ANALYSIS OF FINANCIAL STATEMENT OF

JYOTI BIKASH BANK LIMITED

A Project Work Report

By

Himal Sharma
Exam Roll No.: 709278900
Tu Registration No: 7-2-955-47-2019
SHWOYAMBHU INTERNATIONAL COLLEGE
Group: Finance

Submitted To:
The Faculty of Management
Tribhuvan University,
Kathmandu

In Partial Fulfilment of the Requirements for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Lalitpur, Nepal
April, 2024
 Declaration

I hereby declare that the project work entitled ANALYSIS OF FINANCIAL STATEMENT OF
JYOTI BIKASH BANK LIMITED submitted to the Faculty of Management, Tribhuvan
University, Kathmandu is an original piece of work under the supervision of Mr. Jagdish Joshi,
faculty member Swoyambhu International College, Lagankhel, Lalitpur, Nepal, and is submitted
in partial fulfillment of the requirements for the degree of Bachelor of Business Studies (BBS).
This project work report has not been submitted to any other university or institution for the
award of any degree or diploma.

Signature:

Name of Student: Abhishek Raut

Date:

ii
 Supervisor’s Recommendation

The project work report entitled ANALYSIS OF FINANCIAL STATEMENT OF JYOTI

BIKASH BANK LIMITED submitted by Abhishek Raut Shwoyambhu International College,
Lagankhel, Lalitpur, Nepal is prepared under my supervision as per the procedure and format
requirements laid by the Faculty of Management, Tribhuvan University, as partial fulfillment of
the requirements for the degree of Bachelor of Business Studies (BBS). I, therefore, recommend
the project work report for evaluation.

Signature:
Name of Supervisor: Mr. Jagdish Joshi
Date:

iii
 Endorsement

We hereby endorse the project work report entitled ANALYSIS OF FINANCIAL STATEMENT
OF JYOTI BIKASH BANK LIMITED submitted Abhishek Raut Swoyambhu International
College, Lagankhel, Lalitpur, Nepal, in partial fulfillment of the requirements for the degree of
the Bachelor of Business Studies (BBS) for external evaluation.

Signature: Signature:
Name of Chairperson: Name of Chief/Principal:

Date: Date:

iv
 Acknowledgements

This field work report entitled "A Report on Financial Performance Analysis of JYOTI BIKASH
Bank Limited” has been prepared in partial fulfillment for the degree of Bachelor of Business
Studies (BBS) under the teachers of Swoyambhu International College. It is my privilege of
getting help and co-operation from different people. It is not possible to enumerate the names of
all of them. However, it will be a matter of injustice if I forget the names of those personalities
whose valuable suggestions and co-operation escorted me to complete this field work report.

First and foremost, I would like to offer special thanks to Jagdish Joshi Sir for their proper
suggestions. I would like to thank all the staff of JYOTI BIKASH Bank Limited for their full
support in providing all the necessary data which helped me in preparing this report. I could not
remain without thanking my teachers and lecturers who all helped me during my study of BBS
and during preparation of this report.

Abhishek Raut
BBS 4th Year
Swoyambhu International College
Lagankhel, Lalitpur, Nepal

v
 Content

Declaration.................................................................................................................................................ii
Supervisor’s Recommendation................................................................................................................iii
Endorsement.............................................................................................................................................iv
Acknowledgements....................................................................................................................................v
Content......................................................................................................................................................vi
List of Tables............................................................................................................................................vii
List of Figures..........................................................................................................................................viii
INTRODUCTION.....................................................................................................................................1
1.1 Background of the Study...................................................................................................................1
1.2 Profile of Organization......................................................................................................................5
1.3 Statement of Problems.....................................................................................................................11
1.4 Objective of The Study....................................................................................................................12
1.5. Rationale of the Study....................................................................................................................12
1.6. Review Of Literature......................................................................................................................13
1.7. Method of study..............................................................................................................................16
1.8. Limitation of the study....................................................................................................................23
CHAPTER TWO.....................................................................................................................................24
RESULT AND ANALYSIS......................................................................................................................24
2.1 Introduction.....................................................................................................................................24
2.2 Financial Statement Analysis:..........................................................................................................24
CHAPTER THREE.................................................................................................................................43
SUMMARY AND CONCLUSION.........................................................................................................43
3.1 Summary.........................................................................................................................................43
3.2 Conclusion.......................................................................................................................................43

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 List of Tables
Table 1: Cash and Bank Balance to Total Investment Ratio.........................................................25
Table 2: Cash and Bank Balance to Total Deposit Ratio..............................................................26
Table 3: Cash and Bank Balance to Total Assets Ratio................................................................28
Table 4: Current ratio...................................................................................................................29
Table 5: Return on Shareholder′ s Fund.......................................................................................31
Table 6: Return on Total Assets................................................................................................... 33
Table 7: Earnings per Share (EPS)...............................................................................................34
Table 8: Dividend per share.........................................................................................................36
Table 9: Loan and Advances to Total Deposits Ratio...................................................................38
Table 10: Loan and Advances to Fixed Deposit Ratio.................................................................40
Table 11: Loan and Advances to Total Assets Ratio.....................................................................41

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 List of Figures
Figure 1: Cash and Bank Balance to Total Investment Ratio.......................................................25
Figure 2: Cash and Bank Balance to Total Deposit Ratio............................................................27
Figure 3: Cash and Bank Balance to Total Assets Ratio...............................................................28
Figure 4: Current ratio................................................................................................................. 30
Figure 5: Return on Shareholder′ s Fund.....................................................................................32
Figure 6: Return on Total Assets..................................................................................................33
Figure 7: Earnings per Share (EPS).............................................................................................35
Figure 8: Dividend per share........................................................................................................36
Figure 9: Loan and Advances to Total Deposits Ratio.................................................................39
Figure 10: Loan and Advances to Fixed Deposit Ratio................................................................40
Figure 11: Loan and Advances to Total Assets Ratio...................................................................41

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 CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

1.1.1 Meaning of Financial Analysis

Financial analysis refers to the process of evaluating a company's financial performance and
stability. It involves assessing financial statements such as the income statement, balance sheet,
and cash flow statement to understand various aspects of the organization's financial health. The
primary goals of financial analysis are to assess profitability, solvency, liquidity, and overall
financial strength. Financial statements provide a record of financial information, which requires
analysis in order to gain more value for shareholders, management, investors, and other
interested parties. It is a technique for assessing a company's past, current, and future
performance. Many distinct techniques for financial statement analysis, such as vertical,
horizontal, and ratio analysis, are used by analyst to follow performance measurements across
financial statements. Financial analysis is crucial for investors, lenders, managers, and other
stakeholders to make informed decisions about the company's financial health, future prospects,
and investment potential. It helps in identifying strengths, weaknesses, opportunities, and threats,
guiding strategic decisions and actions to improve performance and sustainability.

1.1.2 Elements of the Financial analysis

Profitability ratios:

A crucial indicator for assessing the financial performance of banks is the profitability ratio. The
following are a few of the often-used profitability ratios in the banking industry:

1. Net interest margin (NIM): NIM is a measure of a bank's profitability that indicates how
much money it is earning from the difference between the interest it receives from borrowers
and the interest it pays to depositors. NIM is calculated by dividing the net interest income
by total interest-earning assets.
2. Return on assets (ROA): ROA is a measure of a bank's profitability that indicates how much
profit it is generating in relation to its total assets. ROA is calculated by dividing net income
by total assets.

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3. Return on equity (ROE): ROE is a measure of a bank's profitability that indicates how much
profit it is generating in relation to its shareholder's equity. ROE is calculated by dividing net
income by shareholder's equity.
4. Efficiency ratio: The efficiency ratio measures a bank's ability to control its expenses relative
to its revenue. It is calculated by dividing non-interest expenses by revenue.
5. Operating expense ratio (OER): The OER measures a bank's efficiency in managing its
operating expenses. It is calculated by dividing operating expenses by net interest income
plus non-interest income.

These statistics offer crucial information about the profitability and effectiveness of a bank in
collecting funds and controlling in costs. Financial analysts can easily grasp a bank's financial
health and performance and make wise investment decisions by examining these parameters.

Liquidity ratios

Liquidity ratios are crucial financial measurements that assess a company's capacity to pay short-
term obligations when they fall due. For banks to continue operating efficiently and meet the
needs of depositors and borrowers, it is necessary that they retain adequate liquidity. In the
banking industry, a few of the frequently used liquidity ratios are as follows:

1. Current ratio: The current ratio measures a bank's ability to pay its short-term debts with its
current assets. It is calculated by dividing current assets by current liabilities.
2. Quick ratio (also known as the acid-test ratio): The quick ratio measures a bank's ability to
pay its short-term debts with its most liquid assets. It is calculated by subtracting inventory
from current assets and dividing the result by current liabilities.
3. Loan-to-deposit ratio (LDR): The LDR measures the percentage of a bank's total loans that
are funded by its total deposits. It indicates the level of liquidity risk that the bank is taking
on. A higher LDR indicates that the bank is relying more heavily on deposits to fund its
lending activities.
4. Cash reserve ratio (CRR): The CRR is the percentage of deposits that banks are required to
hold as reserves with the central bank. It is a regulatory requirement that ensures that banks
maintain a certain level of liquidity.

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5. Loan loss coverage ratio (LLCR): The LLCR measures a bank's ability to absorb losses from
bad loans. It is calculated by dividing the bank's loan loss reserves by its total non-
performing loans.

These liquidity measures shed light on a bank's capacity to fulfill short-term obligations and
control liquidity risk.

Leverage Ratio:

Leverage ratios are financial ratios that measure the amount of debt a company is using to
finance its operations and the level of risk associated with that debt. In the banking sector,
leverage ratios are used to measure the amount of capital a bank has in relation to its assets and
the level of risk associated with that capital structure.

Some of the commonly used leverage ratios in the banking sector include:

1. Debt-to-equity ratio: The debt-to-equity ratio measures the proportion of debt to equity that a
bank is using to finance its operations. It is calculated by dividing total debt by shareholder's
equity.
2. Equity-to-assets ratio: The equity-to-assets ratio measures the proportion of a bank's assets
that are funded by shareholder's equity. It is calculated by dividing shareholder's equity by
total assets.
3. Tier 1 capital ratio: The tier 1 capital ratio is a regulatory requirement that measures a bank's
ability to absorb losses. It is calculated by dividing the bank's tier 1 capital (which includes
common equity and retained earnings) by its risk-weighted assets.
4. Total capital ratio: The total capital ratio measures the amount of capital a bank has in
relation to its risk-weighted assets. It is calculated by dividing the bank's total capital (which
includes both tier 1 and tier 2 capital) by its risk-weighted assets.
5. Debt-to-assets ratio: The debt-to-assets ratio measures the proportion of a bank's assets that
are financed by debt. It is calculated by dividing total debt by total assets.

These leverage ratios provide important insights into a bank's capital structure and level of risk.
By analyzing these ratios, financial analysts can assess a bank's ability to absorb losses, manage
its debt, and maintain a stable financial position. In addition, regulatory authorities use leverage
ratios to ensure that banks maintain a certain level of capital and manage their risk effectively.
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 Efficiency Ratios:

Efficiency ratios are financial ratios that measure a company's efficiency in managing its
resources and assets. They help to evaluate how well a company is utilizing its assets to generate
revenue. Some common activity ratios include:

i. Inventory turnover ratio: It measures the number of times a company sells and replaces its
inventory during a specific period. A higher inventory turnover ratio indicates that the
company is efficiently managing its inventory and generating sales.
ii. Accounts receivable turnover ratio: It measures the number of times a company collects its
accounts receivable during a specific period. A higher accounts receivable turnover ratio
indicates that the company is efficient in collecting payments from its customers.
iii. Accounts payable turnover ratio: It measures the number of times a company pays its
accounts payable during a specific period. A higher accounts payable turnover ratio indicates
that the company is efficiently managing its payments to suppliers.
iv. Fixed asset turnover ratio: It measures the efficiency of a company in utilizing its fixed
assets, such as machinery and equipment, to generate sales. A higher fixed asset turnover
ratio indicates that the company is efficiently utilizing its fixed assets.
v. Total asset turnover ratio: It measures the efficiency of a company in utilizing its total assets
to generate sales. A higher total asset turnover ratio indicates that the company is efficiently
utilizing its assets to generate revenue.

Efficiency ratios are significant because they offer light on the effectiveness and efficiency of an
organization's operations. Investors and analysts can assess a company's performance and
pinpoint areas for development by contrasting its activity ratios with those of its rivals or the
industry average. Efficiency ratios play a critical role in financial analysis by providing a
comprehensive view of a company's operational efficiency, financial health, and potential for
future growth. They are essential tools for stakeholders seeking to make informed decisions
about investment, lending, and strategic management.

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1.1.3 Commercial Banking Scenario in Nepal

The national bank of Nepal is called Nepal Rastra Bank. In accordance with the Nepal Rastra
Bank Act of 2012, it was founded on Baisakh 14, 2013 B.S. It develops policies to regulate the
work done by the banks. It formulates a policy to control the function carried out by the banks.
At present, NRB has allowed the commercial banks to fix the interest rate on deposit as well as
credit on the basis of cost and availability of financial resources. This policy framework has
introduced an element of competitiveness in the financial sector.

The first commercial bank in Nepal was established in 1994 under the Nepal Bank Act of 1993
as "Nepal Bank Limited." The government established "Rastriya Banijya Bank" in accordance
with the Banijya Bank Act, 2021 B.S. The government provided all the funding. Similar to this,
the "Agriculture Development Bank" was founded on January 2, 1968, and is wholly owned by
the government with the aim of developing the agriculture sector.

As per the latest data from Nepal Rastra Bank, at present, there are 20 commercial banks, 17
development banks, 17 Finance Companies, 52 Microfinance companies and 1 Infrastructure
Deveopment Bank operating in Nepal. Currently there are 7 joint venture banks in operation in
Nepal with their branches located in different part of the country.

1.2 Profile of Organization

Jyoti Bikash Bank Limited is a national level development bank engaged in commercial banking
activity with category "Kha" license from Nepal Rastra Bank.The Bank started its operation from
9th Shrawan 2065. Established by a core group of promoters coming from the employees of
Nepal Electricity authority among other businessmen, professionals and common citizens, the
bank had an original focused vision of promoting hydropower sector through lending credit
facilities to potential hydro projects. Continuously assessing the needs of the common citizens
and economy of the country on the whole, the Bank has by now established itself as a financial
institution catering to a large segment of the society with the cause of the citizens' needs at the
Centre.

With the growing economy and a change in the demographic mix, more and more people are
getting engaged into commercial and financial activities and the need of credit and other banking
facilities has been on a tremendous rise. From personal financial needs to the financial needs of

5
small and medium size businesses to the needs of big corporates, the Bank has been at the
forefront of supporting the national goal of bringing about prosperity in the lives of the citizens.

Starting with an initial paid-up capital of Rs. 259 million, the Bank has reached a paid-up capital
of Rs. 4.26 billion. In the journey of past 13 years, the Bank merged with Jhimruk Bikas Bank
Limited (FY 2073/74) and has acquired 2 more regional level development banks in, Raptiveri
Bikas Bank Limited (FY 2074/75) and Hamro Bikas Bank Limited (FY 2075/76).

The Bank currently has 121 branches across the county including 3 extension counters. The Bank
has also been providing services from network of ATM machines (75) and is in the process of
extending its reach through both branch and ATM expansion apart from reaching the growing
techno-friendly customers with wide range of digital banking products.

Jyoti Bikash Bank has set a clear set of Purpose, Vision, Core values and business strategy which
truly reflects its utmost urge to serve the citizens of the Country through all possible avenues.

Vision

To be established as an institution with the larger cause of citizens and society at the center,
delivering modern, informed and easy financial services by building upon best practices of risk
management and operation system.

Mission

Establishing a system of decision making through extraction and analysis of information related
of banking industry, having regard to the economic and social dimensions prevalent in national
and international context, ensure that dispersed economic resources and tools are concentrated,
mobilized and progressed towards productive sector through optimal use of modern information
technology; thus providing equitable return to stakeholders including customers, shareholders,
employees, society and the government while acting as a trustworthy financial intermediary.

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Motto

The motto or slogan of Jyoti Bikash Bank is "Your Partner for Progress." This motto reflects the
bank's commitment to partnering with its customers and stakeholders in their journey towards
financial progress and development. It underscores the bank's role in supporting economic
growth and prosperity by providing reliable financial solutions and services to its clients.

Strategic Focus

The strategic focus of Jyoti Bikash Bank revolves around several key pillars aimed at achieving
sustainable growth and delivering value to its stakeholders. While specific strategies may evolve
over time based on market dynamics and business objectives, the typical strategic focus areas for
Jyoti Bikash Bank include:

1. Customer-Centric Approach: Focusing on understanding and meeting the diverse

financial needs of individual customers, businesses, and corporate clients. This includes
offering personalized banking solutions and enhancing customer experience through
innovative products and services.
2. Expansion and Network Growth: Continuously expanding its branch network and
service delivery channels to reach more customers across different regions of Nepal. This
expansion aims to improve accessibility and convenience for customers while
strengthening the bank's market presence.
3. Digital Transformation: Embracing technology and digital solutions to enhance
operational efficiency, streamline processes, and offer convenient banking services such
as internet banking, mobile banking, and digital payment solutions. This includes
investments in IT infrastructure and digital platforms to meet the evolving preferences of
customers.
4. Risk Management and Compliance: Ensuring robust risk management practices and
compliance with regulatory requirements to maintain financial stability and safeguard
stakeholders' interests. This involves implementing stringent risk assessment frameworks
and adhering to governance standards set by Nepal Rastra Bank and other regulatory
authorities.
5. Product Innovation and Diversification: Continuously innovating and diversifying its
product portfolio to cater to emerging market trends and customer preferences. This may
7
 include introducing new financial products and services tailored to specific customer
segments, such as retail banking, corporate banking, and SME financing.
6. Corporate Social Responsibility (CSR): Demonstrating commitment to CSR initiatives
by contributing to community development, education, healthcare, environmental
sustainability, and other social causes. This aligns with the bank's values and reinforces
its role as a responsible corporate citizen.
7. Enhancing Stakeholder Value: Prioritizing shareholder value creation through
sustainable profitability and prudent financial management practices. This includes
optimizing operational efficiencies, managing costs effectively, and delivering
competitive returns to shareholders.

These strategic focus areas collectively guide Jyoti Bikash Bank in achieving its long-term
objectives of growth, profitability, customer satisfaction, and community impact while
navigating the competitive landscape of the banking industry in Nepal.

1.2.1 Shareholding Composition

The present shareholding pattern of bank is presented below:

Particulars % Amount

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 Domestic Ownership
"A" Class Licensed
- -
Institutions
Other Licensed Institutions - -
Other Institutions - -
Public 49.00% 2,153,936,820
Other (promoter) 51.00% 2,241,849,065
Foreign Ownership - -
Total 100.00% 4,395,785,885

1.2.2 JBBL Network Overview

The JBBL’s network overview is presented below:
Province wise Branch No. of Branches
Province 1 14
Madhesh Pradesh 12
Bagmati Pradesh 52
Gandaki Pradesh 12
Lumbini Pradesh 26
Karnali Pradesh 3
Sudur Paschim Pradesh 4
Total Branch 123

1.2.3. No. of Staff: (As of 2079-80)

Total number is 945 for which classification is presented below:

On the basis of Designation of Employees:

Position/Level No. of Employees

Chief Executive Officer 1
Senior Deputy Chief Executive
1
officer
Deputy Chief Executive officer 2
Assistant General Manager 2
Manager Level 19
Officer Level 144
Supporting Level 636
Associate Level 140
Total 945

On the basis of types of services that the employees provide:

Type of Services No. of Employees

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 Permanent and Probatory (other than contractual) 783
Contract 162
Total 945

1.2.4. Composition of Board of Directors

The composition of board of directors of this Bank consists of:

Name of Directors Designation

Mr. Hari chandra khadka Chairman
Mr. Santosh Adhikari Director
Mr. Ram Kumar Shrestha Director
Mr. Dhruba Koirala Director
Mrs. Mana Maharjan Director
Mr. Naresh Raj Acharya Director
Mr. Surendra Bahadur Nepali Independent Director
Baldev Thapa Company Secretary

1.2.5. Composition of Management Team

The management team of this Bank comprises:

Name of Person Designation

Mr. Kapil Dhakal Chief Executive Officer
Mr. Prakash Baral Deputy Chief Executive officer
Mr. Sushil Kumar Sharma Deputy General Manager/ Chief Credit officer (COO)
Mr. Roshan Thapa Chief Risk Officer (CRO)
Mr. Bikash Ranabhat Chie- Corporate Credit and Credit Sales Management
Chief Marketing Officer, Company Secretary, Chief Human
Mr. Baldev Thapa
Resources and Chief Operating Officer (COO)
Mr. Dilip Raj Baral Recovery Department head
Mr. Raja Ram Thapa Cluster Head- Kathmandu Cluster office "A" and "B"
Ms. Uma Shestha Chief Finance Officer
Mr. Krishna Prasad Osti Head- Legal
Ms. Apeksha Paudel In charge- Internal Audit

1.3 Statement of Problems

A statement of the problem is a brief description of an issue to be addressed or a condition to be
improved upon. It aims to identify and explain the problem.

10
In the present context of Nepal, commercial banks have good performance. Based on the
profitability and productivity of commercial banks, the public has confidence in their
performance. However, various environmental factors, the state of the economy, the structure of
capital and money market, government policies, taxation policies, and various internal factors
have influenced upon financial performance and position of commercial banks. In These
circumstances, it is highly useful to make the study on the financial statement of JYOTI
BIKASH BANK LIMITED (JBBL).

Profitability position and stock prices are the general factors considered for evaluating the
financial performance of JBBL. However, one can raise the question, “Are these the only factors
to reflect the performance of the bank?”

Thus, the main problem of the study is to inquire into the financial performance of JYOTI
BIKASH BANK LIMITED (JBBL).

This study is targeted to find out answers to the following questions:

i. What is the financial performance of JBBL?

ii. Does the overall financial statement depict the financial position indicating any special
strengths and weaknesses of the Bank?
iii. Is JBBL utilizing its assets efficiently?
iv. JBBL is considered to be operationally efficient. But how far it is efficient?

In this context, the main purpose of the study is to analyze the financial performance of JYOTI
BIKASH BANK LIMITED in terms of turnover, profitability, liquidity, and efficiency in
operation.

1.4 Objective of The Study

It defines the purpose of this study. Simply, it helps to find out the answer to the questions stated
above. The general objective of this study is to analyze the financial statements of JYOTI
BIKASH BANK LIMITED (JBBL) regarding the financial performance and position.

Other specific objectives are as follows:

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 i. To evaluate the financial position of JBBL.
ii. To analyse the financial performances through the use of appropriate financial and
analytical tools.
iii. To identify the profitability position i.e., Earning per share (EPS), Dividend per share
(DPS), and Return on Asset (ROA).
iv. To measure liquidity, solvency, and efficiency.
v. To determine the past, and present performance of the company.

1.5. Rationale of the Study

Optimum utilization of funds makes a better impact on the economy of the nation. NBL is one of
the government owned national banks. So, it has been chosen for the study with below
limitations:

• Importance to shareholders.
• Importance to the management bodies of the bank for the evaluation of the performance
of bank.
• Importance to "outsiders" which are mainly the customers, financing agencies, stock
exchanges etc.
• Importance to the government bodies or the policy makers such as the central bank
• Interested outside parties such as- investors, customers (depositors as well as credit
takers), and competitors, personnel of the banks, stockbrokers, dealers, and market
makers.

So, this study helps to identify its unseen strengths and weakness regarding financial as well as
credit administration.

1.6. Review Of Literature

Literature review is the study of the available literature in one’s field of research. The literature

provides us with knowledge of the status of their field of research. Past study knowledge

provides foundation to the present study. So, analyzing and presenting the following parts define

12
this chapter:

i. Origin of Bank
ii. Conceptual/Theoretical review
iii. Review of related journal, articles

Detail explanation of the parts in this chapter is explained below:

i. Origin of Bank
The word "bank" has several roots, including the German word "bank," which refers to a
joint stock company, the Latin word "bank," the Italian word "bank," and the French word
"banquet," which denotes a bench. The first bank was founded as a public institution under
the name "Bank of Venice" in Venice, Italy. The "Bank of Barcelona" and "Bank of Geneva"
were subsequently founded in 1401 and 1407, respectively. A renowned bank called "Bank
of Amsterdam" was founded in the year 1609 A.D. In actuality, the "Bank of England" in
1694 A.D. marked the beginning of modern banking. However, it wasn't until 1833 A.D. that
the modern joint stock banks were founded in England. The ‘Banque De France’ was
established in France in 1807 A.D. Later, the banks were established in other parts of the
world.

iv. Conceptual/Theoretical review

The bank's main goals are to mobilize into the most profitable industry and to collect as
many deposits from customers as possible. A bank cannot make money if it does not use the
resources it processes of determining the bank in question's financial strengths and
weaknesses. It is the process of identifying the concerned bank's strengths and weaknesses.
Financial statement analysis is a technique for looking over and analysing a company's
accounting reports (Financial statements) to assess its past, present, or anticipated future
performance. Better economic decisions can be made thanks to the financial statements
review process.
It is performed to determine the following:
• Profitability
• Liquidity
• Solvency

13
 • Efficiency
The function or the performance of finance can be broken down into three major decisions
i.e., the investment decision, the financing decision, and the dividend decisions. An optional
combination of the three decisions will maximize the value of the firm.

iii. Review of literature

According to Brigham E.F., L.G. Gapenski, (1992), “financial analysis means assessing the
viability, stability and profitability of a project. It also includes techniques used for
determining
the needs of a business.”
According to Ross, Peter S, (2000), “Financial analysis refers to the assessment of a
businessto
deal with the planning, budgeting, monitoring, forecasting, and improving of all financial
details within an organization.”
Tarawneh (2006) analysed the financial statement of five Omani banks for the financial
period
1999-2003. In addition, he used simple regression to estimate the impact of asset
management,
operation efficiency, and bank size on the financial performance of these banks. The results
showed that financial performance of the banks was strongly and positively influenced by the
operational efficiency, asset management, and bank size.
Almazari (2011) in his study attempted basically to measure the financial performance of
seven
Jordanian commercial banks for the period 2005-2009, by using simple regression in order to
estimate the impact of independent variable represented by; the bank size, asset management,
and operational efficiency on dependent variable financial performance represented by;
return on assets and interest income size. It was found that banks with higher total deposits,
credits, assets, and shareholders’ equity do not always mean that has better profitability
performance. Also found that there exists a positive correlation between financial
performance and asset size, asset utilization and operational efficiency, which was also

14
confirmed with regression analysis that financial performance is greatly influenced by these
independent factors.
Haque and Sharma (2011), their research studied the hypotheses tested imply that there are
significant differences amongst Saudi banks. The financial performance of banks in Saudi
Arabia is studied on the basis of financial variables and ratios through the help of Spearman's'
rank correlation method. Although, benchmarking performance of banks is done using
advanced linear programming models, this study attempts to develop an efficiency frontier
on the basis of simple linear regression. Albeit certain restrictive assumptions, this study
identifies Al Rajhi bank to be the best bank to which other banks could look up to and
justifies this model on the basis of parsimony.
Almumani (2014) the purpose of his study is to analyze and compare the performance of
Saudi banks that listed in stocks market for the period 2007-2011. The study is an evaluator
in nature, drawing sources of information from secondary data. The financial performance of
banks is studied on the basis of financial ratios and variables. Financial performance was
measured by two approaches; trend analysis and inter-firm analysis. It was found that
increasing of assets, operating expenses, and cost to income causes a decrease in Saudi
bank’s profitability, while increasing of operating income causes an increase in the
profitability of Saudi Banks. Analysis shows that all the variables of study have a positive
mean value and all banks are generating income. Saudi joint venture banks proved to be more
proficient in generating profits, absorbing loan losses and dominating in ROE, while Saudi
established banks have more capacity of absorbing asset losses and dominating in ROA.
Kumal (2015) evaluated the financial performance of M/s Kumari Bank Limited, a
commercial bank in Nepal taking the period of three financial years in considerations, from
FY 2011/12 to FY 2012/13. The results showed that the financial position of M/s Kumari
Bank Limited is satisfactory and in good position.
In the Gulf, Samad (2004) investigated the performance of seven locally incorporated
commercial banks during the period 1994-2001. Financial ratios were used to evaluate the
credit quality, profitability, and liquidity performances. The performance of the seven
commercial banks was compared with the banking industry in Bahrain which was considered
a benchmark. The article applied a student’s t-test to measure the statistical significance for

15
the measures of performance. The results revealed that commercial banks in Bahrain were
relatively less profitable, less liquid and were exposed to higher credit risk than the banking.

1.7. Method of study

A research project is an organized, systematic, data-driven, critical, scientific enquiry or
investigation into a particular problem with the aim of identifying solutions. This study
focuses on the systematic and planned handling of data collection, analysis, and
interpretation. It consists of the research design, population and sample study, data sources,
data processing method, and data analysis technique.
This chapter describes the methodology employed in this study.
The applied methodology will be used in order to accomplish the study's goals.

1.7.1 Research Design:

“Research design is a master plan specifying the methods and procedures for collecting and
analyzing the needed information.” (Zikmund, 2007)
It is the official schedule of events for a research project or its blueprint. To conduct a
research project, it requires the researchers to outline their research questions, methodologies,
implementation processes, and data collection and analysis procedures. The research design
then focuses on how data will be collected, the research tools that will be used, and the
sampling strategy that will be used.
Specifically, research design describes the general plan for collecting, analysing and
evaluating data after identifying the facts and findings. What the researcher wants to know
and What must be dealt with to obtain the required information? (Wolf & Pant, 2002:50)
It includes an outline of what the investigator will do from writing the hypotheses and their
operational implications to the final analysis of data. Generally, a common research design
possesses the five basic elements viz.
(i) Selection of problem
(ii) Methodology
(iii) Data gathering
(iv) Data analysis and

16
(v) Report writing.

1.7.2 Population and Sample

The entire group of people, events, or interesting objects that the researcher wishes to study
is referred to as the population. It is typically impossible for researchers to survey every
single population group. In the conducted research, a subset of the population is used as a
proxy for the entire population. To conduct our study, a sample of objects and components
from the population was selected. It includes a few population-based observations that were
chosen.

There are altogether 20 commercial banks functioning all over the nation and most of their
stocks are traded actively in the stock market. Here JBBL have been selected as sample for
our study. Similarly, financial statements of this bank for 3 years have been taken as samples
for the same purpose.

1.7.3 Nature and Sources of Data

In regards to the primary data, some personal views and ideas of individual respondent are
collected. But in case of entire study, secondary data which are used are basically of the
following nature:

▪ Most of the data taken for the analysis is collected from the material published by the
concerned banks through their annual reports.

▪ Since the stock of JBBL is listed in NEPSE, the figures are all most reliable and suitable
too.

In order to fulfill the objective of this research work, all the secondary data are collected,
processed and tabulated in time series and bar diagram. The reliability of the data compiled
in the annual report of the bank is judged and confirmed by an independent auditor.

So, the major sources of secondary data used for this study are as follows:

 Annual Report of JBBL (FY 2077/2078 to FY 2079/2080.)

 Official Website of JBBL
 NRB circulars.
 NRB directives.

17
1.7.4 Data Processing Procedures
Data collected from various sources is in raw form. The method of analysis is directed to find
the actual financial performance of the bank. The obtained data are presented in the tabular
form, diagrams, and graph with the supporting interpretation. The collected data are
accumulated in an organized way and are grouped for calculation using the method given by
the formulas.

1.7.5 Data Analysis Tools

Analysis and presentation of the data is the core of each research work. Financial and
statistical tools are considered as the most reliable tools to accomplish the objective of the
study. These tools are used to make the analysis more effective, convenient, reliable, and
authentic. The various results obtained with the help of financial, accounting, and statistical
tools are tabulated under different headlines. Such results are interpreted to portray the
current position and performance of the bank. Two kinds of tools have been used to achieve
certain goals.

1. Financial Tools
2. Statistical Tools

1. Financial Tools

It basically helps to identify the financial strengths and weakness of the firm by establishing
a relationship between the items of the financial position and statement of profit or loss
account.

While processing data in the table and charts following tools were used:

a. Liquidity Ratio
b. Profitability Ratio
c. Asset Management Ratio

a. Liquidity Ratio

18
 The term "liquidity" describes a company's capacity to cover its ongoing obligations.
Therefore, liquidity ratios are used to assess a company's capacity to fulfill its immediate
obligations. From them, it is possible to assess the firm's current cash solvency as well as its
capacity to continue operating in the face of difficulties. In other words, liquidity refers to the
capacity of cash and other assets to meet liabilities such as accounts payable and short-term
debt. It is distinguished by the use of turning an asset into cash at a low cost. Liquid assets
mainly include cash and bank balances money at call and short notice, investment in
government securities such as treasury bills, development bonds, saving bonds etc.

i. Cash and Bank Balance to Total Investment Ratio

ii. Cash and Bank Balance to Total Deposits Ratio
iii. Cash and Bank Balance to Total Assets Ratio
iv. Current Ratio

i. Cash and Bank Balance to Total Investment Ratio

This ratio demonstrates the banks' ability to cover their investment with quick funds. Higher
ratios indicate greater liquidity and deposit coverage capacity, and vice versa. You can figure
it out by dividing deposits by cash and bank balance.

This ratio can be calculated using the following formula.

Cash∧Bank Balance
Cash and Bank Balance to Total Investment Ratio =
Total Investment

ii. Cash and Bank Balance to Total Deposits Ratio

This ratio is computed to disclose the soundness of the company to compute cash and
bank balance made of total deposits.

It can be expressed as:

Cash∧Bank Balnce
Cash and Bank Balance to Total Deposit Ratio =
Total Deposit

19
iii. Cash and Bank Balance to Total Assets Ratio

It can be expressed as:

Cash∧Bank Balnce
Cash and Bank Balance to Total Assets Ratio =
Total Assets

iv. Current Ratio

Current Ratio is the ratio that indicates the relationship between current assets and current
liabilities.

It can be expressed as:

Current Assets
Current ratio =
Current Liabilities

b. Profitability Ratio

The ability to generate a profit or gain financially is referred to as profitability. It

describes the business's capacity to use its resources to produce more revenue than it
spends.

Like this, profitability ratios are typically regarded as the fundamental bank financial
ratio for assessing how well the bank is doing in terms of profitability. In general, a
profitability ratio that is relatively higher than that of the competitor(s), industry
averages, guidelines, or similar ratios from prior years is viewed as a sign of the bank
performing better.

i. Return on Shareholder’s Fund

ii. Return on Total Assets
iii. Earnings per Share (EPS)
iv. Dividend Per Share (DPS)

i. Return on Shareholder’s Fund

20
 This ratio, also called Return in Proprietor’s Fund or Return in Net worth. It measures the
percentage of net profit to the average shareholder’s fund.

It can be expressed as

Net Profit after Tax

Return on Shareholder′ s Fund = '
×100
Shareholde r s Fund

ii. Return on Total Assets

Return on Total Assets measures the profitability of the total investment of the company.
The ratio is computed by dividing net income after tax by average total assets.

It can be expressed as:

Net Profit after Tax

Return on Total Assets = × 100
Total Assets

iii. Earnings per Share (EPS)

EPS simply shows the profitability of the firm on a per share basis. It is calculated from
the point of view of the ordinary shareholders.

It can be expressed as:

Net Profit after Tax

Earnings per share = × 100
Number of Shares

iv. Dividend Per Share (DPS)

This ratio is calculated by dividing the Dividend payable to Equity Shareholders by

Number of Equity Shares.

Dividend per share =

Dividend Payable ¿ Equity Shareholders ¿ ×100
No . of equity shares outstanding

c. Asset Management Ratio

It measures how effectively the company uses its assets and is also known as a turnover
ratio, efficiency ratio, or assets management ratio. Turnover refers to the frequency with

21
 which assets pass from a firm's operations into sales. If all else is equal, a company that
has a higher rate of turnover or conversion is more effective at managing and using its
resources. This heading examines various ratios.
i. Loan and Advances to Total Deposits Ratio
ii. Loan and Advances to Fixed Deposit Ratio
iii. Loan and Advances to Total Assets Ratios

i. Loan and Advances to Total Deposits Ratio:

Commercial banks utilize the outsider’s fund for profit generation purpose. Loan and
advances to deposit ratio shows whether the banks are successful to utilize the outsiders’
funds (i.e. total deposits) for the profit generating purpose on the credit and advances or
not.
Loan∧ Advance
Loan and Advances to Total Deposits Ratio =
Total Deposits
ii. Loan and Advances to Fixed Deposit Ratio

Fixed deposits are the long-term interest-bearing obligations and credits and advances is
the major sources of investment. This ratio measures how many times the amount is used
in credits and advances in comparison to fixed deposit for the income generating purpose.

Loan∧ Advance
Loan and Advances to Fixed Deposit Ratio =
¿ Deposits

iii. Loan and Advances to Total Assets Ratios

It measures the ability in mobilizing total assets into credits and advances for profit
generating income. The following formula is used to obtain this ratio.

Loan∧ Advance
Loan and Advances to Total Assets Ratio =
Total Assets

1. Statistical Tools
For supporting the study, statistical tools have been used under it.
i. Mean

22
 ii. Standard Deviation
iii. Coefficient of Variation

i. Mean
The statistical mean refers to the mean or average that is used to derive the central tendency
of the data in question. It is determining by adding all the data points in a population and then
dividing by total number of points.
It can be calculated as:

Mean =
∑X
N

ii. Standard Deviation

Standard deviation is a statistic used as a measure of the dispersion in a distribution, equal to

the square root of the arithmetic mean of the squares of the deviations from the arithmetic
mean.

It can be calculated as:

Standard Deviation (S.D) =

√ ∑ (X −Mean)2
N

iii. Coefficient of Variation

It is a standardized measure of dispersion of a profitability distribution. It is often expressed

as a percentage, and is defined as the ratio of the standard deviation to the mean.

It can be calculated as:

S. D
Coefficient of Variation (C.V) =
Mean

1.8. Limitation of the study

Limitation tends to narrow the area of study. It is caused due various undeniable circumstances.
The major limitations of this study are mentioned below:

23
 i. The Research is based on records of 3 fiscal years’ analysis only i.e., from FY 2077/2078
to FY 2079/2080.
ii. The researcher has used only some statistical tools for the presentation and analysis of
data.
iii. Most of the data used in this study are based on secondary sources mainly the official
website of JYOTI BIKASH bank limited
iv. The main focus is given to the quantitative aspect rather than the qualitative aspect.
v. The study is based on JYOTI BIKASH bank limited only.
vi. It is only for partial fulfilment of Bachelor of Business Studies (BBS).
vii. The required time duration to complete the proposed study is 1 month.
viii. Tentative Time Frame

24
 CHAPTER TWO

RESULT AND ANALYSIS

2.1 Introduction
In order to achieve the goal of this study, this chapter deals with the presentation, analysis, and
interpretation of pertinent data from JYOTI BIKASH Bank Limited. The data have been
competently evaluated in accordance with the research approach as described in the third chapter
of this study. This chapter's goal is to introduce the mechanisms for analyzing and interpreting
data. Financial ratio analysis and statistical analysis are just two examples of the various
analytical techniques and instruments that are used.

2.2 Financial Statement Analysis:

The practice of examining a company's financial statements in order to make decisions and
determine the overall health of an organization is known as financial statement analysis. To
provide a good view of the project's viability, financial analysis is done using a variety of
financial techniques. It is a technique for assessing a company's past, present, and future
performance. To determine the firm's liquidity, profitability, leverage, ability to service debt and
interest, and ability to service debt, a financial analysis is conducted. In the preceding chapter,
the idea of financial statement analysis was covered. Here, we use accounting tools to examine
and analyze the data.

2.2.1 Liquidity Ratio

Liquidity refers to the ability of a firm to meet its short- term or current obligations. So liquidity
ratios are used to measure the ability of a firm to meet its short-term obligations. Inadequate
liquidity can lead to unexpected cash short falls that must be covered 5at excessive costs
reducing profitability. In the worst case, inadequate liquidity can lead to the liquidity insolvency
of the institution. To find - out the ability of the bank to meet their short-term obligations, which
are likely to mature in the short period, the following ratios are developed under the liquidity
ratios to identify the liquidity position.

25
i. Cash and Bank Balance to Investment Ratio:
This shows the ratio between cash & bank balance to Investment. Cash and bank balance is the
outcome of deposit of customers plus other income and reserves of the bank. Bank is liable to
customer to pay out upon demand of customers, so we are trying to find the comparative study
between them.

Cash∧Bank Balance
Cash and Bank Balance to Total Investment Ratio =
Total Investment

Table 1: Cash and Bank Balance to Total Investment Ratio

(Amount in Rs.)
Fiscal Year Cash and Bank Balance Total Investment Ratio Percentage
2077/78 5,542,489,906.00 7,595,466,381.00 0.73 -
2078/79 11,158,580,565.00 7,322,187,465.00 1.52 108%
2079/80 8,464,914,658.00 8,422,945,191.00 1.00 -34%
Mean 1.09
SD 0.40
CV 37%
Source: Annual Report of JBBL

Figure 1: Cash and Bank Balance to Total Investment Ratio

Cash and Bank Balance/Total Investments

1.60

1.40

1.20

1.00

0.80

0.60

0.40

0.20

-
2077/78 2078/79 2079/80

26
The above Table 1 and Figure 1 reveals that the Cash and Bank Balance to Total Investment ratio
is increasing in 2078/79 and decreasing in 2079/80. JBBL’s Cash and Bank Balance to Total
Investment ratio is the highest of 1.52 times in 2078/79 and lowest in year 2077/78 of 0.73 times.

The average is 1.09 times greater than 1. Thus, it means that JBBL can meet the demand of
current depositors during the research period.

Similarly, the standard deviation of the data analyzed is 0.40 which is lower than the mean, it
reveals that most of the numbers are close to the average. And the cash and bank balance and
total investment values are less volatile.

Likewise, the CV represents the ratio of standard deviation to mean. The CV obtained here is 37
percent which means that the ratio of standard deviation to mean is low. A CV lower than 1
indicates that the standard deviation (risk) of returns is relatively low compared to the mean
return. This suggests that the investment or portfolio is achieving its expected returns with less
variability, which is typically preferred by investors who prioritize stability and predictability in
returns.

ii. Cash and Bank Balance to Total Deposit Ratio:

This cash & bank balance to total deposit ratio shows that percentage relation between them. It
means the liquid balance available in respect to total deposit of the bank whereas the difference
between the cash & bank balance to total deposit is said to be the investment of the bank.

Cash∧Bank Balnce
Cash and Bank Balance to Total Deposit Ratio =
Total Deposit

Table 2: Cash and Bank Balance to Total Deposit Ratio

(Amount in Rs.)
Fiscal Year Cash and Bank Balance Total Deposit Ratio Percentage
2077/78 5,542,489,906.00 49,557,561,243.00 0.11 -
2078/79 11,158,580,565.00 53,792,999,844.00 0.21 9%
2079/80 8,464,914,658.00 61,284,476,383.00 0.14 14%
Mean 0.15
SD 0.05

27
 CV 3%
Source: Annual Report of JBBL

Figure 2: Cash and Bank Balance to Total Deposit Ratio

Cash and Bank Balance/Total Deposits

0.25

0.20

0.15

0.10

0.05

-
2077/78 2078/79 2079/80

The above Table 2 and Figure 2 shows that the cash and bank balance to total deposit ratio of
JBBL is in fluctuating trend. JBBL’s cash and bank balance to total deposit ratio is the highest of
0.21 times in 2078/79 and lower in the year 2077/78 of 0.11 times. The ratio over the past 3 years
in terms of percentage also reveals fluctuation. Ratio is found to have increased in the year
2078/79 whereas decreased in the year 2079/80.

The average is 0.15 which is lower than 1. It means that JBBL has more total deposit than cash
and bank balance. In this situation, there is insufficient cash on hand to pay off all the deposit of
the customers. This may not be bad news if the bank has the condition to extend normal credit
terms to the suppliers and very little credit extended to its customers.

Similarly, the standard deviation of data analyzed is 0.05 which is very much lower than the
mean, it means that most of the numbers are close to the average. And cash and bank balance and
total deposit are less volatile.

28
Likewise, the CV shows the extent of variability of the data in relation to the mean of the
population. The CV obtained here is 3 percent which means that the ratio of SD to mean is low.
The lower the ratio of SD to mean, better the risk return trade off.

iii. Cash and Bank Balance to Total Assets Ratio:

This cash and bank balance to total assets ratio shows the relation between them. The cash flow
to total assets ratio shows investors how efficient the business is at using its assets to collect cash
from sales and customers.

Cash∧Bank Balnce
Cash and Bank Balance to Total Assets Ratio =
Total Assets

Table 3: Cash and Bank Balance to Total Assets Ratio

(Amount in
Rs.)
Fiscal Year Cash and Bank Balance Total Assets Ratio Percentage
2077/78 5,542,489,906.00 60,174,380,893.00 0.09 -
2078/79 11,158,580,565.00 71,407,867,243.00 0.16 70%
2079/80 8,464,914,658.00 72,785,964,910.00 0.12 -26%
Mean 0.12
SD 0.03
CV 4%
Source: Annual Report of JBBL

29
 Figure 3: Cash and Bank Balance to Total Assets Ratio

Cash and Bank Balance/ Total Assets

0.18
0.16
0.14
0.12
0.10
0.08
0.06
0.04
0.02
-
2077/78 2078/79 2079/80

Table 3 and Figure 3 shows that the cash and bank balance to total assets ratio of JBBL is in
fluctuating trend. JBBL’s cash and bank balance to total deposit ratio is the highest of 0.16 times
in 2078/79 and lower in the year 2077/78 of 0.09 times. The ratio over the past three years in
terms of percentage also reveals the fluctuation. Ratio is to be found to increase in 2078/79 and
decrease in 2079/80.

The average is 0.12 which is lower than 1. It means that JBBL will not be able to pay off all its
liabilities with available cash and cash equivalents.

Similarly, the standard deviation of data analyzed is 0.03 which is much lower than the mean, it
means that most of the numbers are close to the average. And cash and bank balance and total
assets are less volatile.

Likewise, the CV shows the extent of variability of the data in relation to the mean of the
population. The CV obtained here is 4 percent which reveals that the ratio of SD to mean is low.
The lower the ratio of SD to mean, better the risk return trade off.

iv. Current Ratio

This ratio is used to find the relation between current assets and current liabilities of the bank.
The current ratio is a liquidity ratio that measures a company's ability to pay short-term
obligations or those due within one year.

30
 Current Assets
Current ratio =
Current Liabilities

Table 4: Current ratio

(Amount in Rs.)
Fiscal Year Current Assets Current Liabilities Ratio Percentage
2077/78 23,669,003,956.00 25,596,130,278.00 0.92 -
2078/79 33,210,969,692.00 22,465,303,612.00 1.48 60%
2079/80 25,776,041,722.00 24,232,450,552.00 1.06 -28%
Mean 1.16
SD 0.29
CV 25%
Source: Annual Report of JBBL

Figure 4: Current ratio

Current Ratio
1.60

1.40

1.20

1.00

0.80

0.60

0.40

0.20

-
2077/78 2078/79 2079/80

The above Table 4 and Figure 4 shows that the current ratio of JBBL has fluctuated over the past
three years. JBBL’s current ratio is highest of 1.48 times in 2078/79 and lowest in the year
2077/78 of 0.92 times. The ratio over the past three years in terms of percentage also reveals the
fluctuation. Ratios are found to be increasing to 2078/79 and then decreasing in 2079/80.

The average is 1.16 which is lower than 1. This shows that the current assets of the company are
sufficient to meet its current liabilities.

31
Similarly, the standard deviation of data analyzed is 0.29 which is lower than the mean, it means
that most of the numbers are close to the average. And volatility of current assets and current
liabilities are less.

Likewise, the CV represents the ratio of standard deviation to mean. The CV obtained here is 25
percent which means that the ratio of SD to mean is low. The lower the ratio of SD to mean,
better the risk return trade off.

2.2.2 Profitability Ratio:

A profitability ratio is a measure of profitability, it is a way to measure a company's performance.
Profitability is simply the capacity to make a profit. A profit is what is left over from income
earned after one has deducted all costs and expenses related to earning the income. It refers to the
ability of the company to use its resources to generate revenues more than its expenses.
Profitability ratios are generally considered to be the basic bank financial ratio to evaluate how
well a bank is performing in terms of profit.

i. Return on Shareholder’s Fund:

This ratio, also called Return in Proprietor’s Fund or Return in Net worth. It measures the
percentage of net profit to the average shareholder’s fund.

Net Profit after Tax

Return on Shareholder′ s Fund = '
×100
Shareholde r s Fund

Table 5: Return on Shareholder′ s Fund.

(Amount in Rs.)
Fiscal Year Net Profit after Tax Shareholder's Fund Ratio Percentage
2077/78 663,869,529.00 5,245,854,139.00 12.66% -
2078/79 670,001,152.00 5,637,254,321.00 11.89% -6%
2079/80 301,816,958.00 5,782,069,382.00 5.22% -56%
Mean 9.92%

32
 SD 4.09%
CV 41%
Source: Annual Report of JBBL

Figure 5: Return on Shareholder′ s Fund.

Net Profit after Tax/Shareholders' Fund

14.00%

12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%
2077/78 2078/79 2079/80

The above Table 5 and Figure 5 shows that the Return on shareholders fund of JBBL is in
decreasing trend. JBBL’s Return on shareholders fund is the highest of 12.66 percent in 2077/78
and lowest in year 2079/80 of 5.22 percent. Ratio is decreasing every Year from 2077/78 to
2079/80.

The average is 9.92 percent, which means that the return on shareholders’ funds is 9.92 percent
of net profit on average.

Similarly, the standard deviation of the data analyzed is 4.09 percent, which is lower than the
mean, it reveals that most of the numbers are close to the average. And the net profit after tax and
shareholders fund are less volatile.

Likewise, the CV represents the ratio of standard deviation to mean. The CV obtained here is 41
percent which means that the ratio of standard deviation to mean is low. A CV lower than 1
indicates that the standard deviation (risk) of returns is relatively low compared to the mean
return. This suggests that the investment or portfolio is achieving its expected returns with less

33
variability, which is typically preferred by investors who prioritize stability and predictability in
returns.

ii. Return on Total Assets:

Return on Total Assets measures the profitability of the total investment of the company. The
ratio is computed by dividing net income after tax by average total assets. The ratio is calculated
to measure the profit after tax against the amount invested in total assets to ascertain whether
assets are being utilized properly or not.

Net Profit after Tax

Return on Total Assets = × 100
Total Assets

Table 6: Return on Total Assets

(Amount in Rs.)
Fiscal Year Net Profit after Tax Total Assets Ratio Percentage
2077/78 663,869,529.00 60,174,380,893.00 1.10% -
2078/79 670,001,152.00 71,407,867,243.00 0.94% -15%
2079/80 301,816,958.00 72,785,964,910.00 0.41% -56%
Mean 0.82%
SD 0.36%
CV 44%
Source: Annual Report of JBBL

34
 Figure 6: Return on Total Assets

Net Profit after Tax/Total Assets

1.20%

1.00%

0.80%

0.60%

0.40%

0.20%

0.00%
2077/78 2078/79 2079/80

The above Table 6 and Figure 6 shows that the Return of Total Asset of JBBL is in fluctuating
trend. JBBL’s return on total assets is highest of 1.10 percent in 2077/78 and lower in the year
2079/80 of 0.41 percent. Ratio over the past three years in terms of percentage gone decreasing
from IY 2077/78 to 2079/80.

The average is 0.82 percent which means that JBBL needs to increase the efficiency of assets
utilization to increase the earning.

Similarly, the standard deviation of data analyzed is 0.36 percent, which is much lower than the
mean, it means that most of the numbers are close to the average. And the volatility is lesser
between the values.

Likewise, the CV shows the extent of variability of the data in relation to the mean of the
population. The CV obtained here is 44 percent which reveals that the ratio of SD to mean is low.
Lower the ratio of SD to mean, better the risk return trade off.

iii. Earnings per Share (EPS)

EPS simply shows the profitability of the firm on a per share basis. It is calculated from the point
of view of the ordinary shareholders.

Net Profit after Tax

Earnings per share = × 100
Number of Shares

35
 Table 7: Earnings per Share (EPS)

(Amount in Rs.)
Fiscal Year Net Profit after Tax No. of Shares EPS Percentage
2077/78 663,869,529.00 38,448,227.81 17.27 -
2078/79 670,001,152.00 42,677,532.87 15.70 -9%
2079/80 301,816,958.00 43,957,858.86 6.87 -56%
Mean 13.28
SD 5.61
CV 42%
Source: Annual Report of JBBL

Figure 7: Earnings per Share (EPS)

Net Profit after Tax/No. of Shares

20.00
18.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
-
2077/78 2078/79 2079/80

The above Table 7 and Figure 7 shows that the earnings per share of JBBL are in fluctuating
trend. JBBL’s earning per share is highest of Rs.17.27 in 2077/78 and lowest in the year 2079/80
of Rs.6.87. Ratio is found to be higher in 2077/78 and decrease in 2078/79 and 2079/80.

The average is Rs. 13.28 which means that JBBL shows promising return in terms of JBBL in
future.

Similarly, the standard deviation of data analyzed is Rs. 5.61 which is lower than the mean, it
means that most of the numbers are close to the average. And the volatility is lesser between the
values.

36
Likewise, the CV shows the extent of variability of the data in relation to the mean of the
population. The CV obtained here is 42 percent which reveals that the ratio of SD to mean is
medium.

iv. Dividend Per Share (DPS):

This ratio is calculated by dividing the Dividend payable to Equity Shareholders by Number of
Equity Shares.

Dividend per share =

Dividend Payable ¿ Equity Shareholders ¿ ×100
No . of equity shares outstanding

Table 8: Dividend per share

(Amount in Rs.)
Dividend payable to
Fiscal Year No. of Shares DPS Percentage
equity shareholders
2077/78 349,529,344.00 38,448,227.81 9.09 -
2078/79 595,947,531.00 42,677,532.87 13.96 54%
2079/80 290,207,224.00 43,957,858.86 6.60 -53%
Mean 9.89
SD 3.74
CV 38%
Source: Annual Report of JBBL

37
 Figure 8: Dividend per share

Dividend Payable to ESH/No. of Shares

16.00

14.00

12.00

10.00

8.00

6.00

4.00

2.00

-
2077/78 2078/79 2079/80

The above Table 8 and Figure 8 shows that the dividend per share of JBBL is in fluctuating
trend. JBBL’s dividend per share is highest of Rs.13.96 in 2078/79 and lowest in the year
2079/80 of Rs.6.60. Ratio over the past three years in terms of percentage also reveals the
fluctuation. Ratio are found to be increased in the year 2078/79 and decreased in 2079/80.

The average is Rs. 9.89 which means that JBBL has distributed favorable income as dividend to
the investors.

Similarly, the standard deviation of data analyzed is Rs. 3.74 which is lower than the mean, it
means that most of the numbers are close to the average. And the volatility is lesser between the
values.

Likewise, the CV shows the extent of variability of the data in relation to the mean of the
population. The CV obtained here is 38 percent which reveals that the ratio of SD to mean is low.
A CV lower than 1 indicates that the standard deviation (risk) of returns is relatively low
compared to the mean return. This suggests that the investment or portfolio is achieving its
expected returns with less variability, which is typically preferred by investors who prioritize
stability and predictability in returns.

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2.2.3 Assets Management Ratio
It is also known as turnover or efficiency ratio or assets management ratio. It measures how
efficiently the firm employs the assets. The asset turnover ratio measures the value of a
company's sales or revenues relative to the value of its assets. The asset turnover ratio can be
used as an indicator of the efficiency with which a company is using its assets to generate
revenue. The higher the asset turnover ratio, the more efficient a company. Conversely, if a
company has a low asset turnover ratio, it indicates it is not efficiently using its assets to generate
sales.

i. Loan and Advances to Fixed Deposit Ratio:

Loan and advances are the assets of the bank and fixed deposit is the liability. So, this is the ratio
between assets and liability. This helps to show the ratio of Loan & advances to fixed deposit.
We can also conclude that what part of the credit and advances is initiated against fixed deposit.

Loan∧ Advance
Loan and Advances to Total Deposits Ratio =
Total Deposits

Table 9: Loan and Advances to Total Deposits Ratio

(Amount in Rs.)
Fiscal Year Loan and Advances Fixed Deposit Ratio Percentage
2077/78 45,847,038,599.00 28,333,774,824.00 1.62 -
2078/79 50,949,979,338.00 36,038,847,690.00 1.41 -13%
2079/80 53,991,251,439.00 41,674,282,764.00 1.30 -8%
Mean 1.44

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 SD 0.16
CV 11%
Source: Annual Report of JBBL

Figure 9: Loan and Advances to Total Deposits Ratio

Loans and Advances/Fixed Deposit

1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
-
2077/78 2078/79 2079/80

The above Table 9 and Figure 9 shows that the loan and advances to fixed deposit ratio of JBBL
is in fluctuating trend. JBBL’s loan and advances to fixed deposit ratio is highest in 2077/78 and
lowest in the year 2079/80.

The average is 1.44 times which means earning of JBBL is insufficient to cover unforeseen fund
requirement.

Similarly, the standard deviation of data analyzed is 0.16 times which is lower than the mean, it
means that most of the numbers are close to the average. And the volatility is lesser between the
values.

Likewise, the CV shows the extent of variability of the data in relation to the mean of the
population. The CV obtained here is 11 percent which reveals that the ratio of SD to mean is low.
The lower the ratio of standard deviation to mean, the better the risk return trade off.

ii. Loan and Advances to Total Deposit Ratio:

Loan and advances are the investing activities of the bank and total deposit is the deposit amount
of the bank collected from its customers. This ratio measures the extent to which the bank is
successful in managing its total deposit on loan and advances for the purpose of income
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generation. A high ratio indicates better mobilization of collected deposit and vice versa.
However, it should be noted that too high a ratio might not be better from a liquidity point of
view.

Loan∧ Advance
Loan and Advances to Fixed Deposit Ratio =
¿ Deposits

Table 10: Loan and Advances to Fixed Deposit Ratio

(Amount in Rs.)
Fiscal Year Loan and Advances Total Deposit Ratio Percentage
2077/78 45,847,038,599.00 49,557,561,243.00 0.93 -
2078/79 50,949,979,338.00 53,792,999,844.00 0.95 2%
2079/80 53,991,251,439.00 61,284,476,383.00 0.88 -7%
Mean 0.92
SD 0.03
CV 4%
Source: Annual Report of JBBL

Figure 10: Loan and Advances to Fixed Deposit Ratio

Loans and Advances/Total Deposits

0.96

0.94

0.92

0.90

0.88

0.86

0.84
2077/78 2078/79 2079/80

The above Table 10 and Figure 10 shows that the loan and advances to total deposit ratio of
JBBL is fluctuating trend. JBBL’s loan and advances to total deposit ratio is highest of 0.95 times
in 2078/79 and lowest in the year 2079/80 of 0.88 times. Ratio over the past three years in terms

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of percentage also reveals the fluctuating trend. Ratio are found to be increased in the year
2078/79 and decreased in 2079/80.

The average of loan and advances to total deposit ratio is 92 percent which means credit
management of JBBL is in good position.

Similarly, the standard deviation of data analyzed is 3 percent, which is lower than the mean, it
means that most of the numbers are close to the average. And the volatility is lesser between the
values.

Likewise, the CV shows the ratio of standard deviation to mean. The CV obtained here is 4
percent which reveals that the ratio of SD to mean is low. Lower the ratio of standard deviation
to mean, the better the risk return trade off.

iii. Loan and Advances to Total Assets Ratio:

This ratio is determined to find out the relationship between credit & advances to total assets.
Loan and advances are part of total assets. This ratio helps to find out how much proportion of
credit & advances to total assets.

Loan∧ Advance
Loan and Advances to Total Assets Ratio =
Total Assets

Table 11: Loan and Advances to Total Assets Ratio

(Amount in Rs.)
Fiscal Year Loan and Advances Total Assets Ratio Percentage
2077/78 45,847,038,599.00 60,174,380,893.00 0.76 -
2078/79 50,949,979,338.00 71,407,867,243.00 0.71 -6%
2079/80 53,991,251,439.00 72,785,964,910.00 0.74 4%
Mean 0.74
SD 0.02
CV 3%
Source: Annual Report of JBBL

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 Figure 11: Loan and Advances to Total Assets Ratio

Loans and Advances/Total Assets

0.77
0.76
0.75
0.74
0.73
0.72
0.71
0.70
0.69
0.68
2077/78 2078/79 2079/80

The above Table 11 and Figure 11 shows that the loan and advances to total asset ratio of JBBL
is in fluctuating trend. JBBL’s loan and advances to total asset ratio is highest of 76 percent in
2077/78 and lowest in the year 2078/79 of 71 percent.

The average loan and advances to total asset ratio is 74 percent which shows that the capability
of utilizing the asset of the bank is good.

Similarly, the standard deviation of data analyzed is 2 percent, which is lower than the mean, it
means that most of the numbers are close to the average. And the volatility is lesser between the
values.

Likewise, the CV shows the ratio of standard deviation to mean. The CV obtained here is 3
percent which reveals that the ratio of SD to mean is low. The lower the ratio of standard
deviation to mean, the better the risk return trade off.

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 CHAPTER THREE

SUMMARY AND CONCLUSION

3.1 Summary
The study is mainly based on secondary sources. All data are taken from JBBL annual report,
literature publication, balance sheet, profit and loss account, different website, related books and
booklets, journals and articles. After collecting data from different sources, it is analyzed by
using financial and statistical tools. Findings are drawn by applying various financial tools viz.
liquidity, profitability and assets management ratio and statistical tools: mean, standard deviation
and coefficient of variation of cash and bank balance and total deposit. To fulfill the objectives of
the research work, all secondary data are compiled, processed and tabulated as per necessity and
figures, diagrams and different types of figures are also used.

This study suffers from different Limitation; it considers study of only JBBL because of time and
resource are the constraints of the study. For our study, here we have analyzed the financial
performance of JBBL over the period of FY 2077/78 to FY 2079/80. To evaluate the financial
performance of the bank, we have divided the whole report into different chapters. In every
chapter, there are several sub-chapters. The first Introduction chapter gives background
information about the project work, introduction of JBBL, Review related studies etc. The
second chapter is called Presentation and Analysis of Data; we tried to analyze the financial
performance of the bank. Therefore, the study may not be generalized in all cases and accuracy
depends upon the data collected and provided by the organization.

3.2 Conclusion
Major findings from the study lead to the conclusion of our study. The following are the findings
from our study:

• Cash and Bank Balance to Total Investment Ratio of the bank shows the increasing
trend during the study period. The mean ratio is above 1.09 which means that JBBL is
able to meet the demand of current depositors during the research period.
• Considering the Cash and Bank balance to total deposit ratio of JBBL, it shows that
total deposit of JBBL is increasing as compare to cash and bank balance. The mean
ratio is 0.15 times, it shows that the bank has the condition to extend normal credit
terms to the suppliers and very little credit extended to its customers.

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• Cash and Bank Balance to Total Assets Ratio of the bank depicts that JBBL is able to
maintain satisfactory financial condition. The average cash and Bank balance to total
assets ratio is 12 percent.
• Current ratio of the bank is 1.16 which shows that the current assets of the bank is
higher than the current liabilities. In other words, a current ratio of 1.16 times
suggests that the company has enough current assets to cover its short-term liabilities,
but it’s crucial to analyse this in the context of industry norms, historical trends, and
other financial indicators to get a comprehensive understanding of the company’s
liquidity and financial health.
• Return on shareholders fund shows that the bank is earning 9.92 percent of net profit
after tax against shareholders fund on average which shows good profitability
position.
• The average of Return on total assets is 0.82 percent which means that JBBL needs to
increase the efficiency of assets utilization to increase the earning.
• EPS of the bank has decreased significantly in the year 2078/79 and 2079/80.
• Considering the DPS, it is seen that dividend distributed by the bank has increased in
the year 2078/779 to Rs.13.96 per share from Rs.9.09 per share of 2077/78 and then it
decreased to Rs.6.60 per share in year 2079/80.
• Loan and Advances to Fixed Deposit ratio, loans and advances are assets of the bank
whereas fixed deposit is the liability of the bank. This ratio depicts what part of the
credit and advances is initiated against fixed deposit. The average obtained is 1.44
times which means earning of JBBL is insufficient to cover unforeseen fund
requirement.
• Loan and Advances to Total deposit ratio measures the extent to which the bank is
successful to manage its total deposit on loan and advances for the purpose of income
generation. A high ratio indicates better mobilization of collected deposit and vice-
versa. The average of loan and advances to total deposit ratio is 92 percent which
means credit management of JBBL is in good position.
• Loan and Advances to Total Assets ratio helps to find out that how much proportion
of credit & advances is total assets. The average of loan and advances to total asset

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ratio is 74 percent which shows that the capability of utilizing the asset of the bank is
good.

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Reference:

Annual Report of JYOTI BIKASH Bank Limited (for the year 2077/78 to 2079/80)

Website: www.JBBL.com.np

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