The worked question on this page is original educational practice. It is not represented as a question from an official previous-year examination paper.
01 / UNDERSTANDING
Review the question
Write an original profitable-but-cash-constrained business case. Require explanation of the receivable movement and timing; authentic past-paper analysis should record the stated accounting assumptions before comparing answers. Give an original case with growing receivables, unchanged inventory and stated supplier payments. Ask what can explain the cash pressure and what remains uncertain. Require a link to collection timing instead of automatically treating strong sales as proof of cash generation or weak cash as proof of fictional revenue.
02 / UNDERSTANDING
The concept in context
Working-capital movements and non-cash items explain part of that bridge. Rising receivables can absorb cash even when sales grow, while depreciation reduces profit without a fresh period cash payment. The interpretation should examine the actual causes rather than automatically labelling every profit-cash difference a warning sign.
03 / UNDERSTANDING
A worked learning case
A wholesaler reports a profitable quarter after making many credit sales, but customers have not yet settled invoices. Supplier payments still fall due. The banker compares receivable movements and cash collections with the income statement, asking whether the gap is a temporary sales-cycle effect or evidence of weakening collection discipline.
ORIGINAL EDUCATIONAL PRACTICE
Try it before you check.
Can growing credit sales increase profit before improving cash receipts?
Show the answer and reasoning
Yes.
A sale may be recognised before collection under the applicable accounting approach. Until customers pay, the amount can remain tied up in receivables rather than available cash. The analyst should inspect collection timing, outstanding balances and the working-capital cycle when reconciling reported profitability with the business's payment capacity.
Two traps to watch for.
- Treating recognised credit revenue as cash already received.
- Assuming every profit-cash difference has the same adverse cause.
YOUR TOPIC-SPECIFIC LEARNING MAP
Learn from the attempt
Identify which sales remain uncollected at quarter-end.
Bridge the profit figure using receivables and non-cash items.
Compare the cash gap with actual supplier-payment obligations.
Explain the idea, apply it to a new situation, then check what changed in your reasoning.
BANKERS TUTORIAL · SOURCE NOTES
Keep the source alongside your notes.
Official links provide subject context and authoritative reference material. This guide’s explanation, scenario and question are original Bankers Tutorial learning content.
- iibf.org.in https://iibf.org.in/jaiib-junior-associate-IIBF
- iibf.org.in https://iibf.org.in/documents/RulesSyllabus/2026/FlagshipCourses/21%20-%20JAIIB-Final_Exam_24.07.25_Final_23.02.2026.pdf
- www.rbi.org.in https://www.rbi.org.in/commonperson/English/Scripts/PressReleases.aspx?Id=2123
For JAIIB preparation, check the current official notice before relying on changing dates, rules or examination requirements.
