP in Sales = ( Fixed Costs / Contribution per unit ) * Price per unit.
Contribution Sales Ratio = ( Contribution per unit / Sale price per unit ) * 100
Level of sales to result in target profit after Tax = (Target Profit) / (1 – Tax rate / Contribution per unit)
Level of sales to result in target profit = (Fixed Cost + Target profit) * sales price per unit Contribution per unit.