JAIIB AFM Paper Guide 2026 — Syllabus, Formula Sheet & Strategy
AFM = Accounting & Financial Management for Bankers · 100 MCQs, 120 minutes, no negative marking · Pass mark: 45/100 · Difficulty: High — numerical paper · Recommended study: 3–4 weeks · May 2026 exam: 10 May 2026
AFM (Accounting & Financial Management for Bankers) is Paper III of JAIIB and the only numerical paper in the exam. About 40% of MCQs require calculation — ratio analysis, time value of money, depreciation, capital budgeting, and EMI. The remaining 60% are conceptual — accounting principles, financial statements, and bank-specific accounting. Candidates with a commerce background find this manageable; others need extra time on the numerical modules. In both cases, the strategy is the same: build a formula sheet on Day 1 and solve numericals daily from Day 1.
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AFM Syllabus 2026 — Module-wise Breakdown
| Module | Key Topics | ~MCQs | Type |
|---|---|---|---|
| A — Business Mathematics | Simple & compound interest · Time Value of Money (PV, FV, annuity, perpetuity) · EMI calculation · Depreciation (SLM, WDV, Sum of Digits) · Capital budgeting (NPV, IRR, Payback Period, ARR) · Ratio and proportion | 35–40 | 🔴 Numerical |
| B — Principles of Bookkeeping | Accounting concepts (going concern, accrual, matching, conservatism) · Double entry system · Journal entries · Ledger, trial balance · Rectification of errors · Bank reconciliation statement | 15–20 | Mixed |
| C — Final Accounts | Trading, P&L account · Balance sheet · Cash flow statement · Fund flow statement · Depreciation in accounts · Revenue vs capital expenditure | 15–18 | Mixed |
| D — Banking Operations | Ratio analysis (liquidity, profitability, leverage, activity ratios) · Financial statement analysis of borrowers · Working capital assessment (Nayak Committee / Turnover method) · Drawing power calculation · DSCR (Debt Service Coverage Ratio) · Credit appraisal | 20–25 | 🔴 Numerical |
AFM Formula Sheet — All Key Formulas
Write this formula sheet on paper on Day 1 of your AFM preparation. Revise it every day. By exam day, you should be able to recall every formula below in under 5 seconds.
Interest & Time Value of Money
| Concept | Formula | Variables |
|---|---|---|
| Simple Interest | SI = (P × R × T) / 100 | P=Principal, R=Rate%, T=Time(years) |
| Amount (SI) | A = P + SI = P(1 + RT/100) | A=Maturity amount |
| Compound Interest | A = P × (1 + r)ⁿ | r=rate per period (decimal), n=number of periods |
| Effective Annual Rate | EAR = (1 + r/m)ᵐ − 1 | m=compounding frequency per year |
| Present Value | PV = FV / (1 + r)ⁿ | FV=Future Value, r=discount rate, n=periods |
| Future Value | FV = PV × (1 + r)ⁿ | PV=Present Value |
| PV of Annuity | PVA = PMT × [1 − (1+r)⁻ⁿ] / r | PMT=periodic payment (same each period) |
| FV of Annuity | FVA = PMT × [(1+r)ⁿ − 1] / r | Accumulation of equal periodic payments |
| PV of Perpetuity | PV = PMT / r | Infinite equal payments |
| EMI | EMI = P × r × (1+r)ⁿ / [(1+r)ⁿ − 1] | P=loan amount, r=monthly rate, n=months |
Depreciation
| Method | Formula | Key Feature |
|---|---|---|
| SLM — Straight Line Method | Annual Dep = (Cost − Salvage Value) / Useful Life | Equal amount every year; book value reaches salvage value at end of life |
| WDV — Written Down Value (Reducing Balance) | Annual Dep = WDV at Start of Year × Rate% | Higher depreciation in early years; book value never reaches zero |
| Sum of Years Digits (SYD) | Dep = (Remaining Life / SYD) × (Cost − Salvage); SYD = n(n+1)/2 | Accelerated method; more depreciation in early years than WDV |
| Accumulated Depreciation | Accumulated Dep = Annual Dep × Number of Years (SLM) | Book Value = Cost − Accumulated Depreciation |
Capital Budgeting
| Method | Formula / Rule | Accept if… |
|---|---|---|
| Payback Period | PP = Initial Investment / Annual Cash Inflow (equal flows) Or: cumulative cash flows until recovery | PP < Target period set by management |
| NPV (Net Present Value) | NPV = Σ [CFₜ / (1+r)ᵗ] − Initial Investment | NPV > 0 (accept); NPV < 0 (reject) |
| IRR (Internal Rate of Return) | Rate at which NPV = 0 IRR ≈ Lower rate + [NPV_L / (NPV_L − NPV_H)] × (Higher − Lower) | IRR > Cost of Capital |
| ARR (Accounting Rate of Return) | ARR = (Average Annual Profit / Average Investment) × 100 Avg Investment = (Initial + Salvage) / 2 | ARR > Target rate set by management |
| Profitability Index | PI = PV of Cash Inflows / Initial Investment | PI > 1 (accept); PI < 1 (reject) |
Ratio Analysis — All Categories
Ratio analysis is the highest-MCQ topic in AFM. Expect 15–20 MCQs — both calculation-based (given a balance sheet, calculate a ratio) and conceptual (what does a ratio measure, what is an ideal value). Master all four categories.
- Current Ratio = Current Assets / Current Liabilities · Ideal: 2:1
- Quick Ratio (Acid Test) = (CA − Inventory − Prepaid) / CL · Ideal: 1:1
- Cash Ratio = (Cash + Bank + Marketable Securities) / CL
- Working Capital = Current Assets − Current Liabilities
- Higher current ratio = better short-term liquidity
- Quick ratio excludes inventory as it is least liquid current asset
- Gross Profit Margin = (Gross Profit / Net Sales) × 100
- Net Profit Margin = (Net Profit / Net Sales) × 100
- Return on Assets (ROA) = Net Profit / Total Assets × 100
- Return on Equity (ROE) = Net Profit / Shareholders’ Equity × 100
- Return on Capital Employed (ROCE) = EBIT / Capital Employed × 100
- Earnings Per Share (EPS) = Net Profit after Tax / No. of Equity Shares
- Debt-Equity Ratio = Total Debt / Shareholders’ Equity · Lower = safer
- Debt-to-Assets = Total Debt / Total Assets
- Interest Coverage Ratio = EBIT / Interest Expense · Higher = safer
- DSCR = (Net Income + Depreciation + Interest) / (Principal + Interest)
- DSCR > 1.5: comfortable for banks; <1: repayment risk
- DSCR is the most important ratio in bank credit appraisal
- Inventory Turnover = COGS / Average Inventory · Higher = faster moving stock
- Debtor Days = (Debtors / Net Credit Sales) × 365
- Creditor Days = (Creditors / Net Credit Purchases) × 365
- Asset Turnover = Net Sales / Total Assets
- Working Capital Turnover = Net Sales / Working Capital
- Lower debtor days = faster collection; higher = collection risk
Worked Examples — Typical AFM MCQ Types
Question: A bank sanctions a home loan of ₹20,00,000 at 8.4% per annum for 20 years. What is the approximate monthly EMI?
Step 2: n = 20 × 12 = 240 months
Step 3: EMI = P × r(1+r)ⁿ / [(1+r)ⁿ − 1]
= 20,00,000 × 0.007 × (1.007)²⁴⁰ / [(1.007)²⁴⁰ − 1]
(1.007)²⁴⁰ ≈ 5.2 (use table or calculator in exam)
≈ ₹17,330 per month
Exam tip: JAIIB provides discount/annuity tables. Use them — do not try to compute (1+r)ⁿ manually.
Question: A project costs ₹1,00,000. It generates ₹40,000 per year for 3 years. Cost of capital is 10%. Should the bank finance this project?
PV of Year 2: 40,000 / (1.10)² = 33,058
PV of Year 3: 40,000 / (1.10)³ = 30,053
Total PV of inflows: 99,475
NPV: 99,475 − 1,00,000 = −₹525 (Negative)
Decision: Reject — NPV is negative, project destroys value at 10% cost of capital.
Question: A company has Current Assets ₹5,00,000 (including Inventory ₹1,50,000 and Prepaid ₹20,000) and Current Liabilities ₹2,50,000. Calculate the Current Ratio and Quick Ratio.
Quick Assets = 5,00,000 − 1,50,000 − 20,000 = 3,30,000
Quick Ratio = 3,30,000 / 2,50,000 = 1.32 : 1 (above ideal 1:1 — good)
Exam tip: Always subtract both inventory AND prepaid expenses from Current Assets to get Quick Assets.
Study Strategy for AFM — 4-Week Plan
- Use the JAIIB exam tables — the exam provides annuity and present value tables. Learn to use them, not memorise values.
- Ratio analysis first — it has 15–20 MCQs and only needs understanding + arithmetic. Fastest return on study time.
- 10 numericals per day from Day 1 — this is the single most important rule for AFM. Do not negotiate with yourself on this.
- DSCR is the most important credit ratio — banks use it for all term loan appraisals. Know the formula and what values are acceptable (>1.5).
- NPV rule is binary — positive NPV = accept, negative = reject. No grey area. Do not second-guess this in MCQs.
Best Book for JAIIB AFM — Official Macmillan
IIBF prescribes one official textbook for AFM, published by Macmillan Education India. The book includes worked examples and practice questions at the end of each numerical chapter. Solve every example in the book — do not skip them.
Affiliate link — bankersclub.in earns a small commission at no extra cost to you.
For paper-wise book reviews for all four JAIIB papers, see the Best Books for JAIIB 2026 →
Frequently Asked Questions
What formulas do I need for JAIIB AFM?
The key AFM formulas are: Simple Interest (SI = PRT/100), Compound Interest (A = P(1+r)u207f), EMI (P u00d7 r(1+r)u207f / [(1+r)u207fu22121]), Present Value (PV = FV/(1+r)u207f), Future Value (FV = PV(1+r)u207f), PV of Annuity (PMT u00d7 [1u2212(1+r)u207bu207f]/r), NPV (sum of discounted cash flows minus initial investment), Payback Period (initial investment divided by annual cash inflow), SLM Depreciation ((Costu2212Salvage)/Useful Life), Current Ratio (CA/CL), Quick Ratio ((CAu2212Inventoryu2212Prepaid)/CL), DSCR ((Net Income+Depreciation+Interest)/(Principal+Interest)), and ROE (Net Profit/Equity). Write these on a single page on Day 1 of your AFM preparation and revise daily.
What is the difference between NPV and IRR in JAIIB AFM?
NPV (Net Present Value) is the sum of present values of all cash inflows minus the initial investment, discounted at the cost of capital. If NPV is positive, the project is accepted. IRR (Internal Rate of Return) is the discount rate at which NPV equals zero. If IRR exceeds the cost of capital, the project is accepted. NPV gives a rupee value of value created; IRR gives a percentage return. Both are discounted cash flow methods. JAIIB MCQs test both the calculation and the decision rule u2014 always remember: NPV positive = accept; IRR greater than cost of capital = accept.
What is DSCR and why is it important in JAIIB AFM?
DSCR (Debt Service Coverage Ratio) measures a borrower’s ability to service debt from operating cash flows. Formula: DSCR = (Net Income after Tax + Depreciation + Interest on TL) / (Principal Repayment + Interest on TL). A DSCR above 1.5 is generally considered comfortable for bank financing. A DSCR below 1.0 means the borrower cannot service debt from cash flows u2014 a credit risk. DSCR is the most important ratio in bank credit appraisal and appears frequently in AFM MCQs, especially in questions about evaluating term loan proposals.
What is the difference between SLM and WDV depreciation?
SLM (Straight Line Method): depreciation is a fixed equal amount every year. Formula: (Cost minus Salvage Value) divided by Useful Life. The asset book value reaches the salvage value exactly at the end of its useful life. WDV (Written Down Value or Reducing Balance Method): depreciation is a fixed percentage of the book value at the start of each year. It gives higher depreciation in early years and lower in later years. The book value never mathematically reaches zero under WDV. SLM is simpler; WDV is more conservative and preferred for assets that lose value faster in early years. In JAIIB, expect MCQs asking you to calculate depreciation for a specific year under both methods.
How many numerical questions are there in JAIIB AFM?
Approximately 35 to 40 out of 100 MCQs in AFM require calculation. These come from ratio analysis (15 to 20 MCQs), time value of money and EMI (8 to 12 MCQs), depreciation (4 to 6 MCQs), and capital budgeting such as NPV, IRR, and payback period (6 to 10 MCQs). The remaining 60 to 65 MCQs are conceptual u2014 accounting principles, bookkeeping entries, financial statement interpretation, and banking operations. You need 45 out of 100 to pass, which means even if you skip all numerical MCQs (unlikely), you cannot pass on conceptual questions alone. Daily numerical practice is non-negotiable.
Latest Updates — AFM 2026
- 10 May 2026 — AFM Paper III exam for the May 2026 JAIIB attempt.
- 1 May 2026 — This guide published with complete formula sheet, worked examples, and 4-week plan.
- February 2026 — IIBF confirmed May 2026 exam dates.
- 2023 — JAIIB revised to 4 papers. AFM remains Paper III with updated content on working capital assessment and credit appraisal.