CAIIB · Advanced Bank Management · Module C — Credit Management
CAIIB ABM Unit 18 — Analysis of Financial Statements: Free MCQs with Explanations
By Swarnakshi Jha (ex-banker) · Updated 29 October 2026 · Paper I of the December 2026 cycle (Sunday 6 December 2026)
This is the free practice page for CAIIB ABM Unit 18 — Analysis of Financial Statements (Module C — Credit Management). The CAIIB Mock Centre holds 193 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five practice questions with explanations, and the traps that cost marks.
ABM · Module C193 MCQs in the Mock Centre5 free belowPaper on 6 December
Key facts examiners test from this unit
Financial statements, their users, accounting concepts and standards — know what the statements are, check they are genuine, and read them with the reports and the policies behind them.
Legal position: formats, the balance sheet and the profit and loss account — Schedule III sets the formats; classify by purpose and time; the notes reveal what the face hides.
Cash flow, funds flow and projected statements — profit is not cash; a falling NWC means short-term money went long; projections drive credit.
Changed since the textbook
Income-tax Act, 2025 in force: 'tax year' replaces previous year and assessment year (1 April 2026). The Income-tax Act, 2025 replaced the Income-tax Act, 1961 from 1 April 2026. It uses a single 'tax year', the twelve months from 1 April to 31 March, in place of the 'previous year' in which income was earned and the 'assessment year' in which it was assessed. Source: Tax year concept under the Income-tax Act, 2025 (summary by Patron Accounting)
Small company thresholds raised to ₹10 crore paid-up capital and ₹100 crore turnover (1 December 2025). MCA's Companies (Specification of Definition Details) Amendment Rules, 2025 (G.S.R. 880(E)), effective 1 December 2025, raised the limits in the definition of a small company (section 2(85)) from paid-up capital of ₹4 crore and turnover of ₹40 crore to ₹10 crore and ₹100 crore, the maximum the Act allows. Both limits must be met, and public companies, holding or subsidiary companies, section 8 companies and companies governed by a special Act cannot be small companies. Source: Companies (Specification of Definition Details) Amendment Rules, 2025, G.S.R. 880(E) of…
5 free practice questions — tap an option
Five practice questions from this unit. Answers lock on the first tap, exactly as in the exam, and an explanation opens underneath. The Mock Centre has all 193 questions on this unit, from easy to tough, with caselets and key-in numericals, why every other option is wrong and the exam tip — and tracks your score and revision dates.
Question 1 of 5
A company changes its inventory valuation method this year. Which statement is correct?
Why (b): Inventory valuation feeds into the cost of sales, so changing the method can change profit; a change is allowed where a standard requires it or it gives a more appropriate presentation, but its nature and effect must be disclosed. (a) is wrong: Closing stock directly affects profit. (c) is wrong: A change is allowed if justified and disclosed. (d) is wrong: Closing stock affects both the balance sheet and the profit.
Question 2 of 5
Trade receivables outstanding for more than how many months from the due date must be shown separately?
Why (c): Schedule III requires the amount outstanding for more than six months from the due date to be stated separately. (a) is wrong: Twelve months is the current or non-current test, not this one. (b) is wrong: Three months is not the Schedule III test. (d) is wrong: The disclosure starts at six months.
Question 3 of 5
For a term loan to a new project, projected statements normally cover:
Why (a): They establish viability over the whole loan period and fix the disbursement and repayment schedule. (b) is wrong: One year is the horizon for working capital. (c) is wrong: The period follows the loan tenor. (d) is wrong: Repayment comes after construction.
Question 4 of 5
In the 1.33 : 1 benchmark, what does the 0.33 over 1 represent?
Why (d): The textbook says the 0.33 over 1 is technically the net working capital. (a) is wrong: The current ratio has nothing to do with profit. (b) is wrong: Margins on stock are a drawing power concept. (c) is wrong: NWC is not a cash requirement.
Question 5 of 5
What is the formula for the raw material holding ratio (in days)?
Why (a): It shows how many days' consumption of raw material is held; multiplying by 12 instead gives months. (b) is wrong: Raw materials relate to consumption, not sales. (c) is wrong: That gives a turnover in times. (d) is wrong: The base is consumption and the result here is in months.
0 of 5 answered.
Traps in this unit
Audited does not mean analysed.
Restricted deposits are not cash.
Machinery purchase is investing, not financing.
Practise all 193 questions on Unit 18. The free CAIIB demo opens Units 1–2 of every paper with full explanations; the ABM Online Mock Centre unlocks all 4,600+ ABM questions, the full-length papers with caselets and key-ins, module mocks and Smart Revision for 18 months (₹1,499).
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