JAIIB AFM Formula Sheet 2026 — All Formulas for Paper III (Printable)
Paper III (Accounting & Financial Management for Bankers) is the most numerical paper in JAIIB. Most candidates who fail AFM fail because they read the textbook without solving enough problems — and because they do not have a formula sheet to revise from the night before the exam. This page covers every formula you need for JAIIB AFM 2026, organised by topic, with one worked example for each.
How to use this: Print this page (Ctrl+P → Save as PDF → A4, Background graphics ON). Review once a day in the final 2 weeks. Solve at least 5 numericals per formula cluster per week.
1. Ratio Analysis
Ratio analysis typically accounts for 20–25 MCQs in AFM — the highest single topic weight. Master this first.
| Ratio | Formula | What it tells you |
|---|---|---|
| Current Ratio | Current Assets ÷ Current Liabilities | Short-term liquidity. Ideal: 2:1 |
| Quick Ratio (Acid Test) | (CA − Inventory − Prepaid) ÷ CL | Immediate liquidity. Ideal: 1:1 |
| Debt‑Equity Ratio | Long-term Debt ÷ Shareholders’ Equity | Leverage / financial risk |
| Proprietary Ratio | Shareholders’ Equity ÷ Total Assets | Proportion of assets financed by owners |
| Gross Profit Ratio | (Gross Profit ÷ Net Sales) × 100 | Core trading profitability |
| Net Profit Ratio | (Net Profit after Tax ÷ Net Sales) × 100 | Overall profitability |
| Return on Equity (ROE) | (Net Profit after Tax ÷ Shareholders’ Equity) × 100 | Return to equity shareholders |
| Return on Assets (ROA) | (Net Profit after Tax ÷ Total Assets) × 100 | Efficiency of asset utilisation |
| Debtors Turnover | Net Credit Sales ÷ Average Debtors | How quickly debtors pay |
| Debtors Collection Period | 365 ÷ Debtors Turnover Ratio | Average days to collect receivables |
| Inventory Turnover | COGS ÷ Average Inventory | How quickly inventory is sold |
| Interest Coverage Ratio | EBIT ÷ Interest Charges | Ability to service debt |
Worked example: A company has Current Assets of ₹8,00,000 and Current Liabilities of ₹4,00,000. Inventory is ₹2,50,000.
• Current Ratio = 8,00,000 ÷ 4,00,000 = 2.0 (Ideal)
• Quick Ratio = (8,00,000 − 2,50,000) ÷ 4,00,000 = 5,50,000 ÷ 4,00,000 = 1.375
• Current Ratio = 8,00,000 ÷ 4,00,000 = 2.0 (Ideal)
• Quick Ratio = (8,00,000 − 2,50,000) ÷ 4,00,000 = 5,50,000 ÷ 4,00,000 = 1.375
2. Time Value of Money (TVM)
| Concept | Formula | Variables |
|---|---|---|
| Simple Interest | SI = P × R × T ÷ 100 | P=Principal, R=Rate%, T=Time(years) |
| Compound Interest — FV | FV = PV × (1 + r)ⁿ | r=rate per period, n=no. of periods |
| Present Value | PV = FV ÷ (1 + r)ⁿ | Discounting future value to today |
| Annuity — FV (ordinary) | FVA = PMT × [(1+r)ⁿ − 1] ÷ r | PMT=periodic payment (end of period) |
| Annuity — PV (ordinary) | PVA = PMT × [1 − (1+r)⁻ⁿ] ÷ r | PV of equal periodic receipts |
| Perpetuity PV | PV = PMT ÷ r | Infinite stream of equal payments |
| Rule of 72 (doubling time) | Years to double = 72 ÷ Rate% | Quick mental estimate only |
Worked example: ₹1,00,000 invested for 3 years at 10% compounded annually.
FV = 1,00,000 × (1.10)³ = 1,00,000 × 1.331 = ₹1,33,100
PV of ₹1,33,100 received after 3 years @ 10% = 1,33,100 ÷ 1.331 = ₹1,00,000
FV = 1,00,000 × (1.10)³ = 1,00,000 × 1.331 = ₹1,33,100
PV of ₹1,33,100 received after 3 years @ 10% = 1,33,100 ÷ 1.331 = ₹1,00,000
3. Depreciation Methods
| Method | Formula | Key point |
|---|---|---|
| Straight Line Method (SLM) | (Cost − Residual Value) ÷ Useful Life | Equal annual depreciation. Book value reaches residual value. |
| Written Down Value (WDV) | Rate% × Book Value at start of year | Higher depreciation in early years. Book value never reaches zero. |
| SLM Rate% | [(Cost − Residual) ÷ (Cost × Life)] × 100 | Annual depreciation as % of cost |
| WDV Rate% | 1 − (Residual ÷ Cost)^(1/n) | Also: [1 − ⁿ√(Scrap/Cost)] × 100 |
Worked example: Machine cost ₹5,00,000. Residual value ₹50,000. Life 5 years.
• SLM = (5,00,000 − 50,000) ÷ 5 = ₹90,000 per year
• WDV @ 20%: Year 1 = 20% × 5,00,000 = ₹1,00,000 | Year 2 = 20% × 4,00,000 = ₹80,000
• SLM = (5,00,000 − 50,000) ÷ 5 = ₹90,000 per year
• WDV @ 20%: Year 1 = 20% × 5,00,000 = ₹1,00,000 | Year 2 = 20% × 4,00,000 = ₹80,000
4. Capital Budgeting
| Method | Formula / Decision rule |
|---|---|
| Payback Period | Initial Investment ÷ Annual Cash Inflow (if equal). Or: cumulate until investment is recovered. |
| Net Present Value (NPV) | Σ[CF₋ ÷ (1+r)ⁿ] − Initial Investment. Accept if NPV ≥ 0 |
| Profitability Index (PI) | PV of Cash Inflows ÷ Initial Investment. Accept if PI ≥ 1 |
| Internal Rate of Return (IRR) | Rate at which NPV = 0. Accept if IRR ≥ Cost of Capital |
5. Working Capital & Cash Management
| Concept | Formula |
|---|---|
| Working Capital | Current Assets − Current Liabilities |
| Operating Cycle | Raw Material Period + WIP Period + FG Period + Debtors Period − Creditors Period |
| MPBF (Tandon Norms — Method II) | 75% × (Current Assets − Core Current Assets) − Current Liabilities (other than bank) |
| Drawing Power (DP) | Stock + Debtors − Creditors (at invoice value, within approved norms) |
| Cash Budget — Net Surplus/Deficit | Opening Cash + Cash Inflows − Cash Outflows |
6. Banking-Specific Ratios & Concepts
| Concept | Formula | Benchmark / Note |
|---|---|---|
| DSCR | Net Operating Income ÷ Total Debt Service | Must be ≥ 1.50 for most project loans |
| Capital Adequacy Ratio (CAR) | (Tier I Capital + Tier II Capital) ÷ Risk-Weighted Assets × 100 | Minimum 11.5% for Indian banks (Basel III) |
| Net Interest Margin (NIM) | (Interest Income − Interest Expense) ÷ Average Earning Assets × 100 | Profitability of lending book |
| NPA Ratio (GNPA) | Gross NPAs ÷ Gross Advances × 100 | Asset quality measure |
| Provision Coverage Ratio | Total Provisions ÷ Gross NPAs × 100 | RBI minimum: 70% |
| Yield on Advances | Interest Income from Advances ÷ Average Advances × 100 | Effectiveness of lending portfolio |
7. Break-Even Analysis
| Concept | Formula |
|---|---|
| Contribution | Sales − Variable Costs (or SP − VC per unit) |
| P/V Ratio (Contribution Margin %) | (Contribution ÷ Sales) × 100 |
| Break-Even Point (Units) | Fixed Costs ÷ Contribution per Unit |
| Break-Even Point (Sales ₹) | Fixed Costs ÷ P/V Ratio |
| Margin of Safety | Actual Sales − Break-Even Sales |
| Target Profit (Units) | (Fixed Costs + Desired Profit) ÷ Contribution per Unit |
8. Accounting Principles & Journal Entry Rules
- Golden Rules: Personal A/c: Debit the receiver, Credit the giver. Real A/c: Debit what comes in, Credit what goes out. Nominal A/c: Debit all expenses and losses, Credit all incomes and gains.
- Balance Sheet equation: Assets = Liabilities + Capital (Owner’s Equity)
- Trial Balance: Total Debits = Total Credits (checks arithmetic, not conceptual errors)
- Closing Stock: Appears on the credit side of Trading A/c AND as an asset in Balance Sheet
- Gross Profit: Sales − COGS. COGS = Opening Stock + Purchases − Closing Stock
- Net Profit: Gross Profit + Other Income − Operating Expenses − Depreciation − Interest − Tax
- Adjusting entries: Outstanding expenses (add to P&L + show as liability), Prepaid expenses (deduct from P&L + show as asset), Accrued income (add to P&L + show as asset)
9. Quick-Reference: Key Numbers to Remember
| Item | Value / Benchmark |
|---|---|
| Ideal Current Ratio | 2:1 |
| Ideal Quick Ratio | 1:1 |
| CAR minimum (India, Basel III) | 11.5% (Tier I minimum: 9.5%) |
| PCR (Provision Coverage Ratio) | Minimum 70% (RBI norm) |
| DSCR for project loans | Minimum 1.50 |
| MPBF (Tandon Method II) | 75% of (CA − CCA) − OCL |
| RBI SLR requirement | 18% of NDTL |
| RBI CRR requirement | 4% of NDTL |
| Income Tax depreciation method | WDV only (under Income Tax Act) |
📚 Get JAIIB Study Alerts
Join 1,200+ bank officers getting free study tips, MCQ sets and exam date alerts — straight to your inbox.
No spam. Unsubscribe any time.
For the complete paper guide with syllabus and strategy, visit the JAIIB AFM Paper Guide. For the full JAIIB hub with all papers, visit JAIIB 2026 Complete Hub.