JAIIB | AFM | CASE STUDY ON LIQUIDITY RATIO

In the world of banking, the potential to assess financial health accurately is critical, primarily for professionals aiming to succeed in their Junior Associate of Indian Institute of Bankers (JAIIB) exams. Within the JAIIB’s Accounting and Financial Management (AFM) module, the topic of Liquidity Ratios plays an important role. These ratios provide an in-depth look at a bank’s capacity to fulfill its short-term financial obligations, thus ensuring stability in an unpredictable market environment. Learning Sessions presents this article, we delve into Liquidity Ratios, particularly the Current Ratio and Quick Ratio, through a detailed case study. This practical analysis not only highlights the importance of liquidity in financial management but also establishes the application of these concepts for aspiring banking professionals preparing for the JAIIB exam.

DOWNLOAD PDF LIQUIDITY RATIO -CASE STUDY

The Liquidity Ratio is an essential measure in financial management that assesses a company’s or bank’s ability to meet short-term obligations. In the context of banking, this ratio holds special importance because it indicates a bank’s financial health and capacity to manage unexpected demands for cash. The JAIIB’s AFM module covers two primary types of liquidity ratios:

-Current Ratio: Measures the bank’s ability to cover its short-term obligations using current assets. The formula is:
Current Ratio=Current Assets \ Current Liabilities

A ratio greater than 1 indicates that the bank has more assets than liabilities in the short term.

-Quick Ratio (Acid-Test Ratio): A more stringent measure, excluding inventory from current assets to assess the bank’s immediate liquidity. The formula is:
Quick Ratio=Current Assets−Inventory \ Current Liabilities

The Quick Ratio provides a clearer picture of liquidity by focusing on the most liquid assets.

For the extensive preparation of candidates, get details through our YouTube videos for JAIIB AFM Module wise Syllabus with explanations and tips to help candidates in their preparation journey.

You may also like these JAIIB case studies:

JAIIB | AFM | BILLS OF EXCHANGE

JAIIB | AFM | TYPES OF BILLS OF EXCHANGE

In the end, considering the perception of liquidity ratios is necessary for JAIIB applicants, majorly for those focusing on the AFM module. Liquidity ratios, including Current and Quick Ratios, are foundational in assessing a bank’s capacity to meet short-term obligations and sustain financial stability. Learning Sessions provides additional information about JAIIB AFM OVERDRAFT BALANCE by giving examples of real life scenarios.

Learn more about this case study through our YouTube channel and PDF.

Get access to our Telegram Channel for free Pdfs of JAIIB.

You May also Find these JAIIB Posts Useful

PRINCIPLE OF FINANCE 

METHODS OF ISSUE OF SHARES

FUND FLOW STATEMENT

LIABILITIES OF BANKS