Professional Documents
Culture Documents
Of
By
MOHAMMED AZIZ
Bachelor of Business Studies
Part III
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A Fieldwork Report
Submitted to
Tribhuvan University
in partial fulfillment of the requirements for the degree of
BACHELOR OF BUSINESS STUDIES
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Parashar College
Damauli, Tanahun
March , 2013
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Faculty of Management
TRIBHUVAN UNIVERSITY
RECOMMENDATION
Entitled
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has been prepared as approved by this Department. This fieldwork assignment report is forwarded for examination.
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Supervisor
Head of Department
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Parashar College
Damauli, Tanahun
MOHAMMED AZIZ
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Acknowledgement:
I would like to extend my gratitude to Tribhuvan University for involving this skill developing practical exercise in BANKING & INSURANCE (MGT 324) which provides us first hand knowledge about the world of work and also helps us to apply the conceptual knowledge acquired in classroom to real life. It is my great pleasure to present this fieldwork report for the partial fulfillment of the requirements for the Bachelors Degree of Business Studies (BBS). I would take the pleasure of offering thanks to the staffs of Nepal Investment Bank limited, Damauli Branch for providing me the required data and information. I am indebted to all those authors and scholars whose works have directly or indirectly supported me in its preparation. I sincerely acknowledge to all the teachers and especially to Mr. Mahesh Thapa (Branch Manager for NIBL) without whom this report would not have been completed. I would like to express my sincere gratitude to the respected teachers Mr. Amrit Bhandari (Campus Chief) & Mr. Surendra Shrestha (Fieldwork report supervisor). I have been able to prepare this report only by receiving significant help in different ways from my family and friends. I would like to express thanks to all of them for their guidance, inspiration and invaluable assistance. I would be extremely delighted to appreciate the efforts of Mr. Kehar Singh Ale ( Image Digital Pvt Ltd.) for computer setting and printing of the report.
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Abbreviations
BOD BS EBIT eg etc FOM FY HDI i.e. Ltd No P/L ROA NPR NIBL TU NRB % Fig Ltd Pvt Dia.
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A/c BBS
Account Bachelors of Business Studies Board of Directors Bikram Sambat Earning Before Interest and Tax exempligratia (for example) etcetera (and so on) Faculty of Management Fiscal Year Human Development Index id est (that is) Limited Number Profit and Loss Return on Assets Nepalese Rupees Nepal Investment Bank Ltd. Tribhuvan University Nepal Rastra Bank Percentage Figure Limited Private Diagram
List of Figures
Figure
Fig.1 Shareholding Pattern of NIBL Fig.2 Earning Per Share Fig.3 Return on Asset Fig.4 Price Earning Ratio Fig.5 Valuation Highligts
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Dia.1 Trend Analysis of EPS, ROA & PE Ratio Dia.2 Bargraph of Valuation Highlights
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Diagram
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List of Diagrams
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15 15 16 16 17
Table of Contents
Acknowledgement List of abbreviations List of Figures List of Diagrams
Chapter
1. Introduction 1.1 Meaning of Bank 1.2 History of Banking 1.3 Banking in Nepal 1.4 Introduction to NIBL 1.5 Vision 1.6 Mission 1.7 Statement of Problem 1.8 Objectives of Field Report 1.9 Literatures Review 1.10 Methodology of Fieldwork 1.11 Significance of the Study 1.12 Limitation of the Fieldwork 1.13 Organization of the study
2.1.1 Earning Per Share 2.1.2 Return on Asset 2.1.3 Price Earning Ratio 2.1.4 Ratio of Net Proft to Gross Income 2.1.5 Exchange Gain to Total Income Ratio 2.1.6 Net Profit to Loans & Advances Ratio 2.1.7 Cash & Bank balance to Current Deposit Ratio 2.1.8 Cash & Bank balance to Total Deposit Ratio 2.1.9 Saving Deposit to Total Deposit Ratio 2.1.10 Fixed Deposit to Total Deposit Ratio
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3. Appendices Bibliography
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1 1 1 2 3 4 4 5 5 6 7 8 9 10 11 11
11 12 12 12 13 13 13 13 14 14
15 18
Table of Contents
Acknowledgement List of abbreviations List of Figures List of Diagrams
2.1.1 Earning Per Share 2.1.2 Return on Asset 2.1.3 Price Earning Ratio 2.1.4 Ratio of Net Proft to Gross Income 2.1.5 Exchange Gain to Total Income Ratio 2.1.6 Net Profit to Loans & Advances Ratio 2.1.7 Cash & Bank balance to Current Deposit Ratio 2.1.8 Cash & Bank balance to Total Deposit Ratio 2.1.9 Saving Deposit to Total Deposit Ratio 2.1.10 Fixed Deposit to Total Deposit Ratio
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1. Introduction 1.1 Meaning of Bank 1.2 History of Banking 1.3 Banking in Nepal 1.4 Introduction to NIBL 1.5 Vision 1.6 Mission 1.7 Statement of Problem 1.8 Objectives of Field Report 1.9 Literatures Review 1.10 Methodology of Fieldwork 1.11 Significance of the Study 1.12 Limitation of the Fieldwork 1.13 Organization of the study
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3. Summary , Conclusion & Recommendations 3.1 Summary 3.2 Conclusion 3.3 Recommendations Appendices Bibliography
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01 01 01 02 03 04 04 05 05 06 07 08 09 10 11 11
11 12 12 12 13 13 13 13 14 14
Chapter
Page
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List of Figures
Figure
Fig.1 Shareholding Pattern of NIBL Fig.2 Earning Per Share Fig.3 Return on Asset Fig.4 Price Earning Ratio Fig.5 Valuation Highlights
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Diagram
Dia.1 Shareholding Pattern of NIBL Dia. 2 Trend Analysis of EPS, ROA & PE Ratio Dia.2 Bargraph of Valuation Highlights
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List of Diagrams
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Chapter -1
Introduction
1.1 Meaning of Bank
Finance is the blood of trade, commerce and industry. Now-a-days banking sector acts as the backbone of the modern business. Development of any country mainly depends upon the banking system. The term Bank is derived from the French word Banco which means a Bench or Money exchanging table. In olden days, European money lenders or money changers used to display coin of different countries in big heaps (quantity) on benches or tables for the purpose lending or exchanging.
In medieval times, the knights Templates, a military and religious order not only stored values and granted loans but also arranged for the transfer of funds from one country to another. The great banking families of the Renaissance such as the Medicis in Florence (Italy) were involved in lending money and financing international trade. The first modern banks were established in the 17th century, notably the Risks bank in Sweden (1656) and the Bank of England (1694).
Functions performed by banks in present context have been carried out by individuals, merchants, families or state official at least 4000 years ago. Clay tablets dated from about 2000 BC indicates that the Babylonians deposited personal valuables for a service charge of one 60 th of their worth. Interest charges on loans ran as high as one third.
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A bank is a financial intermediary that performs one or more of the following functions: safeguards and transfers funds, lends or facilitates lending, guarantees credit worthiness and exchange money. These services are provided by such institutions as commercial banks, central banks, savings banks, trust companies, finance companies like insurer and investment bankers.
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A bank is a financial institution which deals with deposits and advances and other related services. It receives money from those who want to save in the form of deposits and lends money to those who need it.
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1. 2. 3. 4. 5. 6. 7.
Nabil Bank Ltd. Nepal Grindlays Bank Nepal Indosuez Bank Himalayan Bank Ltd. Nepal SBI Bank Nepal Bangladesh Bank Everest Bank Ltd.
S.N
Name of Bank
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Likewise, there have been 32 commercial banks established so far till this date. Apart from this many financial institutions and co-operatives societies have also started contributing in the economy.
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1984 AD 1986 AD 1987 AD 1993 AD 1993 AD 1994 AD 1994 AD
Established
NIBL has been very aggressive in innovating and offering new products and services in the financial market. NIBL started Visa Electron Debit Card for the first time in Nepal after acquiring Principal Membership of Visa International in 2003. Since then, NIBL has been pioneering other existing banks and financial institutions in the card business. NIBL has the largest ATM network in Nepal with the addition of nine more ATMs to the Bank's network. At present, NIBL has in total, seven Visa Associate Member Banks and 260 ATM outlets connected to Switch. We have also enabled recharge card options for telecom and Wi-Fi subscribers of Broadlink Ltd. to carry out top-ups through their ATMs; they are the only Bank to have enabled this feature. It has also enabled ATM-based money transfers for cardholders having multiple accounts with NIBL. Currently, it is implementing their Switch based electronic payment gateway which will enable card to card money transfer to any client within their Switch network. They are also updating their systems to be EMV compliant and to issue Smart Cards. They are currently undergoing PCI-DSS certification as well. They now have 35 Member Banks and
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Over the past 7 years, this bank has grown to become one of the biggest commercial bank in Nepal. This bank has helped to fulfill growing requirements of credit and collects deposits for the development projects and support in the business.NIBL has the highest deposit amongst the private sectors banks throughout the Nepal.
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58 ATMs in their Proprietary Card Network called National Payment Network which began in 2009. They now have over 400,000 cardholders in their Bank and have issued 300,000 on behalf of their National Network. NIBL has also launched NIBL Mobile (SMS) banking which incorporates Fund Transfer, Bill Payments, and Nepal Telecom Prepaid PIN Purchase and inquiry services as major features. We have also made available NIBL Mobile (SMS) Banking application for Android Platform Smart Phones (2.1 and above) and Java Enabled Phones (touch and non-touch). NIBL has also recently launched Domestic e-Banking Remittance which avails customers the facility to instantly transfer money to their relatives/friends online. Financial highlights of NIBL:
1.6 Mission
They aspire to be the leading Nepali bank, delivering world class services through a blend of state-of-the-art technology and visionary management in partnership with competent and committed staff, to achieve sound financial health with sustainable value addition to all their stakeholders. They are committed to fulfilling this mission while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance.
1.5 Vision
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No. 1 private sector bank in paid-up capital with NPR 3.01 billion Highest assets base among private sector banks of NPR 58.35 billion Topmost lender in Nepal with total loans and advances of NPR 41.88 billion Highest deposits of NPR 50.13 billion Net profit of NPR 1.17 billion Interest income of loans and advances at 13.12 percent Return on shareholders fund at 24.10 percent 25% cash dividend, 25% bonus shares Highest paid up capital among the financial institutions in Nepal at NPR 3.01 billion .The highest capital base (including debentures) with NPR 5.15 billion. Largest amongst taxpayers in Nepal.
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To evaluate the liquidity and solvency position of the concern. To judge the organizations efficiency in terms of its operation and management. To ascertain earning capacity of the concern as well as prediction relating to its future earnings. To determine the liquidity ratio, profitability ratio and leverage ratio of the organization.
Ratio Analysis is a popular technique of financial statement analysis which is the process of determining and presenting the mutual relationship between two accounting figures. According to Kennedy and McMullan The relationship of one term to another expressed in simple mathematical form is known as ratio. Ratio analysis revolves around the calculation of ratios, comparing them with the ratios of same firm relating to past and interpretation as well as evaluation of ratios. It makes possible to analyze business activities systematically. This fieldwork report analyses the following ratio of NIBL Ltd:
It reflects the firms ability to pay its short terms debts or claims within a period less than one year. They assess the capacity of the concern to repay its short term liabilities. The position of the concern can be measured mainly by using two liquidity ratios such as:
A. Liquidity Ratio:
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Different journal articles, literature, books, annual reports, professional magazines, brochures etc. were studied throughout the fieldwork to know what is already known on the topic and to discover the shortcomings of the previous studies so that due consideration can be given on them. In 2065, Miss Manisha Thapa , a student of Shree Projjwal Collegiate Academy had made an analysis about accounting ratios of NIBL Ltd. Her study shows that the firm is in quite good condition and profit. According to her analysis, it still needs to improve in various sectors and search for new areas of investment in order to raise profitability and mobilize deposit efficiently. She states that the organization has excess liquid assets and it needs to maintain satisfactory liquidity ratio.
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I. Current Ratio/ Short term Solvency Ratio/ Working Capital II. Quick Ratio/ Acid test Ratio/ Liquid Ratio
B. Leverage Ratio: It is long term solvency ratio or capital structure ratio. It weighs up the ability of a firm to meet the payments associated with its long term debts. It measures the effectiveness of the long term financial position. It stands for relationship between internal and external sources of funds of a firm. The major types of leverage ratios are:
I. Debt Equity Ratio II. Debt to Total Asset Ratio III. Interest Coverage Ratio/ Time Interest Earned Ratio
A. Primary Sources
Primary data refers to data collected for the first time for a specific purpose. It can be collected through interviews, observations or experimentation. The data needed for this fieldwork report was collected from
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I. Net Profit Ratio II. Return on Assets III. Return on Shareholders Equity IV. Interest on Total Assets
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It shows the overall efficiency of the concern to in terms of its sales, investments, and earnings and dividends. An undertaking without profit is unthinkable. The profitability ratio is related to profit. The following are the major types of profitability ratios.
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C. Profitability Ratio:
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face- to- face interview with the manager of the organization Mr. Hemanta Karki and official Mr. Ram Bahadur Poudel. The respondents were asked questions through questionnaire.
B. Secondary Sources
Secondary data refers to data already available. It was collected earlier for another purpose and exists in published form. The necessary data is also gathered from the organizations financial statements Income statement, Balance Sheet and the annual report submitted in Annual General Meeting (AGM). It is also collected from published magazines, books, articles and literature about the organization. The collected data and information are edited, classified, tabulated and presented in different types of charts to serve the needs of the study.
Management: Management can draw significant conclusion and determine the new policies and procedures. Owners: It lets them be acquainted with profitability and financial position of the organization. Reliable information assures them safety of their investment. Creditor: It helps them to know whether the firm will be financially able to pay their debt or not, in time.
Business results and situations can be understood properly only when relevant figures are considered together. A ratio is simply a number that shows the relationships between two financial figures. The study is important from the point of view of investors, depositors and management for analysis and interpretation of the concerns financial health. It is also useful for judging the firms operating efficiency, identifying strength and weakness of its financial standing and comparing its performance with other vying firms. Ratio analysis is helpful in financial forecasting and planning. The ratio calculation of past years works as a guideline for future. It presents the financial data in purposeful and conclusive manner to facilitate rational decision making of any financial activity. The fieldwork report is expected to serve the following purposes of the different users:
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Bankers/ Lenders: The report can help them to determine whether their principal and interest will be paid when due. Employees: It is purposive for them to ascertain how much emoluments and bonus are possible from the profits of the organization. Researcher students: The report supplies secondary data for their research efforts.
The study depends heavily on secondary data and is not free from its limitations. It may suffer from the inherent weaknesses of the financial statements of the organization. The deadline for the submission of report restricted the depth study.
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The fieldwork report may suffer from the following pitfalls: This fieldwork report is prepared in partial fulfillment of the requirement for the degree of Bachelor of Business Studies of Tribhuvan University. It is just a case study of the NIBL Ltd. The fieldwork report is based only on the financial statements of fiscal year 2067/68 and 2068/69. It considers only liquidity ratio, leverage ratio and profitability ratio of the concern based on financial statements. The relevant information and data obtained from the concern for the study are presumed to be accurate.
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Chapter -2
Presentation & Analysis of Data
2.1 Presentation & Analysis of Data
Presentation and analysis of data is the chief task of this fieldwork. In this chapter, the data and information gathered during the course of fieldwork have been organized in tables, charts and diagrams. The data is analyzed by using statistical tools. The analyzed data has been interpreted candidly for clear understanding of findings. It is attempted to make the presentation consistent with the objectives of fieldwork. Every presentation of data follows its analysis so that future prediction can be initiated. For the purpose of the analysis simple method of financial tools, ratio analysis is used. Ratio Analysis is widely used as a tool of financial analysis. It is defined as a systematic use of ratios to interpret the financial statement so that strength and weakness of firms as well as its historical performance and current financial condition can be defined. The main kinds of financial tools to measure the performance are: 2.1.1 Earning Per Share (EPS) It simply shows the profitability of the firm of a per share basis. It is calculated from the point of view of the ordinary shareholder. It is calculated by dividing the profit after tax by the total number of ordinary share outstanding. EPS =
Findings: The EPS trend is fluctuating, but it is clear that the EPS of NIBL is substantially high than other competitors. The average EPS of NIBL is Rs 51.77. The highest and lowest EPS of NIBL are Rs 62.57 and Rs 37.42 resp. in the FY 2064/2065 and 2066/2067. Therefore, from above analysis we can say that the earning power of NIBL is in good condition.
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2.1.2 Return on Asset (ROA): It measures the firms return on investment of financial resources. It also helps us to provide the information of proper utilization of the resources. It is the relation between profit and total assets. Lower ROA means lower profit and higher ROA means higher profit. In the present study, this ratio is examined to measure the profitability of all financial resources in the bank assets. ROA =
()
Findings:
2.1.3 Price Earnings Ratio (PE Ratio) : In the fiscal year 2065/2066 , the PE ratio was 42.34 and further decreased up to 37.09 in the FY 2066/2067 likewise it continuously decreases in the year 2067/2068 and 2068/2069. The PE ratio is 10.54 2.1.4 Ratio of Net Profit to Gross Income In the fiscal year 2066/2067 the ratio of Net Profit to Gross Income is 16.71% but increases up to 20.26 % in the year 2067/2068. In current year 2068/2069 its ratio is 23.99
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The trend of ROA is also fluctuating; it rises in the year 2067/2068. The highest ROA was 2.20 % in the fiscal year 2067/2068 and lowest was 1.70 % in the fiscal year 2066/2067. The above table shows that the ROA is satisfactory. However the management of NIBL must keep their eyes towards the situation and mobilize their working assets more to earn more profit. The average ROA is 1.91 %.
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Findings: In the fiscal year 2067/2068 the ratio of Net profit to Gross Income is 20.26 which are greater than last year and this year ratio was 23.99 which is more than last year. 2.1.5 Exchange Gain to Total Income Ratio
Findings:
2.1.7 Cash and Bank balance to Current Deposit Ratio In the FY 2067/2068 the ratio was 84.68 % which is less than previous year and in FY 2064/2065 the ratio was the lowest during 5 year. Thus, the bank has less liquidity in FY 2064/2065. Cash and Bank balance include cash in hand and total bank balance.
In the FY 2067/2068 the ratio was 84.68 which is less than previous year 84.78% and the FY 2068/2069 it is 136.92 which is higher than last year . The average ratio is 88.83%.
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2.1.8 Cash and Bank balance to Total Deposit Ratio (CRR) Cash Reserve Ratio In the FY 2064/2065 the cash reserve ratio is 8.12 % and later become 11.70 % in FY 2065/2066. The trend line is fluctuating it goes up and down. However cash reserve ratio should be minimum. In current year CRR is 12.33%
Findings:
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In the FY 2064/2065 the ratio of net profit to loan and advances is 2.10 % but it decreases by 0.13 and became 1.975 in the fiscal year and that it continuously increases up to 2068/2069 i.e. 2.66 %
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In the FY 2066/2067 the ratio was 9.63 which were higher than previous year and this year 2068/2069 i.e. 8.60
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In the FY 2065/2066 the ratio of Exchange Gain to Total Income is 8.80 but it increases up to 9.63 in the year 2066/2067, after 2066/2067 it was decreasing continuously.
Findings: In the FY 2065/2066 the cash reserve ratio is 11.70% that were higher than previous year i.e. 12.33 %. The average cash reserve ratio is 10.63 %. 2.1.9 Saving Deposit to Total Deposit Ratio Saving deposit is sorts of short term liquidity, which can be withdrawn by the depositors. Lower the ratio of saving deposit to total deposit higher the liquidity ratio. Findings: The ratio of Saving Deposit to Total Deposit are 30.83% , 30.72 %, 42.40 %, 47.03% and 42.70 % in FY 2064/2065, 2065/2066, 2066/2067, 2067/2068 and 2068/2069 resp. In the FY 2066/2067 ratio is 42.40% which is greater than FY 2065/2066 and this years ratio is 42.70 % which is lesser than previous year which indicates liquidity has increased this year. 2.1.10 Fixed Deposit to Total Deposit Ratio The ratio of Fixed Deposit to Total Deposit are 22.65%, 21.11%, 19.92 %, 22.53% and 28.60% in the FY 2064/2065, 2065/2066, 2066/2067, 2067/2068 and 2068/2069 resp. The highest ratio for the five year is 28.60 % in the FY 2068/2069 and the lowest ratio is 19.92% in 2066/2067. Findings: In the FY 2067/2068 the ratio is 22.53 which is greater than previous year. This year ratio 28.60% which is greater than previous year , which means liquidity is higher than previous year.
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In table 3.1 & Appendices, the EPS trend is fluctuating, but it is clear that the EPs of EPS of NIBL is substantially high than other competitors. The average EPS of NIBL is Rs 51.77. The highest and lowest EPS of NIBL are Rs 62.57 and Rs 37.42 resp. in the FY 2064/2065 and 2066/2067. Therefore, from above analysis we can say that the earning power of NIBL is in good condition. The trend of ROA is also fluctuating; it rises in the year 2067/68. The highest ROA was 2.20 % in the fiscal year 2067/2068 and lowest was 1.70 % in the fiscal year 2066/2067 . The above table shows that the ROA is satisfactory. However of NIBL must keep their eyes towards the situation and mobilize their working assets more to earn more profit. The average ROA is 1.91 %. In the FY 2064/2065 the ratio of net profit to loan and advances is 2.4 % but it decreases by 0.13 and became 1.975 in the fiscal year and that it continuously increases up to 2068/2069 i.e. 2.66 % In the FY 2067/2068 the ratio of cash & bank balance to current deposit was 84.68 which is less than previous year 84.78% and the FY 2068/2069 it is 136.92 which is higher than last year . The average ratio is 88.83%. Thus , a bank has highest liquidity in last five years.
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48.44
3.2 Conclusion
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On the basis of the study following recommendations are forwarded to the organization: It needs to endeavor to bear low risk by increasing the proportion of financing by the owners. It has to increase its profit to more satisfactory point by proper utilization of share members fund and other available resources. It needs to endeavor to bear low risk by increasing the proportion of financing by the owners.
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3.3 Recommendations
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Ever since the establishment of NIBL is playing a pivotal role to foster in the economy of Nepal. Strong financial position of the organization is a must to survive, grow and succeed in this world passing through tumultuous changes. The crux of this fieldwork report is to analyze the financial status of NIBL with the help of Ratio Analysis. For this purpose the liquidity ratio, leverage ratio and profitability ratio were ascertained. The liquidity ratio of the concern shows calculation of leverage ratio portrays that the financial status of the enterprise is in somewhat good condition. The profitability ratio of the organization doesnt depict a favourable condition. There has been significant diminution in its net profit from FY 2067/68 to FY 2068/69. Summing up, the bank still needs to make hard efforts to achieve better outcome.
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In the FY 2067/2068 the cash reserve ratio is 7.68 % that were lower than current year i.e. 12.33 %. The average cash reserve ratio is 10.63 %. The ratio of Saving Deposit to Total Deposit are 30.83% , 30.72 %, 42.40 %, 47.03% and 42.70 % in FY 2064/2065, 2065/2066, 2066/2067, 2067/2068 and 2068/2069 resp. In the FY 2066/2067 ratio is 42.40% which is greater than FY 2065/2066 and this years ratio is 42.70 % which is lesser than previous year which indicates liquidity has increased this year. In the FY 2067/2068 the ratio is 22.53 which is greater than previous year. This year ratio 28.60% which is greater than previous year , which means liquidity is higher than previous year.
Chapter -4
APPENDICES
Name
Ka Licensed Institutions Insurance Company Organized Institutions General Public
FY
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Appendix II
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Average
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Fig 2: Earning per Share
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51.77
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TOTAL
100%
2,409,097,700
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Average
1.91%
Average
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EPS ROA PE Ratio
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Diagram 2 :Trend Analysis of EPS, ROA & PE Ratio (Source: Appendices II , II & IV)
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PE Ratio
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Particulars
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FY 206566 FY 206667 FY 206768 FY 206869
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(Source : Appendix V)
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Fixed Deposit to Total Deposit Ratio Saving Deposit to Total Deposit Ratio Cash Reserve Ratio (CRR) Cash & Bank balance to Current Deposit Ratio Net Profit to Loans & Advances Ratio Exchange Gain to Total Income Ratio
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Bibliography
Ale, Kamal 2009, Institution Analysis, Fieldwork Assignment, Nepal Commerce Campus (NCC).
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www.nibl.com.np
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Dangol, Ratna Man 2009, Accounting For Financial Analysis & Planning . Kathmandu : Taleju Prakashan.
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Agrawal, Govinda Ram 2011, Project Management in Nepal. Kathmandu: M.K Publishers.