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JAIIB AFM Unit 20 — Ratio Analysis: Free MCQs with Explanations

By Swarnakshi Jha (ex-banker) · Updated 20 September 2026 · Paper 3 of the November 2026 cycle (28 November 2026)

This page is a free slice of our JAIIB AFM question bank for Unit 20 — Ratio Analysis (Module C — Financial Management). The Mock Centre holds 44 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five of those questions to try, and the traps that cost marks.

AFM · Module C44 MCQs in the Mock Centre5 free belowPaper on 28 November 2026

Key facts examiners test from this unit

  1. Ratio = arithmetic relationship between two accounting figures; classifications: traditional (P&L / balance-sheet / composite) and functional (liquidity / leverage / turnover / profitability).
  2. ROI = profit ÷ capital employed; EPS = net profit ÷ number of equity shares (50,000 ÷ 5,000 = Rs.10); P/E = market price ÷ EPS — the per-share ratios cure ROI's aggregate blindness.
  3. GP ratio = GP ÷ net sales × 100 (2L ÷ 10L = 20%).

5 free practice questions — tap an option

Five basic questions from this unit. Answers lock on the first tap, exactly as in the exam, and a short explanation opens underneath. The Mock Centre adds the moderate and tough questions, why every other option is wrong, the concept capsule and the exam tip — with your score and revision dates tracked.

Question 1 of 5
An accounting ratio is:
Why (b): A ratio is a mathematical relationship between two RELATED accounting figures — related, so the comparison teaches something (profit to sales, debt to equity).
Question 2 of 5
The Current Ratio formula is:
Why (a): Current ratio = Current Assets ÷ Current Liabilities — cover for near-term obligations.
Question 3 of 5
Turnover (activity) ratios measure:
Why (b): Activity ratios (stock turnover, debtors turnover, DCP) show how effectively assets are being worked — higher rotation, better utilisation.
Question 4 of 5
Which ratio pairs BOTH statements (P&L and Balance Sheet), making it a composite ratio?
Why (c): Debtors turnover divides credit SALES (P&L) by average DEBTORS (Balance Sheet) — an inter-statement composite.
Question 5 of 5
Which limitation of ratio analysis do PRICE-LEVEL CHANGES create?
Why (a): Inflation makes a 2020 rupee and a 2026 rupee different measuring rods — trend comparisons mislead unless adjusted.
0 of 5 answered.

Traps in this unit

Confusable AConfusable BThe difference
Current ratioQuick ratioIncludes inventory (2:1 ideal) vs excludes it (1:1 ideal)
ROIEPSAggregate return vs per-share earnings
Practise all 44 questions on Unit 20. The free demo opens a slice of every subject with the same explanations; the AFM Online-only pass unlocks all 1,681 AFM questions, the full and module mocks, Smart Revision and the Readiness Score for one year (₹1,299). Not sure where you stand? Take the free 10-question test first.
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← Unit 19: Financial Management - An Overview · Unit 21: Financial Mathematics - Calculation of Interest and Annuities → · All AFM units · JAIIB 2026 guide

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Independent study aid — not affiliated with, endorsed by, or sponsored by the Indian Institute of Banking & Finance (IIBF). Exam pattern, dates, fees and passing criteria are set by IIBF — always confirm the current rules at iibf.org.in. Regulatory figures verified as of September 2026; verify from official sources before relying on them in practice.