Working Capital Position of Siddhartha Bank

Working capital position of Siddhartha Bank Limited
CHAPTER ONE 1. INTRODUCTION

1.1 Background of study
It is very difficult to give definition to any particular subject matter. Different scholars have presented the definition or meaning of the same subject matter in different ways. In the same way the definition of bank given by different scholars also varies. Though there is no universal definition of bank, the definitions of the writers are somehow similar to each others. Bank is an institution established by law, which deals with money and credit. In a common sense, an institution involved in monetary transaction is called bank. So, Bank is the financial institution, which is especially related with economic transaction. It is an important financial institution in economy and essential business in the world. It must be identified by the role and services, they performed in the economy. Banks work as credit creature, money maker, currency exchanger, transfer etc in the country. Today, Banks are playing the changes roles in the modern economy and the function of their principal competitors like finance company, insurance, insurance company, brokerage firm, cooperative institution etc are also trying to be played the similar roles and function. So, Bankers are challenging these non- bank competitors by lobbying for expanded authority. The meaning of bank can be made clear from the following definition. According to Nepal Commercial Bank Act 2031 B.S. A commercial bank refers to such type of bank which deals in money exchange accepting deposits, advancing loans and commercial transactions except specific banking related to cooperatives, agriculture & industry and other objectives. According to professor Kinsley, Bank is an establishment, which awakes to individual such as advances of money as may be required and safety made to and to which individual withdrew money when and required by them for use.. According to U.S. Law, Any institution offering deposits subject to withdraw on demand and making loan of a commercial or business nature is a bank. Bank can, therefore, be definition which renders a lost of financial services besides taking deposits and giving loan. Bank provides other much more important services to its clients and also the Operation of bank, today, is not confined with in the boundary of a nation. It has spreader the function in different foreign country.
Name, Year of Establishment and Head office of Existing Commercial Banks of Nepal Table 1.1
S.No . 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Nepal Bank Ltd. Rastriya Banijya Bank Nabil Bank Ltd. Nepal Investment Bank Ltd. Ltd. Himalayan Bank Ltd. Nepal SBI Bank Ltd. Nepal Bangladesh Bank Ltd. Everest Bank Ltd. Bank of Kathmandu Ltd. Bank Ltd. Lumbini Bank Ltd. NIC Bank Ltd. Machhapuchree Bank Ltd. Citizens Bank International Ltd. Sunrise Bank Ltd. Kumari Bank Ltd. Laxmi Bank Ltd. Siddhartha Bank Ltd. Agriculture Development Bank Global IME Bank Ltd. Prime commercial Bank Ltd. Bank of Asia Nepal Ltd. Grand Bank Nepal Ltd. NMB Bank Ltd. Kist Bank Ltd. Janata Bank Nepal Ltd. Mega Bank Nepal Ltd. Name Year of Estd. (AD) 1937/11/15. 1966/01/23 1984/07/16. 1986/02/27. Head Office Kathmandu,Dharmapath. Kathmandu,Singhadurbarplaza. Kathmandu,kantipath. Kathmandu,Durbarmarg. Kathmandu,Nayabaneshwor. Kathmandu, Thamel. Kathmandu,Hattisar. Kathmandu,Nayabaneshwor. Kathmandu,Lazimpat. Kathmandu,Kamaladi. Rupandehi,Siddharthanagar. Chitwan,Narayangadh. Biratnagar,Morang. Pokhara,prithivichowk. Kathmandu,Kamaladi. Kathmandu,Gairidhara. Kathmandu,Durbarmarg. Birgunj,Adarshanagar. Kathmandu,kamaladi. Kathmandu,Ramshahpath Birjung, Parsa. Kathmandu,Newroad. Kathmandu,Tripureshowr Kathmandu,Kamaladi. Kathmandu,Babarmahal. Kathmandu,Anamnagar Kathmandu,Nayabaneshwor. Kathmandu,Kantipath.
Standard Chartered Bank Nepal 1987/01/30. 1993/01/18. 1993/07/07. 1994/06/05. 1994/10/18. 1995/03/12.
Nepal Credit and commerce 1996/10/14. 1998/07/17. 1998/07/21. 2000/10/03. 2007/06/21. 2007/10/12. 2001/04/03. 2002/04/03. 2002/12/24. 1968/01/21. 2007/10/02 2007/09/24. 2007/10/12. 2008/05/07. 2008/06/05. 2009/05/07. 2010/04/05. 2010/07/23.
Working capital position of Siddhartha Bank Limited 29 30 31 32 Commerz and Trust Bank Nepal 2010/09/20. Ltd Civil Bank Ltd. Century Commercial Bank Ltd. Sanima Bank Ltd. 2010/11/26. 2011/03/10 2012/02/15. Kathmandu,Kamaladi. Kathmandu,Kamaladi. Kathmandu,Putalisadak. Kathmandu,Naghpokhari.
Having the opportunity to pick a bank of my choice for my study I choose Siddhartha Bank Ltd. For the reason, that it is easily accessible and they would provide me with all the data and information. Siddhartha Bank was established by 100% domestic investment. Being a commercial bank, it provides the greater part of the money/check in the form of deposit. In this bank, 51% of share is allotted by Nepalese promoters and remaining 49% of shares allotted to general public of Nepal. Siddhartha Bank has ever since its establishment been included in banking services including Working Capital position which happens to be the subject of my study. Since its establishment in 2002, the Bank has come a long way. The portfolio size of the Bank has been consistently growing each year. At the end of FY2067-68(20102011), deposit portfolio stood at Rs 21.57 billion while the loan portfolio reached Rs 18.64 billion. The net profit of the Bank stood at Rs 311.4 million. This growth trajectory is expected to further go up with the infrastructure the bank has been building up over the recent years. The Bank has installed a new state of the art software FLEXCUBE, an oracle financial services and software (OFSS) product which is highly regarded worldwide and has been used by number of international banks. This technology platform supports the ever widening branch and ATM network that currently stand at 41 and 42 respectively. The branches have been strategically expanded to meet our existing customer value chain requirements and to penetrate into new customer segment. Similarly, the bank has been established a dedicated payment solutions department to look into alternative delivery channels such as card service, internet Banking, ATMs and Mobile Banking with this set-up, the bank has been able to delivery technologically driven products and services to its customers.
1.1.1 Definition and Importance of Working capital
Working capital position of Siddhartha Bank Limited Working capital, also known as net working capital or NWC, is a financial metric which represents operating liquidity available to a business. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. It is calculated as current assets minus current liabilities. If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit. Working Capital = Current Assets Current Liabilities A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable and cash.
1.1.2 Capital Structure of Siddhartha Bank Ltd

This Bank started its functioning with the following amount of capital: Authorized capital Issued capital Paid up capital Par value of shares No. of shares 3,000,000,000 1,571,130,000 1,571,130,000 100 15,713,000.
1.1.3 Organization Board of Director of Siddhartha Bank Ltd.

S.No.
1. 2.
Name
Mr. Surendra Bhandari. Mr.chiranjilal Agrawal.
Position
CEO Chairman

3. 4. 5. 6. 7. 8. 9. 10. 11. Mr. Mahesh Prasad pokhrel. Mr. subodh todi. Mr.Ratan lal Kedia. Mr.Poonam chand Agrawal. Mr. Bishwa nath shah. Mr. Hemant Gyawali. Mr.Bhagwat Bista. Mr. Manoj kumar Kedia. Mr. Tara Chand Kedia. Director Director Director Director Director Director Director Director Alternative Director
1.1.4 Management Committee of Siddhartha Bank Ltd

S.No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. Name Surendra Bhandari Surendra Prasad kandel Rameshwor Prasad Bashyal Sher bahadur Budhathoki Arjun Bhadra khanal Anindra Acharya Pankaj Pant Ira Pradhan Bhola Nath Dhungana Ram Chandra Khanal Laxman Subba Rudra nath Dhungana Shambhu nath Gautam Ashok Upadhya Biplavi Singh Santosh panday Pradeep Pant Manager Head Relationship Manager _ Manager Relationship Manager Relationship manager Ralationship Manager Position CEO Head Head Head Manager Manager _ Relationship Manager _ Company Secretary and Manager Finance and Account SME and Consumer Banking SME and Consumer Banking General Manager Branch operation Credit admin.and Control Marketing Marketing Department --Deputy General Manager Assistant General Manager Assistant General Manager Business support Control and compliance Branch Manager. Credit
Working capital position of Siddhartha Bank Limited 18. 19 20. 21. 22. Chandan Karki Surya Bahadur Tamang Sailaja Gyawali Srijan Krishna Malla Amit Shrestha Manager Branch manager Manager Head Relationship Manager Treasury Marketing It Credit.
1.1.5 Corporate Social Responsibilities Siddhartha Bank Ltd

Siddhartha bank has a strong tradition of supporting the communities in which it operates. We understand we have a direct impact on the community through our operation and indirectly through our business activity and we are committed to treating our employment and customer fairly . Siddhartha is trusted within its territories and it is dedicated in making difference. Social and community programs installed billboards across the highways with social messages to create social awareness on child labor, domestic violence, antismoking and anti-drug addiction. With the banks focus on youth and education, the bank continued its support to the deserving students. The Bank goes all out to help people in times of natural calamities. Every year, the Bank organizes blood donation camps within the Bank premises in coordination with Nepals major blood bank.
1.1.6 Performance of Siddhartha Bank Ltd

Performance of SBL Up to now have: Established its branchless services from Dailekh. The first project under branchless banking which was launched to facilitate cash for work program of UNWFP. Raised awareness, internally and externally, of their priorities and intentions.
Working capital position of Siddhartha Bank Limited Aligned Corporate Responsibility aspirations and priorities with their business goals. Established clear goals for all areas overseen by the Corporate Responsibility committee. Engaged with key stakeholders on reporting and the Banks priority areas. Published their second Corporate Responsibility Review. Establish a dedicated payment solutions department to look into alternative delivery.
1.1.7 Priorities of Siddhartha Bank Ltd
To publish a sustainable business strategy and sustainability report in early 2009 and continue to report on their progress. To develop a global stakeholder research network. To develop a Group-wide approach and stance towards building a sustainable business, including a gap analysis of activities and policies. To understand and define the focus and boundaries of their influence.
Publish their approach to climate and the environment, including targets and key actions the Bank will take. To embed a consistent understanding internally of what building a sustainable business means for Siddhartha. To focus on the boundaries of sustainability reporting in particular in relation to sustainability risk evaluation and the Equator Principles. To continue to build momentum as an international thought leader in building a sustainable business. Embedded processes for talking with their stakeholders and communication performance.
1.2 Objectives of Study.

Generally, working capital is known as the amount of fund necessary to cover the cost of daily operation of the enterprise. And the study of working capital of Siddhartha bank is to focus on ascertainment of the current assets and current liabilities. following are the objectives of the study: 1) To know the level of working capital of siddhartha bank limited. 2) To identify total working capital trend of siddhartha bank limited. 3) To study the relationship between current assets and current liabilities with working capital. Besides
4) To measure the ability of company to meet its short term obligations. 5) To provide necessary suggestions for improvement based on finding of the study.
1.3 Needs and Significance of study .

This fieldwork study has been prepared for the achievement of the BBA degree. Students are well benefited by such report writing. Mainly aiming to broaden the mind of researchers by getting practical knowledge the study directly helps to the students. The importance of fieldwork can be summarized as follows: 1) Importance to the other researchers 2) Importance to investors 3) Importance to the company itself to improve its financial position 4) Importance to other stakeholders.
1.4 Review of Literature 1.4.1 Net Working Capital

The Working Capital refers to the net current assets i.e. difference between Current Assets and Current liabilities. Working Capital, sometimes, is also termed as firms liquidity. The larger the net working capital in the firm, larger will be the firms capability to meets its current obligation. Working Capital, however, measures the firms reservoir of the funds. It is calculated by subtracting the current liabilities from the current assets. i.e., Working capital = Current assets current liabilities. According to Weston and Brigham, Working capital refers to a firms investment in short term assets such as cash, short term securities, account receivables and inventories.
Working capital position of Siddhartha Bank Limited According to John J. Hampton, working capital is defined as all the short term assets used in daily operation. They consist primarily of cash, marketable securities, account receivable and inventories. According to Shubin, working capital is the amount of funds necessary to cover the cost of operating the enterprises. According to Mead,Baker and Mallot, working capital means current assets. According to J.S Mill, The sum of current assets is the working capital of a business . According to Gestanburg, It is ordinarily been defined as the excess of current assets over current liabilities. According to Hogland, working capital is to consider it as the difference between the book value of current assets and current liabilities.
I)
Net Working Capital Ratio Working capital ratio is computed by dividing the working capital by net assets.
Net assets refer to the sum of net working capital and net fixed assets. It can be expressed as following: Net working capital ratio = Net working capital Net assets [Where, net asset = net working capital + net fixed asset]
1.4.2 Liquidity Ratio
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Liquidity ratio is the ratio to analyze current and quick assets. Liquidity refers to the ability to lay ones hand on cash when needed within no time. And liquidity ratio is the ratio that measures the liquidity position and short term solvency position of the bank i.e. banks ability to meet its short term obligation and cash needs. Liquidity is the prerequisite for the survival of the firm as it checks the liquidity position and the managerial effectiveness in the working capital and its components. I) Current Ratio The current ratio is computed by dividing current assets by current liabilities. It is the most common measure to calculate the short term solvency. Mathematically, it can be illustrated as follows:
Current assets Current ratio = Current liabilities current assets represent those asset which can be converted into cash within an accounting period For example: cash, bank balance, marketable securities, account receivable, inventory, etc. similarly, current liabilities refers to the obligation that must be met within a year such as short term debt, accrued income, trade creditor, bills payable, bank credit, outstanding expenses. The current ratio represents margin of safety and higher the ratio, higher the margin of safety. II) Quick Ratio Quick ratio is also termed as Acid Test ratio or liquid ratio. This ratio is computed by dividing the current assets minus inventories by the current liabilities. Quick Ratio = Current assets - Inventories Current Liabilities Quick assets refer to current assets that can be converted into cash immediately. An asset is said liquid if it can be converted into cash immediately or reasonably soon without and 11
Working capital position of Siddhartha Bank Limited loss of the value. Cash, book debts, marketable securities etc are considered to be the liquid assets.
1.4.3 Correlation Analysis of Siddhartha Bank Ltd

Correlation Analysis is the statistical tool used to describe the degree, where one variable is related to another. The analysis helps us in determining the degree of relationship between two or more variables. Correlation measures the extent to which two random variables move together. The correlation may be positive or negative (i.e., +1 or -1) and most cases lies between these two extreme values. If both variables are moving in the same direction, then it is to be positive and vice- versa. And in our context, the purpose is to find out correlation between working capital & current assets and working capital & current liabilities over the study period. (I) Karl Pearsons Correlation Coefficient Karl Pearsons correlation coefficient is one of the popular mathematical tools
to calculate the correlation coefficient between the two variables. It is denoted by simply r and defined as:
xy r=
x2 y2
Where, x = X - X, y = Y-Y
The value of r always lies between -1 and +1 and (r = 1) denotes the positive correlation between two variables and (r = - 1) denotes the negative correlation between two variables.
(II) Probable Error

Probable error of the correlation coefficient is the measure of testing the reliability of the calculated value of r. It is denoted by P.E. If r be the calculated value of r from sample of n pair of observation, then P.E is defined by
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1- r2 P.E = 0.6745 n
It is used to interpret, whether the calculated value of r is significant or not. If r < P.E, it is insignificant, so there may not be evidence of correlation. And if r > 6 P.E, it is significant.
1.4.4 Trend Analysis of Siddhartha Bank Ltd

Trend Analysis is a series formed by a group of statistical data arranged in accordance with their time of occurrence. It is least square method used in this study. The analysis shows the relationship between two variables in which one is time. The equation of the straight line trend is
Yc = a + bx.. (i)
Where, a= y n
b=
xy x2
1.5
Fieldwork Procedure
13
Working capital position of Siddhartha Bank Limited A planned procedure is of utmost need for the successful accomplishment of any task. As per the instructions provided in class and by studying related books following procedures are taken while preparing this fieldwork report Site visit was the first step where researcher makes direct interview with related personnel. Secondly, the related data such as annual reports, journals, income statements etc was collected. Then the data was analyzed and evaluated for the right solution. Last step was to give logical result of the study.
1.6 Research Methodology

Basically, this field report was made on the basis of the annual reports of Siddhartha Bank which is the secondary source or published ones. With the objectives of finding the working capital and operating financial position of the bank and to recommend with necessary suggestions for the improvement of the financial position in the future. The research Methodology applied in this fieldwork study is Research Design, Data Collection Procedures and Processing Techniques and other statistical tools and measures.
1.6.1 Research Design

The task of defining the research problems in the preparation of the Design of Research project is widely known as the Research Design. It generally constitutes the blue print for the collection Measurement and Analysis of Design. It is the planned structure and strategy of investigation. The Research Design refers to the entire process of planning and carrying out the Research study. And in this report writing, secondary data are analyzed and both analytical and descriptive methods are used for the analyzing the data.
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1.6.2 Sources of Data of Siddhartha Bank

The required data for this study is collected through contacting concerned staffs from the concerned authorities of siddhartha bank. Generally, annual report and other official reports are the main sources of data for this report writing. The data, used for this study are of two types: a) Primary data b) Secondary data Primary data are self prepared by site visiting the company office and interviewing the concerned personnel. Use of primary data is statistical investigation but is not always practicable. Secondary data are the published sources which are readily available. So due to the limited time secondary data are used for this study which are as follows: I. II. III. Annual report of siddhartha bank ltd. Balance sheet of the bank Income statement of the bank.
1.6.3 Tools for Analysis or Analytical of Tools of Siddhartha Bank Ltd

This Fieldwork is prepared considering the accuracy. Various statistical tools such as percentages, averages, correlation etc. to meet the required standard of accuracy and effective result of the research. For the analysis of the data, mainly two sorts of tools have been followed: a) Financial Tools
15
Working capital position of Siddhartha Bank Limited Working capital is calculated subtracting the current liabilities from the current assets. It can be denoted as follows: I. Net Working Capital = Current Assets Current liabilities II. Current Ratio = Current Assets Current liabilities III. Quick Ratio = Quick Assets Current Liabilities
b) Statistical Tools Data requires be classifying and tabulating after collecting the numerical data. And for this, various other statistical tools are used to analyze the financial data of the bank. They are as follows: 1) Arithmetic Mean 2) Karl Pearsons Correlation Coefficient 3) Percentages 4) Pie chart 5) Standard Deviation 6) Coefficient of Variation
1.7 Limitations of the Study

The study is simple and partial requirement of B.B.A. program. It is just a mini research of working capital of siddhartha bank ltd. Which helps to fulfill the requirement of P.U. to get the B.B.A. Degree. This report is prepared in short time period. More orientation classes and extra reference books are required to the students for coming out with best efficient and effective result on the fieldwork report.While preparing the report following limitations was found.
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Working capital position of Siddhartha Bank Limited a) The result of the study depends on the information provided by the company as secondary data has been used. b) Limited budget and time is another problem. c) The study includes the data of just 3 years (2009-2011). d) The qualitative factors, plans and policies, management techniques of the company and the political impacts have not been included.
1.8 Plan of the Study of Siddhartha Bank Ltd

This study has been organized into three chapters each concerned to some aspects of the working capital analysis. The first chapter contains the introduction, purposes, methods of data collection, statement of problems, limitations and the conceptual structure frame work of the study. The second chapter covers the presentation of the data, Analyzing and findings of the study. This last chapter includes summary, Conclusion and the Recommendations of the study.
CHAPTER TWO 2. RESEARCH METHODOLOGY 2.1 Research Design:
The research methodology is the process of arriving to the solution of the problems through planned and systematic dealing with the collection, analysis and interpretation of facts and figures. As the research entirely consists about the saving 17
Working capital position of Siddhartha Bank Limited deposit analysis of the Siddhartha bank ,the main purpose of this study are to show deposits and its utilization in SBL financial position, collection and uses of funds, its prospects and its position in the context of Nepal as well as recommend suggestion for its implement. This research methodology has been used which proves helpful to deposit analysis. For the purpose of achieving the objective, the following methodology is used acquiring various kinds of reports, Bulletins and journals from the organization. Similarly the data has been acquired from SBL also. The study report is based mostly on secondary information of SBL. In addition to this reference has been made in library consult, class lecture, books related to banking, financial management and accounting during the preparation of this report.
2.2
Types of Methodology in Research:
Collection of data means the methods that are used for getting the necessary information from the units under investigation. The method of collecting the data depends upon the nature, object & the scope of the inquiry. There are two types of data: (a) (b) Primary Data Secondary Data
According to Selltiz, Wrightsman and Cook as quoted by Ritchie (1989) the purpose of various data collection techniques are to produce truth worthy evident that is relevant to the research question being asked.
(a) Primary Data: The first hand data, which is collected by the researcher himself, is primary data. The data are thus originated in character. These types of data are obtained in the survey and inquire conducted by Government, some individual institutions & research bodies. This fieldwork is based, to some extent, on the primary data collected from the concern sample group of officers working in SBL. The different sets of questionnaire used in the collection of primary data are given in appendix I & II. (b) Secondary Data:
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Any data, which are already published in other sources, like book, newspaper, website, etc. is secondary data. For this purpose of this fieldwork, I have collected the secondary data from the following sources: 1. 2. 3. 2063/64, 2064/65. 2065/66, 2066,67 and 2067/68 Annual report of EBL. Field work report of previous BBS II year. Other related Manuals & Bulletins stamen published by SBL.
2.3
Data Processing Technique:
The data collected from the above stated sources has been classified, tabulated and interpreted for easier study. Research was conducted on the basis of observation, work experience, customer interaction, prepareation of questionnaires and interaction w ith department heads and senior assistance. For the purpose of collection data we also used the following methods which are as listed here below: a. Questionnaire Method: This method is an instrument consting of a series of questions and other prompts for the purpose of gathering information from respondts. We provided with open-ended question so, it was easy and quick method to get required information from the respondents. It does not require much effort as in verbal or some other collection procedure.
b.
Sampling Method: As the time limit for the internship period was very limited we have used quota
sampling method in the process of survey to get required information. Here we can decide the number of people we want to sample and conduct survey. So this process is less time consuming and quite important enough to get required information.
2.4
Diagrammatic Representation of Data:
Various diagrams are used to present the data more clearly. The diagrams used are as follows: 19
Working capital position of Siddhartha Bank Limited Bar Diagram Pie-chart Line Graph
CHAPTER THREE PRESENTATION AND ANALYSIS OF DATA

This study focuses on ascertaining the total working capital trend of Siddhartha Bank. Total working capital trend refers to the total working capital expenditure during different years which is shown in following table:
3.1 Net working capital of SBL
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Working capital position of Siddhartha Bank Limited Table 3.1: Net working Capital of SBL. Fiscal year 2008/09 2009/10 2010/11 Total SBL) Current assets (NRs) 17,537,573,410 22,211,979,800 23,710,408,870 63,459,962,080 Current liabilities Net working capital
(NRs) (NRs) 16,375,235,600 1,162,337,810 20,626,117,190 1,585,862,610 22,144,697,200 1,565,711,670 59,146,604,990 4,313,912,090 (Sources: Annual Report of
.
The above table shows working capital trend of Siddhartha Bank Limited for three years from fiscal year 2009 to 2011. The working capital for the year 2009 was Rs. 1,162,337,810 (i.e. Rs17,537,573,410-16,375,235,600), 2010 was Rs. 1,585,862,610 (i.e. 22,211,979,800-20,626,117,190), and 2011 was Rs. 1,565,711,670 (i.e. 23,710,408,87022,144,697,200). Above working capital is derived by deducting current liabilities from current assets i.e. WC = CA CL. In above table, the total current assets exceeds the total current liabilities i.e. Rs 63,459,962,080 > 59,146,604,990 which means the liquidity position of the company is strong. The difference between the total current assets and total current liabilities i.e working capital is Rs. 4,313,912,090. The creditors of the bank are satisfied and have good faith over the bank.
Figure 3.1: Net Working Capital of SBL
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The figure shows the trend line of working capital of three different years from 2008/09 to 2009/10 of Siddhartha Bank Limited. There is no uniformity in growth of working capital. In 2009/10 there is increase in working capital up to Rs1, 585,862,610 then, it decreases to Rs 1,565,711,670 in the year 2010/11. It shows the negative sign to the company because there is no improvement in working capital each year.
3.2 Current Ratio of SBL Table 3.2: Current Ratio of SBL

Fiscal year 2008/09 2009/10 2010/11 Current assets (NRs) 17,537,573,410 22,211,979,800 23,710,408,870 Current liabilities Net working capital (NRs) (NRs) 16,375,235,600 1.07 20,626,117,190 1.08 22,144,697,200 1.07 (Sources: Annual Report of SBL)
The above table shows the current ratios of Siddhartha Bank Limited for 3 years. The ratio rises from 1.07 times to 1.08 times in the year 2009/10. Again, it tends to decrease to 1.07 times in the year 2010/11.
Figure: 3.2 Trend Showing Current Ratio
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The above trend line shows that the current ratio of the bank is in increasing trend from the year 2008/09 to the year 2009/10 and it decreases then in 2010/11.
3.3 Quick Ratio Table 3.3: Quick Ratio of SBL

Fiscal year 2008/09 2009/10 2010/11 SBL) Current assets (NRs) 17,537,573,410 22,211,979,800 23,710,408,870 Current liabilities Net working capital (NRs) (NRs) 16,375,235,600 1.07 20,626,117,190 1.08 22,144,697,200 1.07 (Sources: Annual Report of
Since we dont have inventory in the bank, we found that the current ratio and quick ratio is same in the year 2005/06, 2006/07and 2007/08.
3.4 Computation of correlation between WC and CA
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Table 3.4: correlation between WC and CA

(Amount in 10 million) Year 2008/09 2009/10 2010/11 Total WC (X) CA (Y) 116.23 158.58 156.57 x= 431.38 1753.76 2221.19 2371.04 y= 6345.99 X = x x Y = y y X2 (27.56) 14.79 12.78 (361.57) 105.86 255.71 759.55 218.74 163.33 x2 = 1141.62 Y2 130732.86 11206.34 65387.60 y2 =
207326.8
XY 9964.87 1565.67 3267.97 xy = 14798.51
(Source: Annual Report of SBL)
N = No. of the years x Mean (X) = N y Mean (Y) = N = 3 = 3 6345.99 = 2115.33 431.38 = 1 4 3.79
Again,
xy r=
x2 y2
14,798.51 =
1141.62 207326.8
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14798.51 = 33.78 455.33 14798.51 = 15381.04 = 0 . 9621
r = 0.9621
From the above calculation, the correlation coefficient r is 0.939 which is nearly +1. Therefore, it shows the high degree of positive correlation between working capital and current assets. Now, to find out whether the value of r is significant or not, we calculate the probable error. So, 1- r2 P.E = 0.6745 n 1- (0.9621) 2 = 0.6745 3 1 0.9256 = 0 .6745 1.7320 = 0.0289 P.E = 0.0289 6 P.E = 6 0.0289 = 0 .1736 Since, r > 6P.E so the correlation coefficient is significant. Hence, there is positive relationship between WC and CA.
3.5 Computation of correlation coefficient between WC and CL Table 3.5: correlation coefficient between WC and CL
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Working capital position of Siddhartha Bank Limited Year 2008/09 2009/10 2010/11 Total WC (X) CL (Y) 116.23 158.58 156.57 x= 431.38 1637.52 2062.61 2214.47 y= 5914.61
X=x x
Y=yy
X2 759.55 218.74 163.33 x2 = 1141.62
Y2 111569.36 8295.57 59019.84 y2
XY 9205.59 1347.07 3104.77 xy =
(27.56) 14.79 12.78
(334.02 ) 91.08 242.94
=178884.77 13657.43
(Source: Annual Report of SBL) N = No. of the years x Mean (X) = N y Mean (Y) = N Again, xy r= = 3 = 3 5914.6 = 1971.53 431.38 = 1 4 3.79
x2 y
13657.43 =
1141.62 178884.77
13657.43 =
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Working capital position of Siddhartha Bank Limited 33.79 422.95 13657.43 = 14291.40
0 . 9556
r = 0.9556
From the above calculation, the correlation coefficient r is 0.9556 which is nearly 1. Therefore, it shows the positive degree of correlation between working capital and current liabilities. Now, to find out whether the value of r is significant or not, we calculate the probable error. So, 1- r2 P.E = 0.6745 n 1- (0.9556) 2 = 0.6745
3
1 0.9132 = 0 .6745 1.7320
= 0.0337
P.E = 0.0337
Since, r < P.E so the correlation coefficient is significant. Hence, there is positive relationship between WC and CL.
3.6 Calculation of trend values of working capital Table 3.6 Calculation of trend values of working capital (Rs. In 10 million)
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Year (X) 2009 2010 2011
WC (y) 116.23 158.58 156.57 y = 431.38
x= X 2010 -1 0 1
x 1 0 1 x = 2
2
Xy -116.23 00 156.57 xy = 40.34
Yc 629.573 742.69 855.807
(Source: Annual Report of SBL)
where,
y = 431.38 x=0 n=3 x = 2 xy = 40.34
2
Now, we have,
y a = n xy b = x
2
431.38 = 3 40.34 = 2 = 20.17 = 143.79
Now, putting the value of a and b in equation (i) For year 2012,
Yc = a + bx = 143.79 + 20.172 = 1 84.13
For year 2013,

Yc = 143.79 + 20.173 = 2 04.3 28
For year 2014,

Yc = 143.79 + 20.174 = 2 24.47
The above calculation clearly shows that the value of working capital is increasing each year. The trend value of WC for three years has been calculated. For the year 2012, 2013 and 2014, the values are184.13, 204.3 and 224.47 respectively.
Trend line showing the trend value of WC from 2012 to 2014 Figure 3.6 Trend Value
In the above figure, the working capital trend line is increasing for the three years so that the trend line has upward slope from the year 2012 to 2014. Therefore the upward trend line shows the high profit and a positive sign to the company. 3.7 Study Result: During the study period of Siddhartha Bank limited from 2004 to 2011, we found that there was excess amount of current assets than current liabilities and the working capital is also increasing yearly. This shows more current assets had been invested than the current liabilities in each year. However, there was no uniformity in increasing of the working capital. By the study we found following results:
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The calculation of working capital shows that the current asset exceeds current liabilities and the working capital is also increasing yearly. The working capital trend line is increasing yearly which means it is upward sloping. The study results the positive relationship between WC and CA and indicates a favorable position of the company. The current ratio is also increasing and above the standard and sound. Table 3.7 comparative study
Source: Annual report of SBL
3.7.1 Group performance of Siddhartha Bank Table 3.8 Group performance

US$m Income 2010 15,184 2011 16,062 YOY% 6
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Expenses Operating Profit Before Impairment Loan Impairment Other Impairment Profit from associates Profit before tax Profit attributable to ordinary shareholders
7,952 7,232
9,032 7,039
13 (3)
(2,000) (102) 21 5,151 3,279
(883) (76) 42 6,122 4,231
(56) (25) 100 19 29
3.7.2 Income and profit of Siddhartha Bank Limited Table 3.9 income statement
Particulars 1. Interest Income 2. Interest Expenses Net Interest Income 3. Commission & Discount This Year (Rs.) 2,690,294,141 1,925,243,099 765,051,042 68,049,045 Previous Year (Rs.) 2,018,291,813 1,406,489,572 611,802,241 42,758,283
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Working capital position of Siddhartha Bank Limited 4. Other Operating Income 5. Exchange Fluctuation Gain Total Operating Income 6. Employees Expenses 7. Other Operating Expenses 8. Exchange Fluctuation Loss Operating Profit Before Provision for Possible Loan Loss 9. Provisions for Possible Losses Operating Profit 10. Non- Operating Income/(Expenses) 11. Possible Loss Provision Written Back Profit from Regular Activities 12. Income/Expenses from Extraordinary Activities Net Profit after including all Activities 13. Provision for Staff Bonus 14. Provision for Income Tax (a+b-c) a. This year Provision b. Provision upto Last Year c. Deferred Tax Income/(Expenses) Net Proft/ (Loss) 62,252,282 38,689,741 934,042,110 155,803,411 265,477,124 512,761,575 42,628,156 470,133,418 1,432,733 20,871,446 492,437,598 492,437,598 44,767,054 136,255,252 136,139,826 2,040,129 1,924,703 311,415,291 50,694,422 12,167,702 717,422,648 103,680,178 175,735,300 438,007,170 65,322,221 372,684,949 10,858,577 383,543,526 383,543,526 34,867,593 107,828,164 104,917,398 1,363,819 (1,546,947) 240,847,768
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CHAPTER FOUR SUMMARY, CONCLUSION AND RECOMMENDATION

4.1 Summary
Generally, the liquidity position of any company is measured by the working capital. A company should have sufficient amount of the working capital in order to be able to meet the claims of the creditors and meeting the day to day needs of the business. Shortage of working capital is the prime sign of financial crisis. Working capital for an organization indicates its potential reservoir of the funds. So working capital is an important topic. This study primarily focuses in examining the working capital of Siddhartha Bank ltd. The main objective is to measure the current trend of working capital, its level, based on the current assets and current liabilities. The result of analysis shows the positive correlation between CA and WC and negative correlation between CL and WC. The trend line of working capital shows the upward slope from the year 2008/09 to 2009/10 and downward slope from 2009/10 to 2010/11. The current ratio also matches the standard and is in sound position. This study is based on the financial data which are collected from financial statement namely balance sheet, income statement etc. for the three years from 2009/10 to 2010/11.
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4.2 Conclusion
Greater the working capital, greater the liquidity of the company. Large working capital shows the strength of the company. And the study also reveals the sound position of the working capital of the bank. However, holding large amount of current assets is an expensive affair. We can conclude the study in following ways: The weight of CA is greater than weight of CL throughout the study period whose difference creates working capital. The working capital is increasing year by year. The relation of WC with CA and CL is good and the trend value is also increasing yearly i.e. the trend line has upward sloping. The current ratio in the year was 1.07, 1.08 and 1.07 in the years 2008/09, 2009/10 and 2010/11 respectively. The ratio also shows sound position of the current assets over the current liabilities and was in increasing trend.
4.3 Recommendation
The company is in strong position, it is sound in working capital and ratios too show sound economic condition. The level of working capital is increasing. But holding excessive current assets is however expensive. So maintaining the CA in current position is prime requirement. The current ratios also were at the standard level, so more focus is to be done for maintaining the current levels of current ratios. The current liabilities were also decreasing so investing on the current liabilities also should be reduced maintaining the standard current ratio and uniform trend slope.
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Working capital position of Siddhartha Bank Limited Bibliography A) Books Bajracharya, B.C. (2065). Business Statistics. Kathmandu: M.K. Publisher and Distributor. Singh, H.B. (2065). Banking and Insurance. Kathmandu: Asia Publication. B) Reports Siddhartha Bank Limited (2008/09). Annual Report, Kathmandu: Siddhartha Bank Limited Siddhartha Bank Limited (2009/10). Annual Report, Kathmandu: Siddhartha Bank Limited Siddhartha Bank Limited (2010/11). Annual Report, Kathmandu: Siddhartha Bank Limited
C) Others http://www.sbl@siddharthabank.com
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APPENDIX Questionnaires + interviews: APPENDIX I

Question to Branch Manager: 1. From the numerous people who apply in your bank, how do you select your staffs? A. Interview B. on the job training C. Written exam D. Other 2. How do you encourage your staffs to do better work? A. Good Incentives B. Moral Encouragement C. Other 3. What are the problems faced by your bank? A. Administrative problems B. Customers Problems C. Other
APPENDIX-II
Question to customer: 1. What do you think about the management of the bank? Good Average Poor
2. Do you get help from the staffs for the bank procedures? Yes No Dont Know Dont Know
3. Do you think deposits are efficient? Yes No
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Working capital position of Siddhartha Bank Limited

CHAPTER ONE 1. INTRODUCTION