Advanced Bank Management (ABM)

Q1. In business cycle, what follows after depression ......

(a)Boom
(b)Depression
(c)Recession
(d)Recovery

Q2. A situation where an employee feels that there is decrease in his level of
responsibility or his skill is not being fully utilised is called ......
(a)Role Isolation
(b)Role Erosion
(c)Role Inadequacy
(d)Role Expectation Conflict
Q3. For external credit rating, banks depend on ......
(a)Retired experienced staff of the bank
(b)Banking consultants
(c)Rating agencies
(d)None of the above

Q4. Business Cycle is also called as ......

(a)Economic cycle
(b)Entrepreneur cycle
(c)Social cycle
(d)Vicious cycle
Ans (1-4)

1. b,
2.d,
3.c,
4.a,
Directions: A firm has a capital of Rs. 400, Term Loan
400, Sundry Creditors 130, Stock 224 cash 62,
Debtors 46 and Fixed Assets 868.
Answer following questions
Q5. If profit are 67, Return on equity would be ......
(a) 16.75%
(b) 15.50%
(c) 10.00%
(d) 20.00%

Q6. If Sales are 920 the Debt turnover ratio would be ......
(a)10 times
(b)20 times
(c)0.5 month
(d) 1 month
Q.7 Its Debt Equity Ratio
(a) 0.6:1
(b) 0.9:1
(c) 1.1:1
(d) 2:1

Q8. Net worth and tangible net worth is ......

(a) 270, 400
(b) 270, 624
(c) 670, 670
(d) 624, 670
Q9. The quick ratio would be ......
(a) 1:1
(b) 0.83:1
(c) 0.65:1
(d) 0.44:1

Q10. Current ratio is ......

(a) 1.25:1
(b) 1.85:1
(c) 2.1:1
(d) 2.55:1
5. c
Explanations:
Return on Equity=Net Income/Share holders equity*100
= 67/670*100 = 10%

6. b
Explanations:
Debt Turnover Ratio = Net Credit Sales / Average Debtors
= 920/46 = 20 times

7. a
Explanations:
Debt equity ratio=total long term debt/shareholder fund (tangible networth)
=400/670 =0.6:1
8. c
Explanations:
Net worth=total assets-Total liabilities
= 1200-530=670
Tangible networth = share capital + reserve
= 400+270=670

9. b
Explanations
Current Ratio= Current Assets/Current Liabilities
= 332/130 = 2.55:1

10. d
Explanations
Quick Ratio = Current assets- Stock /Current Liabilities
= 332-224/130
= 108/130 = 0.83:1
Directions: As on end of previous financial year 2020-21, XYZ Bank has :

Total Advances Rs. 160000 Cr

ANBC (Adjusted Net Bank Credit) Rs. 150000 Cr

Agriculture Advances Rs. 27000 Cr

MSE Advances Rs. 10000 Cr

Weaker Section Advances Rs. 17000 Cr

Total Priority Sector Advances Rs. 58000 Cr

Q11. Whether the Bank has achieved the target for Agriculture
Advances?
(a)Yes. The Bank has just achieved the target
(b)Yes. the Bank has exceeded the target
(c)No. The Bank has defaulted in achieving the target
(d)No such target for Agriculture Advances
Q12. Whether the Bank has achieved the target for MSE Advances?
(a)Yes. The Bank has just achieved the target
(b)Yes. the Bank has exceeded the target
(c)No. The Bank has defaulted in achieving the target
(d)No such target for Agriculture Advances

Q13. Whether the Bank has achieved the target for Weaker Section Advances?
(a)Yes. The Bank has just achieved the target
(b)Yes. the Bank has exceeded the target
(c)No. The Bank has defaulted in achieving the target
(d)No such target for Agriculture Advances

Q14. Whether the Bank has achieved the target for Priority Sector Advances?
(a)Yes. The Bank has just achieved the target
(b)Yes. the Bank has exceeded the target
(c)No. The Bank has defaulted in achieving the target
(d)No such target for Agriculture Advances
Ans (11-14)

1.a,
2.d,
3.b,
4.c,
Q15. Which of the following is also known as Gearing Ratio?
(a)Current ratio
(b)Debt Equity Ratio
(c)Debt Service Coverage Ratio
(d)Turnover Ratio

Q16. Purchase of goods on credit _____ DE ratio

(a)Increase
(b)Decrease
(c)No change
(d)None of the above
15. Ans.(b)

16. Ans.(c)
Explanations:
The change in the ratio depends upon the original ratio. Let us
assume that external funds are Rs. 5,00,000 and internal
funds are Rs. 10,00,000. Now we will analyse the effect of
given transactions on debt equity ratio.
This will also leave the ratio unchanged as purchase of goods
on credit neither affect Debt nor equity.
Directions: The debt equity ratio of X Ltd. is 0.5 : 1. Which of the following would
increase/decrease or not change the debt equity ratio?
Q17. Redemption of debentures
(a)Increase
(b)Decrease
(c)No change
(d)None of the above

Q18. Sale of goods on cash basis

(a)Increase
(b)Decrease
(c)No change
(d)None of the above
17. Ans.(b)
Explanations:
Redemption of debentures will decrease the debit-equity ratio.

18. Ans.(c)
Explanations:
The change in the ratio depends upon the original ratio. Let us assume that external funds are
Rs. 5,00,000 and internal funds are Rs. 10,00,000. Now we will analyse the effect of given
transactions on debt equity ratio.
This will also leave the ratio unchanged as sale of goods on cash basis neither affect Debt nor
equity.
Q19.Further issue of equity shares DE ratio
(a)Increase
(b)Decrease
(c)No change
(d)None of the above

Q20.Cash received from debtors__ DE ratio

(a)Increase
(b)Decrease
(c)No change
(d)None of the above
19. Ans.(b) Explanations:
The change in the ratio depends upon the original ratio. Let us assume that external
funds are Rs.
5,00,000 and internal funds are Rs. 10,00,000. Now we will analyse the effect of given
transactions on debt equity ratio.
Assume that Rs. 1,00,000 worth of equity shares are issued.
This will increase the internal funds to Rs. 11,00,000. The
new ratio will be 0.45 : 1 (5,00,000/11,00,000).
Thus, it is clear that further issue of equity shares decreases the debt-equity ratio.

20.Ans.(c) Explanations:
The change in the ratio depends upon the original ratio. Let us assume that
external funds are Rs. 5,00,000 and internal funds are Rs. 10,00,000. Now we
will analyse the effect of given transactions on debt equity ratio.
Cash received from debtors will leave the internal and external funds unchanged
as this will only affect the composition of current assets.
Hence, the debt-equity ratio will remain unchanged.
Q27. For rediscounting commercial instruments, the discount rate used by RBI is called ......
(a)Base Rate
(b)Bank Rate
(c)Repo Rate
(d)Reverse Repo

Q28. As per Achievement Motivation Theory, needs are ......

(i)Achievement,
(ii)Power,
(iii)Affiliation
(a)Only (i) and (ii)
(b)Only (i) and (iii)
(c)Only (ii) and (iii)
(d)(i), (ii) and (iii)

Q29. Market equilibrium comes at the price at which commodity demanded equals to quantity ......
(i)Produced, (ii) Supplied
(a)Only (i)
(b)Only (ii)
(c)Either (i) or (ii)
(d)Both (i) and (ii)
27.Ans.(b),
28.Ans.(d),
29.Ans.(b)
Directions: Given the values for the samples 60.25, 62.38, 65.32, 61.41, and 63.23 of a population.

Q30.Calculate Mean
(a) 56.12
(b) 61.52
(c) 62.51
(d) 65.12
Q31. Calculate standard deviation
(a) 1.72
(b) 1.92
(c) 2.19
(d) 2.37

Q32. Calculate coefficient of variance

(a) 0.03071
(b) 0.04071
(c) 0.05071
(d) 0.06071
30. Ans. (b)

31. Ans.(c) Explanations:

Mean = (60.25 + 62.38 + 65.32 + 61.41 + 63.23)/5
= 312.59/5
= 62.51

32. Ans.(b) Explanations:

Standard deviation
= √( (1/(5 - 1)) * (60.25 - 62.51799)2 + (62.38 - 62.51799)2 + (65.32 - 62.51799)2 +
62.51799)2 + (63.23 - 62.51799)2)
= √( (1/4) * (-2.267992 + -0.137989992 + 2.802012 + -1.107992 + 0.712012))
= √( (1/4) * (5.14377 + 0.01904 + 7.85126 + 1.22764 + 0.50695))
= √ 3.68716
σ = 1.92
Directions (33-36): The Concept of Johari Window is related to self-awareness.
The authors Luft and Ingham refer two dimensions i.e how much of one’s behavior is known to him
and
how much he feels others known to him.
These two dimensions give four windows (Open, Blind, Hidden and dark). Based on
this concept. Answer the following questions.

Q33. Each of the four windows relate to specific situation. Which of these is matched?
(a)Open –Known to others but not known to self
(b)Blind –Unknown to self and others
(c)Hidden –Known to self and unknown to others.
(d)Dark –known to self and others

Q34. There is need to enhance the open area. If the actual situation is “Hidden” how the open
area can
be increased and hidden area reduced.
(a)By receiving feedback from others
(b)By self disclosure.
(c)By sharing
(d)All he above
Q35. There is need to enhance the open area. If the actual situation is “Blind” how the open area
can be
increased and hidden area reduced.
(a)By receiving feedback from others.
(b)By self disclosure
(c)By sharing
(d)All he above

Q36. There is need to enhance the open area. If the actual situation is “Dark” how the open
area can be
increased and hidden area reduced.
(a)By receiving feedback from others
(b)By self disclosure.
(c)By sharing.
(d)All the above
33.Ans.(c)
34.Ans.(b)
35.Ans.(a)
36. Ans.(c)
Directions (17-20): Answer the following questions based on the above information.
Year Nominal GDP GDP Deflator
2019-20 2500 120
2020-21 3200 145
Q37. If GDP Deflator in 2018-19 is 100, then Real GDP of 2020-21 ......
(a) 2207
(b) 2215.5
(c) 2214.7
(d) 2214.6
Q38. If GDP Deflator in 2018-19 is 100, then real GDP of 2019-20 ......
(a) 2083
(b) 2038
(c) 2112
(d) 1961

Q39. Growth Rate of Real GDP from 2019-20 ......

(a) 6.12
(b) 5.95
(c) 5.20
(d) 6.95
37. Ans.(c) Explanations:
Real GDP = Nominal GDP / deflater
=3200/145*100
=2206.89
=2207
38. Ans.(a) Explanations:
Real GDP = Nominal GDP / deflator
=2500/120*100
=2083.33
=2083

39. Ans.(b) Explanations:

% change=New value-old value/old value*100
=Real GDP (2020-21)-Real GDP (2019-20)/Real GDP (2019- 2020)
=2207-2083/2083*100
=124/2083*100
=0.0595*100
=5.95
 Q40. Inflation Rate in 2020-21 in relation to 2019-20 ......
(a) 19.61
(b) 20.83
(c) 20.38
(d) 21.12

Q41. In which way Yield to Maturity and Interest Rates are related?
(a)Direct
(b)Indirect
(c)Relative
(d)No relation

Q42. Bank has to open a CC Account of Mr. Raj. He also needs term loans for construction of shed (Term Loan 1)
and for purchase of machinery (Term Loan 1). He also needs to negotiate a LC. He requests to open the CC Account
and LC first. Manager had explained him the sequence of opening the Accounts. WEhat will be the correct
sequence?
(a)LC, CC, TL1, TL2
(b)CC, LC, TL1, TL2
(c)TL1, TL2, LC, CC
(d)TL1, TL2, CC, LC
40. Ans.(b) Explanations:
Inflation rate (2020-21) = GDP Deflator (2020-21)-GDP deflator(2019-20)/GDP
deflator(2019- 20)*100
=145-120/120*100
=25/120*100
=0.2083*100
=20.83%
41. Ans.(a)
42. Ans.(c)
Directions (43-45)
Given,
1.Consumptions - Rs. 62000
2.Gross investment - Rs. 46000
3.Govt spending - Rs. 14000
4.Export - Rs. 96000
5.Import - Rs. 72000
6.Indirect Taxes - Rs. 15000
7.Subsidies(on production and import) - RS. 8000
8.Compensation of employee - Rs. 1000
9.Property Income - Rs. 1000 7,8,9 - Net receivable from aboard
10.Total capital gains from overseas investment - Rs. 18000
11.Income earned by foreign national domestically - Rs. 8000

Q43. Calculate GDP

(a) Rs. 139000
(b) Rs. 146000
(c) Rs. 156000
(d) Rs. 165000
Q44. Calculate GDP at factor cost (a) Rs. 139000
(b) Rs. 146000
(c) Rs. 156000
(d) Rs. 165000

Q45. Calculate GNP

(a) Rs. 139000
(b) Rs. 146000
(c) Rs. 156000
(d) Rs. 165000
Directions (46):
1.Revenue deficit (RD) = 3% of GDP
2.Grants for capital formation = 1.8% of GDP
3.Primary deficit (PD) = 1.2%
4.Non-plan expenditure = 1.5%

Q46. In the above scenario, effective revenue deficit (ERD) will be: (a) 1.2%
(b) 1.5%
(c) 1.8%
(d) cannot be calculated
43. Ans.(b) Explanations:
GDP = Consumption + Gross investment + Government spending +
(Exports - Imports) GDP = C+I+G+(X-M)
= 62000+46000+14000+(96000-72000)
= 122000+24000
= 146000

44. Ans.(a) Explanations:

GDP at factor rate
= GDP-(Indirect taxes-subsidies)
= 146000-(15000-8000)
= 146000-7000
= 139000
45. Ans.(c) Explanations:
GNP=GDP+NR(total capital gains from Overseas investment-income earned by foreign
national domestically)
= 146000 + (18000-8000)
= 146000 + 10000
= 156000

46. Ans.(a) Explanations:

ERD = RD –Grants for capital formation
=3% –1.8%
= 1.2%
Directions (47-52): If Receipts and Expenditures of a Government as per Budget 2020-21 are as given below
1.Revenue Receipts - 1374203
2.Tax Revenue - 1101372
3.Non-Tax Revenue - 272831
4.Capital Receipts - 600991
5.Recovery of Loans - 17630
6.Other Receipts - 47743
7.Borrowings and Other Liabilitites - 535618
8.Expenditure On Revenue Account of which - 1690584
9.Interest Payments - 480714
10.Grants in Aid for creation of capital assets - 165733
11.Expenditure On Capital Account - 284610 Find:

Q47. Total Receipts

(a) 1374203
(b) 1690584
(c) 1975194
(d) 2075416
Q48. Total Expenditure
(a) 1374203
(b) 1690584
(c) 1975194
(d) 2075416

Q49. Revenue Deficit

(a) 54904
(b) 150648
(c) 316381
(d) 535618

Q50. Effective Revenue Deficit

(a) 54904
(b) 150648
(c) 316381
(d) 535618
Q51. Fiscal deficit
(a) 54904
(b) 150648
(c) 316381
(d) 535618

Q52. Primary Deficit

(a) 54904
(b) 150648
(c) 316381
(d) 535618
Q53. Bills Purchased/Discounted/Negotiated under LC are treated as an exposure on .....
(a)The Applicant of LC
(b)The Exporter of Goods
(c)LC Negotiating Bank
(d)LC Opening Bank
47. Ans.(c)
Explanations:
Total Receipts = Revenue Receipts + Capital Receipts
= 1374203 + 600991 = 1975194

48. Ans.(c) Explanations:

Total Expenditure = Revenue Expenditure + Capital Expenditure
= 1690584 + 284610 = 1975194

49. Ans.(c) Explanations:

Revenue Deficit = Revenue Expenditure - Revenue Receipts
= 1690584 –1374203 = 316381

50. Ans.(b) Explanation:

Effective Revenue Deficit = Revenue Deficit - Grants in Aid for creation of capital assets
= 316381 –165733 = 150648
51. Ans.(d) Explanations:
Fiscal deficit = Total Expenditure - Total Receipts net of Borrowings and other
liabilities (Revenue Receipts + Recovery of Loans + Other Receipts)
= 1975194 - (1374203 + 17630 + 47743)
= 535618

52. Ans.(a) Explanations:

Primary Deficit = Fiscal deficit - Interest payments
= 535618 - 480714
= 54904

53. Ans.(d)