Altman Z-Score Case Study in Detail | CAIIB BFM JUNE 2024

Altman Z – Score Case Study in DetailCAIIB BFM JUNE 2024

In this article, we will be providing an important case study of the BFM paper (Bank Financial Management) from the BFM Syllabus 2023 for CAIIB JUNE 2023 Exams. We will be providing the case study on the Altman Z-score. The topic of the Altman Z-score is one of the important concepts from CAIIB BFM 2023. Then we will discuss the Latest Study material of CAIIB which will be sufficient to pass the CAIIB JUNE 2023 Exam & then some Mock MCQs as per the latest CAIIB Exam pattern 2024.


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As we already know that this is the last attempt under the present syllabus 2024. So, we are here with one of the most important topics from CAIIB Syllabus:

Altman Z – Score Case Study in Detail

The Altman Z-score is the output of a credit-strength test that gauges a publicly traded manufacturing company’s likelihood of bankruptcy. The Altman Z-score is based on five financial ratios that can calculate from data found on a company’s annual 10-K report. It uses profitability, leverage, liquidity, solvency, and activity to predict whether a company has a high probability of being insolvent.

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Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E


A = working capital / total assets

B = retained earnings / total assets

C = earnings before interest and tax / total assets

D = market value of equity / total liabilities

E = sales / total assets

A score below 1.8 means it’s likely the company is headed for bankruptcy, while companies with scores above 3 are not likely to go bankrupt. Investors can use Altman Z-scores to determine whether they should buy or sell a stock if they’re concerned about the company’s underlying financial strength. Investors may consider purchasing a stock if its Altman Z-Score value is closer to 3 and selling or shorting a stock if the value is closer to 1.8.


Q: Calculate Altman Z-Score for firm XYZ and State insolvency Probability of Firm:

EBIT: ₹500000,  Total Assets: 2000000

Total Liabilities: 1000000,  Retained Earnings: 1000000

Market Value of Equity: 3000000,   Working Capital: 500000


Solution: Solved in above Video with the description




Bank Financial Management i.e. paper – 1 of CAIIB 2024 can be overwhelming with its vast syllabus. But the upcoming Revised CAIIB for 2024 Exams seems to be more vast than the one applicable for CAIIB NOV 2023 Exams.

So, it’s best that the bankers take up this last opportunity to clear their CAIIB Exams 2024 right in this attempt! And when Learning Sessions is here, you have nothing to worry about. More than lac students have been part of the Learning Sessions & have cleared various IIBF & Bank promotion exams with the study material provided by Learning Sessions.

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After you have covered your CAIIB Syllabus for the Syllabus of BFM i.e. Bank Financial Management, you must practice some Questions to prepare for the Final day!

And what better way than to answer the Questions that are pre-made to help you for the same?

Below are some of the BFM Important Multiple Choice Questions from the CAIIB Latest Syllabus. Answer & don’t cheat!

1 Q. For calculation of cross currency rates, Indian banks use the dollar or foreign currency rates which are quoted in?

  1. Mumbai
  2. Any international market
  3. London
  4. New York

Ans – 2


2 Q. What does ‘Cli’ order stand for?

  1. Trading member’s own order
  2. Proprietary order
  3. Client ID
  4. Client order

Ans – 4


3 Q. What does the aggregated risk of the organizations as a whole called?

  1. Portfolio risk
  2. Transaction risk
  3. Total risk
  4. None of these

Ans – 1


4 Q. What is the difference between sport rate & forward rate is called (In case of forward contract)?

  1. backward margin
  2. spot margin
  3. forward margin
  4. past margin

Ans – 3


5 Q. Which option is not eligible for Credit risk Mitigation?

  1. Cash
  2. OTC
  3. Mutual fund
  4. Life Insurance

Ans – 2


6 Q. Which is the most common means of hedging transactions in foreign currency in Indian market?

  1. Swaps
  2. Forward Contracts
  3. Options
  4. Money market instruments

Ans – 2


7 Q. Which of the below procedures are/is essential to validate the VaR estimates?

  1. Back Testing
  2. Stress Testing
  3. Scenario Analysis
  4. Once approved by regulators no further validation is required

Ans – 1


8 Q. Which instrument(s) does not qualify for upper Tier II capital?

  1. PNCPS
  2. PCPS
  3. RNCPS
  4. All of these

Ans – 1


9 Q. A traveler is required to surrender his unspent travelers’ cheques within what no. days from the date of return from abroad?

  1. 90
  2. 30
  3. 180
  4. 60

Ans – 3


10 Q. A bank that specializes in granting loans to businesses in a distinctive line of industry ……

  1. May reduce its operating expense and decrease its credit risk
  2. May increase both its operational expense and its credit risk
  3. May increase its operational expense and decrease its credit risk
  4. May decrease its operating expense and increase its credit risk

Ans – 4


11 Q. RBI has introduced a new restructuring tool – ‘S4A’ to raise banks’ moral hazard risk. What does S4A stands for?

  1. Systematic Structuring of Stressed Assets
  2. Sustainable Structuring of Stressed Assets
  3. Sustainable Structuring of Scholastic Assets
  4. Sustainable Strength of Stressed Assets

Ans – 2


12 Q. RBI when wants to absorb the liquidity, it _____ from / to banks under a _____ transaction.

  1. borrowing, repo
  2. borrowing, reverse repo
  3. lending, repo
  4. lending, reverse repo

Ans – 2



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