Glossary of Terms

DECEMBER 11, 2015

AS PUBLISHED IN: MOODY'S ANALYTICS RISK PERSPECTIVES | RISK MANAGEMENT: THE DECADE AHEAD | VOLUME VI |
JANUARY 2016
STRESS TESTING
ABS
Asset-Backed Securities
ALLL
Allowance for Loan and Lease Losses
ALM
Asset and Liability Management
BaFin
German Federal Financial Supervisory Authority
BCBS
Basel Committee on Banking Supervision
BHC
Bank Holding Company
BIS
Bank for International Settlement
C&I
Commercial and Industrial
CCAR
Comprehensive Capital Analysis and Review
CCM
Composite Capital Measure
CDS
Credit Default Swap
CECL
Current Expected Credit Loss
CFPB
Consumer Financial Protection Bureau
CFO
Chief Financial Officer
CLAR
Comprehensive Liquidity Assessment Review
CRE
Commercial Real Estate
CRO
Chief Risk Officer
D2C
Direct-to-Consumer
DCAT
Dynamic Capital Adequacy Testing
DFAST
Dodd-Frank Act Stress Test
EAD
Exposure at Default
EBA
European Banking Authority
EC
Economic Capital
ECB
European Central Bank
EDF
Expected Default Frequency
EL
Expected Loss
ERISA
Employee Retirement Income Security Act
ERM
Enterprise Risk Management
ETF
Exchange-Traded Funds
FASB
Financial Accounting Standards Board
FCA
Financial Conduct Authority
FDIC
Federal Deposit Insurance Corporation
FRS
Federal Reserve System
FSA
Financial Services Authority
FSB
Financial Stability Board
FTP
Funds Transfer Pricing
GAAP
Generally Accepted Accounting Principles
GDP
Gross Domestic Product
GSE
Government-Sponsored Enterprises
G-SIB
Global Systematically Important Bank
G-SIFI
Global Systemically Important Financial Institution
HLA
Higher Loss Absorbency
HQLA
High-Quality Liquid Assets
IAS 39
International Accounting Standard 39
ICAAP
Internal Capital Adequacy Assessment Process
ICAS
Individual Capital Adequacy Standards
IFRS 9
International Financial Reporting Standard 9
IRA
Individual Retirement Account
IRB
Internal Ratings-Based
IRRBB
Interest Rate Risk in Banking Book
KPI
Key Performance Indicator
LCR
Liquidity Coverage Ratio
LGD
Loss Given Default
LTV
Loan-to-Value
M&A
Mergers and Acquisitions
MiFID
Markets in Financial Instruments Directive
MIS
Management Information System
NFC
Near-Field Communication
NPL
Non-Performing Loan
NSFR
Net Stable Funding Ratio
ORSA
Own Risk Solvency Assessment
P2P
Peer-to-peer
PCA
Principal Component Analysis
PD
Probability of Default
PPNR
Pre-Provision Net Revenue
PRA
Prudential Regulation Authority (UK)
PRIP
Packaged Retail Investment Products
QE
Quantitative Easing
RAF
Risk Appetite Framework
RDR
Retail Distribution Review
RegC
Regulatory Capital
Risk ID
Risk Identification Process
RWA
Risk-Weighted Asset
RWC
Risk-Weighted Capital
RORAC
Return on Risk-Adjusted Capital
SA-CCR
Standardized Approach to Counterparty Credit Risk
SCAP
Supervisory Capital Assessment Program
SIFI
Systemically Important Financial Institution
SPD
Summary Plan Document
SSFA
Simplified Supervisory Formula Approach
TLAC
Total Loss Absorbing Capacity
VaR
Value-at-Risk
 Important formulae Advance Bank Management CAIIB

A dvance Bank Management that is ABM is one of the important subject

in the Banking Exam Certification of CAIIB and most of the candidates

sought ADVANCE BANK MANAGEMENT to be one of the toughest exam of
the CAIIB. Thought this is not true by avoiding these 10 mistakes in
CAIIB Exam we can get through the ABM exam too.

Here are some formulae of CAIIB which will make ABM numerical a bit easier
for the candidates.

1. Net worth =
A) Excess of assets over liabilities( for individual)
B) Capitals + Reserve (for company)
2. Networking Capital =
A) Total of current asset-Total of current liability
B) Difference b/w long term source and long term use
3. Debt Equity ratio (DER) =
A) Term loan/Tangible networth
B) Long term debt/Share holders equity
C) Total liability/Share holders equity
4. DSCR =
A) Total cash flow before interest/Total repayment obligation
B) ( Net profit + Depriciation + Interest on long term liability )/ (Instalment
+ interest on
long term liability)
5. Return on asset = Operating profit/(Total asset-intangible asset)
6. ICR(Interest coverage ratio )= EBIT / Interest on long term
borrowings
Where EBIT = Earning before interest and taxes
7.Total outside liabilities= current liability + long term liability
8. Total tangible asset = CA+ Fixed asset+ other non currrent asset
9. Tangible networth = Networth – intangible asset
10. Current Ratio = CA:CL
11. Quick Ratio = ( CA – Inventories )/ CL
12. Quick asset = CA – Inventory
13. Heads come under current asset→
▼ Inventory
▼ Preliminary Expenses/prepaid expenses
▼ Cash and banj balance
▼ Sundry debtors/Bill reicivables
▼ Investment in qouted securities such as Govt sec , FDR
♧ Heads that come under liabilities
▼ Sundry creditors/Bills payable
▼ Installment of term loan payable in a year
▼ prefrential capital
▼ Provisions to paid in a year
▼ WCTL( Working capital term loan )
14. Narrow Money ( M1)= Currency with public + Demand deposits with
banking system
+ ‘ other deposits with RBI
15. M2=M1+ Savings deposits of post office savings banks
16. M3= M1+ Time deposits with banking system
17. M4= M3+ All deposits with post office savings banks( Excluding National
savings
certificate )
18. Inflation = ( Price index in current year- Price index in base year)*100
19. GDP = C+I+G+(X-M)
¤ GNP = GDP+ NR( net income from assets abroad( net income receipts ))
20. GDP at factor cost = GDP at market price -( Indirect taxes- Subsidies )
21. Total revenue receipts = Net tax revenue + Total Non-Tax revenue
22. Present value(PV)= Discount factor × Cn
23. Cash flow for n period = Cn= PV(1+r)^n where r = interest rate
24. Discount factor = 1/(1+r)^n
Where r = int rate , n = period in year
25. Effective int rate (EIR)= (1+r/n)^n -1
26.Current yield on coupon = (coupon or nominal yield)× 100 / (current
market price of coupon)
27. Rate of return = (coupon+ price change)/investment
28. YTM = [ C+ ( A-P)/n ] × 100 / ( A + P)/2
Where C- Coupon
A- Face value/ Maturity value of bond
P- Price paid for bond
n – term to maturity
29.Yield on discounted instuments :- The issue price of a discounted
instrument can be
calculated by using formula
D = F / 1+ { (r×n)/36500 }
Where D = Discounted value of the instrument
F = Maturity Value
r = Effective rate of return per annum
n = Tenure of the investment in days.
30.conversely to find out the yield from a discounted instrument, the
following formula
can be derived from the above one
r = ( F- D ) / D × 365/ n × 100
Where D = Discounted value of the instrument
F = Maturity value
r = Effective rate of interest per annum
n = Tenure of the instrument ( in days )
31. When you invest in a bond , you receive a regular coupon
payment. As bond prices
change , you may also make a capital gain or loss.
The Rate of Return can be calculated using
ROR = ( Coupon income + Price change ) ÷ Investment
32. Zero coupan bond is a long term bond that pays no interest. This
bond is sold at
discount. This can be calculated by using formula
ZC = FV / ( 1+r )^n
Where FV = Face value of bond
r = return required
n = Maturity period
33. Future Value of an annuity(End of period) = A/r × [( 1+r)^n – 1]
34. Present Value of an annuity ( End of period )= A/r ×[ ( 1+r)^n-1]
/(1+r)^n
35. FV ( at the beginning )= A/r×(1+r)[( 1+r)^n -1]
36. ¤ Value of Bond = PV( Coupon)+ PV( Face value )
¤ PV( A,r,n)+ PV(Face value)
37. Standard error of the mean= � x = � / sqrt ( n)
38.PV of perpertuity = A/r
Where A = Annuity
r = int rate
39. If S is the sample space & E is the even of occurance
Then Probablity of occurance of even E for n time = P(E) = n(E)/n(S)
40. Equation of estamating of straight line
Y^ = a+bx
Where Y^ = estimating value of dependent variable
x = is an independent variable
a = y intercept when x=0
b = the slop of trend line
41. If x and Y are the two variables then corrleation of cofficient ‘r‘
r = cov{(x,y)/▲x▲y}
42. Return on capital empolyed (ROCE)=( Net profit after tax × 100)/
total capital
empolyed

Ratio Analysis – Ratios Formulae

May 19 2019 Written By: EduPristine

Ratio analysis—the foundation of fundamental analysis—helps

to gain a deeper insight into the financial health and the current
and probable performance of the company being studied. For
this insight, the analysts use the quantitative method where the
information recorded in the company’s financial statements are
compared and analyzed. And there are certain formulae that
are used for the same.
In this blog, we shall discuss various Ratio Analysis, the various
Ratios Formulae, and their importance. We would look into the
classification of ratios, where we have explained the
importance of using various ratios and the formulae to know
how they are calculated. To help you learn better and for the
easy revisions later, you are provided here with the formulae for
the ratios that we have discussed in this series. Let’s move on
and look into Ratio Analysis – Ratios Formulae.

Liquidity Ratios
Also known as Solvency Ratios, and as the name indicates, it
focuses on a company’s current assets and liabilities to assess
if it can pay the short-term debts. The three common liquidity
ratios used are current ratio, quick ratio, and burn rate. Among
the three, current ratio comes in handy to analyze the liquidity
and solvency of the start-ups.

S. No. RATIOS FORMULAS

1 Current Ratio Current Assets/Current Liabilities

2 Quick Ratio Liquid Assets/Current Liabilities

3 Absolute Liquid Ratio Absolute Liquid Assets/Current Liabilities

Profitability Ratios
These ratios analyze another key aspect of a company and that
is how it uses its assets and how effectively it generates the
profit from the assets and equities. This also then gives the
analyst information on the effectiveness of the use of the
company’s operations.

S. RATIOS FORMULAS
No.

1 Gross Profit Ratio Gross Profit/Net Sales X 100

2 Operating Cost Ratio Operating Cost/Net Sales X 100

3 Operating Profit ratio Operating Profit/Net Sales X 100

4 Net Profit Ratio Operating Profit/Net Sales X 100

5 Return on Investment Net Profit After Interest And Taxes/ Shareholders Funds or
Ratio Investments X 100

6 Return on Capital Net Profit after Taxes/ Gross Capital Employed X 100
Employed Ratio
7 Earnings Per Share Ratio Net Profit After Tax & Preference Dividend /No of Equity
Shares

8 Dividend Pay Out Ratio Dividend Per Equity Share/Earning Per Equity Share X 100

9 Earning Per Equity Share Net Profit after Tax & Preference Dividend / No. of Equity
Share

10 Dividend Yield Ratio Dividend Per Share/ Market Value Per Share X 100

11 Price Earnings Ratio Market Price Per Share Equity Share/ Earning Per Share X
100

12 Net Profit to Net Worth Net Profit after Taxes / Shareholders Net Worth X 100
Ratio

Working Capital Ratios

Like the Liquidity ratios, it also analyses if the company can pay
off the current debts or liabilities using the current assets. This
ratio is crucial for the creditors to establish the liquidity of a
company, and how quickly a company converts its assets to
bring in cash for resolving the debts.
S. RATIOS FORMULAS
No.

1 Inventory Ratio Net Sales / Inventory

2 Debtors Turnover Ratio Total Sales / Account Receivables

3 Debt Collection Ratio Receivables x Months or days in a year / Net Credit Sales
for the year

4 Creditors Turnover Ratio Net Credit Purchases / Average Accounts Payable

5 Average Payment Period Average Trade Creditors / Net Credit Purchases X 100

6 Working Capital Turnover Net Sales / Working Capital

Ratio

7 Fixed Assets Turnover Cost of goods Sold / Total Fixed Assets

Ratio
8 Capital Turnover Ratio Cost of Sales / Capital Employed

Capital Structure Ratios

Each firm or company has capital or funds to finance its
operations. These ratios, i.e., the Capital Structure Ratios,
analyze how structurally a firm uses the capital or funds.

S. No. RATIOS FORMULAS

1 Debt Equity Ratio Total Long Term Debts / Shareholders Fund

2 Proprietary Ratio Shareholders Fund/ Total Assets

3 Capital Gearing ratio Equity Share Capital / Fixed Interest Bearing Funds

4 Debt Service Ratio Net profit Before Interest & Taxes / Fixed Interest Charges

Overall Profitability Ratio

True to its name, these ratios measure how profitable a
particular firm or company is, or how it can turn its assets and
capital into profits for future use.
S. No. RATIOS FORMULAS

1 Overall Profit Ability Ratio Net Profit / Total Assets

Hope the knowledge that we shared on the Ratio Analysis –

Ratios Formulae topic helped you understand these!
Get FREE Study Material & Career Counseling Session from Course Counselors!

Ask from Experts!