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CHAPTER I
INTRODUCTION

1.1 Background of the Study

Financial statement analysis is the process of analyzing a company's financial statements for
decision-making purposes and to understand the overall health of an organization. Financial
statements record financial data, which must be evaluated through financial statement
analysis to become more useful to investors, shareholders, managers, and other interested
parties. It is the method of evaluating past, present, and projected performance of a company.
Analysis track performance measures across financial statements using several different
methods for financial statement analysis, including vertical, horizontal, and ratio analysis. It
helps to analyze whether an entity is stable, solvent, liquid or profitable enough to warrant a
monetary investment. It is therefore essential to analyze the financial statement to know the
actual financial statement and financial position of the organization.

Profitability is the most common measure of an enterprise including the banking industry.
Profitability refers to the state or condition of yielding or earning a financial profit or gain. It
refers to the ability of the company to use its resources to generate revenues in excess of its
expenses. Similarly, profitability ratios are generally considered to be the basic bank financial
ratio in order to evaluate how well bank is performing in terms of profit. For the most part, if
a profitability ratio is relatively higher as compared to the competitors, industry averages,
guidelines, or previous year’s same ratios, then it is taken as indicator of better performance
of the bank.

Liquidity refers to a company's ability to pay its current bills and expenses. In other words,
liquidity relates to the availability of cash and other assets to cover accounts payable, short-
term debt, and other liabilities. It is characterized by the use of converting an asset into
money at a little cost. In the assets side of the balance sheet of the commercial bank, will be
liquid assets, which can be easily converted into cash such assets are called liquid assets.
Liquidity can also be defined as the bank’s ability to meet immediate maturing liabilities.
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.
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The liquidity management function of a bank is regular one. It is known that bank liquidity is
the most sensitive and importance aspect. A bank can’t be imagined without liquidity. The
banks and financial institutions should keep the stock of liquid assets in the ratio of their
deposit liability, as fixed by the Nepal Rastra Bank. The importance of liquidity is as follows:
 To meet the expenses for the banks daily administrative work.
 To pay all sorts of deposits.
 To control the economic fluctuation and to keep safe from the risk.
 To fill the demand of the debtor.
 Providing security to the bank.

Leverage Ratio:
Companies rely on a mixture of owner’s equity and debt to finance their operations. A
leverage ratio is any one of several financial measurements that look at how much capital
comes in the form of debt (loans), or assesses the ability of a company to meet financial
obligations.

Activity ratio:
Activity ratios measure the relative efficiency of a firm based on its use of its assets, leverage
or other such balance sheet items and are important in determining whether a company's
management is doing a good enough job of generating revenues and cash from its resources.

Nepal Rastra Bank is the central bank of Nepal. It was established in Baisakh 14, 2013 B.S.
under Nepal Rastra Bank Act, 2012. It formulates 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 and element of competitiveness in the financial sectors.

The commercial banks are contributing in the economic development. Resources for
economic development are made available by the commercial banks which ultimately aids to
the overall development of the nation.

In Nepal, “Nepal Bank Limited” was the first commercial bank established in 1994 under
Nepal Bank Act, 1993. Under Rastriya Banijya Bank Act, 2021 B.S. the government
launched “Rastriya Banijya Bank”. It was fully financed by the government resources.
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Likewise, “Agriculture Development Bank” was established on January 2, 1968 under full
ownership of the government for the purpose of developing agriculture sector.

As per the latest data from Nepal Rastra Bank, at present, there are 20 commercial banks, 33
development banks and 63 Microfinance companies operating in Nepal. Currently there are
seven joint venture banks in operation in Nepal with there branches located in different part
of the country.

1.2 Profile of Nepal Bank Limited (NBL)

Nepal Bank Limited (NBL) is one of the leading commercial banks of Nepal. It provides
professional and customer friendly banking service in Nepal. It is a registered ‘A’ class
commercial bank, having Joint Venture with Punjab National Bank (PNB), India.

Banking services are provided through the wide network of branches and counters to the
entire nation and different section of the society. Deriving strength from the Joint Venture
Partner, Nepal Bank Limited is steadily growing in size and operation in last 24 years.
Currently, the bank has network of total 86 branches, located inside and outside the valley.
Different type of saving account and fixed deposit account are offered by the bank to
facilitate fund accumulation targeting office and institutions, women, youth, and deprived
sectors. In the same way, it also provides various type of loan facilities like home loan,
education loan, vehicle loan, loan against insurance policy and major corporate loan. Its
product and service aim at satisfying the needs and desire of different customers. It is one of
the first banks to introduce Any Branch Banking System (ABBS) in Nepal. It also introduced
branchless banking system for the first time in Nepal to cover unbanked sector of Nepalese
society through biometric machine. NBL was bestowed with the “NICCI Excellence Award”
by Nepal India Chamber of Commerce for its spectacular performance under finance sector.
Correspondingly, the bank was acknowledged as the “Highest Tax Payer among Commercial
Banks” by Nepal Government for FY 2068/69.

Corporate Vision:
To be the Leading Commercial Bank with Pan Nepal presence and become a household
name, providing wide range of financial products & service under one roof.
Mission Statement:
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Its mission states “Growth through Banking for All”.

Motto:
It defines its motto as follows:
Consistent in term of Performance & Growth Strong in terms of its System & Procedures
Dependable in terms of Return to all Stakeholders .

Strategic Focus:
The Bank has set itself the following broad goals:
 Mobilize Deposits through Current, Savings, Term & Call Deposit accounts and
other instruments.
 Grant loans & advances with special thrust on Productive, SME as well as the
Retail Segment.
 Provide Treasury Services following best international practices.
 Facilitates cross border payment services so as to strengthen remittance inflow.
 Provide custody services.
 Provide cash management services, insurance products and other financial services.
 Provide any other service businesses that regulator prescribes from time to time.

1.3 Statement of the Problem

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

In present context of Nepal, commercial banks have good performance. On the basis of
profitability and productivity of commercial banks, public have confidence in their
performance. However, various environmental factors, state of economy, structure of capital
and money market, government policies, taxation policies and various internal factors have
influence upon financial statement and position of commercial banks. In these circumstances,
it is highly useful to make the study on financial statement of Nepal Bank Limited.

Profitability position and stock prices are the general factors considered for evaluating the
financial statement of Nepal Bank Limited. However, one can raise a question, “Are these the
only factors to reflect the performance of the bank ?”
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Thus, the main problem of the study, is to inquire into the financial statement of Nepal Bank
Limited. This study is targeted to find out answers to the following questions:
 What is the Financial statement of Nepal Bank Limited ?
 Does the overall financial statement depict the financial position indicating any
special strength and weakness of the Bank ?
 Is Nepal Bank Limited utilizing its assets efficiently ?
 Nepal Bank Limited is considered to be operationally efficient. But how far it is
efficient ?

In this context, the main purpose of the study is analyzing the financial statement of Nepal
Bank Limited in terms of turnover, profitability, liquidity and efficiency in operation.

1.4 Objectives of the Study

The main objective of this study is to analyze the Financial statement of Nepal Bank Limited.
However, the specific objectives of study are as follows:
 To evaluate the financial position of Nepal Bank Limited.
 To analyze the financial performances through the use of appropriate financial and
analytical tools.
 To identify the profitability position i.e. Earning per share (EPS), Dividend per share
(DPS) and Return on Asset (ROA).

1.5 Rationale of the Study

Optimum utilization of fund makes better impact on the economy of the nation. NBL is one
of the governments owned national bank. 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
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takers), competitors, personnel of the banks, stockbrokers, dealers, and market

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

1.6 Literature Review

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

1.6.1 Origin of Bank

The origin of the word ‘Bank’ is linked to: German word ‘Bank’ means a joint stock
company, Latin word ‘Bank’ means a bench, Italian word ‘Bank’ means a bench and French
word ‘banquet’ means a bench. The first bank was set up in Venice, Italy as a public bank, by
the name ‘Bank of Venice’. Subsequently, ‘Bank of Barcelona’ in 1401 A.D. & ‘Bank of
Geneva’ in 1407 A.D. were established. In 1609 A.D, “Bank of Amsterdam’, a famous bank
was established. In reality, the history of modern banking had started from ‘Bank of England’
in 1694 A.D. But the modern joint stock banks were established in England only in 1833
A.D. In 1844 A.D., ‘Bank of England’ was established as a first central bank in the world.
The ‘Banque De France’ was established in France in 1807 A.D. Later, the banks were
established in other parts of the world.

1.6.2 Conceptual Review

The main objectives of the bank are to collect deposits as much as possible from the
customers and to mobilize into the most profitable sector. If a bank fails to utilize its
collected resources then it cannot generate revenue. Resource mobilization management of
bank includes resource collection, investment portfolio, loans and advances, working capital,
fixed assets management etc. It measures the extent to which bank is successful to utilize its
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resources. To measure the bank performance in many aspects, we should analyze its
financial indicator with the help of financial statements.

Financial statement analysis is the process of identifying the financial strength and weakness
of the concerned bank. It is the process of finding strength and weakness of the concerned
bank. Financial statement analysis is a method of reviewing and analyzing a company's
accounting reports (Financial statements) in order to gauge its past, present or projected
future performance. This process of reviewing the financial statements allows for better
economic decision making.
It is performed to determine the following:
 Profitability
 Liquidity
 Solvency
 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.

1.6.3 Review of related journal, articles

According to Brigham E.F., L.G. Gapenski, (2020), “financial statement 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, (2022), “Financial statement analysis refers to the assessment of
a business to deal with the planning, budgeting, monitoring, forecasting, and improving of all
financial details with in an organization.”

Tarawneh (2019) analyzed 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 statement of these banks.
The results showed that financial statement of the banks was strongly and positively
influenced by the operational efficiency, asset management, and bank size.
Almazari (2021) in his study attempted basically to measure the financial statement of seven
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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 statement represented by; return
on assets and interest income size. It was found that banks with higher total deposits, credits,
assets, and shareholder’s equity do not always mean that has better profitability performance.
Also found that there exists a positive correlation between financial statement and asset
size, asset utilization and operational efficiency, which was also confirmed with regression
analysis that financial statement is greatly influenced by these independent factors.

Haque and Sharma (2019), their research studied the hypotheses tested imply that there are
significant differences amongst Saudi banks. The financial statement 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, bench marking 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 (2023) 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 statement of
banks is studied on the basis of financial ratios and variables. Financial statement 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 (2023) evaluated the financial statement of Nepal Bank Limited, a commercial bank
in Nepal taking the period of three financial years in considerations, from FY 2019/20 to
2023/24. The results showed that the financial statement position of Nepal Bank Limited is
satisfactory and in good position.
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In the Gulf, Samad (2020) 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
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 Research Methodology

Research is an organized, systematic, data based, critical, scientific enquiry or investigation
into specific problem, undertaken with the objective of finding answers or solutions to it.
This study focuses on the planned and systematic dealing with the collection, analysis and
interpretation of facts and figure. It consists of research design, population and sample study,
sources of data, data processing procedure and technique of analyzing data.

This chapter describes the methodology employed in this study. For the purpose of achieving
the objectives of study, the applied methodology will be used.

1.7.1 Research Design

“Research design is a master plan specifying the methods and procedures for collecting and
analyzing the needed information.” (Zikmund, 2023).

It is the formal plan of action for a research project or a blue print of the research project. It
has the re searchers to lay out their research questions, methodologies, implementation
procedures, and data collection and analysis to conduct a research project. The research
design then focuses on the data collection methods, the research instruments utilized, and the
sampling plan to be followed. Specifically, research design describes the general plan for
collecting, analyzing and evaluating data after identifying the facts and findings. What the
researcher wants to know and What has to be dealt with in order to obtain the required
information ?

It includes an outline of what the investigator will do from writing the hypotheses and their
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operational implications to the final analysis of data. Generally, a common research design
possesses the five basic elements viz.
 Selection of problem
 Methodology
 Data gathering
 Data analysis
 Report writing

1.7.2 Population and Sample

Population refers to the entire group of people, events, or things of interest that the researcher
wishes to investigate. Survey of each and every group of population by researcher is not
normally possible. For the held research, a portion of the population is taken as the
representation of the entire population. Sample of items and elements from the population are
taken for conducting our study. It comprises some observations selected from the population.
There are altogether 20 commercial banks functioning all over the nation and most of their
stocks are traded actively in the stock market. Here, NBL have been selected as sample for
our study. Similarly, financial statements of this bank for 5 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 NBL 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 complied
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 NBL (2019/20 to 2023/24).
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 Official Website of NBL.

 NRB circulars.
 NRB directives.

1.7.4 Data Processing Procedures

Data collected from various sources are 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 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 and every research work. Financial
and statistical tools are considered as the most reliable tools to accomplish the objective of
the study. These tools are used in order 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 the certain goals.
 Financial Tools
 Statistical Tools

Financial Tools
It basically helps to identify the financial strengths and weakness of the firm by establishing
relationship between the items of the financial position and statement of profit or loss
account. Financial tools are categorized into two parts. They are:

1. Ratio Analysis
Ratio analysis is the powerful tool of financial analysis. “A ratio is a mathematical
relationship between two variables. It is significant for financial analysis. It also helps us to
predict the future performance of a company based on study of ratios of earlier years.”
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(Benerjee: 2019).

Thus, ratio analysis is the part of whole process of analysis of financial statement to make
decision regarding the output and credit for any business and industry. Quantitative
relationship are established by the ratio which facilitates the qualitative judgement to be
made. They are presented below:

a) Liquidity Ratio
Liquidity refers to a company’s ability to pay its current bills and expenses. So, liquidity
ratios are used to measure the ability of a firm to meet its short-term obligations and from
them the present cash solvency as well as ability to remain solvent in the event of adversities
of the same can be examined. In other words, liquidity relates to the availability of cash and
other assets to cover accounts payable, short-term debt, and other liabilities. It is
characterized by the use of converting an asset into money at a little 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

This ratio shows the ability of banks immediate funds to cover their investment. Higher the
ratio shows higher liquidity position and ability to cover the deposits and vice versa. It can be
calculated by dividing ‘cash and bank balance’ by deposits. This ratio can be calculated using
the following formula.

Cash and Bank Balance to Total Investment Ratio =

Cash∧bank balance
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 balance
Cash and Bank Balance to Total Deposit Ratio =
Total Deposit
iii. Cash and Bank Balance to total assets Ratio
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Cash∧bank balance
Cash and bank balance to assets ratio =
Total Assets

iv. Current Ratio

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

Current assets
Current ratio =
Current liabilities

b) Profitability Ratio
Profitability refers to the state or condition of yielding or earning a financial profit or gain. It
refers to the ability of the company to use its resources to generate revenues in excess of its
expenses. Similarly, profitability ratios are generally considered to be the basic bank financial
ratio in order to evaluate how well bank is performing in terms of profit. For the most part, if
a profitability ratio is relatively higher as compared to the competitors, industry averages,
guidelines, or previous years’ same ratios, then it is taken as indicator of better performance
of the bank.

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 average shareholder’s fund.

Return on Shareholder′s Fund = x 100

Net Profit after tax
'
Shareholder 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.

x 100
Net Profit after tax
Return on total assets =
Total Assets
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iii. Earning 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.

x 100
Net Profit after tax
EPS =
No . of share

iv. Dividend per share (DPS)

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

x
Dividend payable ¿ equity shareholders ¿
DPS = No . of equity share outsatnding
100

c) Assets Management Ratio

It is also known as turnover or efficiency ratio or assets management ratio; measures how
efficiently the firm employs the assets. Turnover means; how much number of times the
assets flow through a firm’s operations and into sales (Kulkarni, 2020). Greater rate of
turnover or conversion indicates more efficiency of a firm in managing and utilizing its
assets, being other things equal. Various ratios are examined under this heading.

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∧advances
Loan and advances to total deposits ratio =
Total deposit

ii. Loan and advances to fixed deposits 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∧advances
loan and advance to fixed deposits ratio =
¿ deposit
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iii. Loan and advances to total assets ratio

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∧advances
Loan and advances to total asset ratio =
Total asset

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

a) 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:
∑X
Mean =
N

b) 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:

S.D. =
√ ∑ (X −Mean)2
N

c) Coefficient of variance
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:

C.V. =
S .D.
Mean

1.8 Limitation of the study

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

 The Research is based on records of 5 fiscal year’s analysis only i.e. from FY
2019/20 to 2023/24.
 The researcher has used only some statistical tools for presentation and analysis of
data.
 Most of the data used in this study are based on secondary sources mainly official
website of Nepal Bank Limited.
 The main focus is given to the quantitative aspect rather than qualitative aspect.
 The study is based on Nepal Bank Limited only.
 It is only for partial fulfillment of Bachelor of Business Studies (BBS).

1.9 Organization of the study

The report on the study of Financial statement of Nepal Bank Limited as per the requirement
of the thesis for Bachelor of Business Studies (BBS) 4th year programme. The study has
three pillar supported by five years of data. Each chapter centers of specific objectives. They
are as follows:

Chapter – I: Introduction
This chapter describes the background of the study, Statement of the problem, Objectives of
the study, rationale of the study, literature review and research methodology, limitations of
the study and Organization of the Study.

Chapter – II: Results and Analysis

This chapter analyses the data related with study and presents the findings of the study and
also command briefly on them. Data processing, data analysis and interpretation are given in
this chapter and there is use of diagram.

Chapter – III: Summary and Conclusions

This chapter is devoted to the conclusions of the research, conclusion derived on the basis of
data analyzed.
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CHAPTER II
RESULTS AND ANALYSIS

2.1 Presentation of data and analysis

This chapter deals with the presentation, analysis and interpretation of relevant data of Nepal
Bank Limited to fulfill the objective of this study. According to the research methodology as
mentioned in the third chapter of this study the data have been analyzed competently. The
purpose of this chapter is to introduce mechanism of data analysis and interpretation.
Different type of analytical methods and tools such as financial ratio analysis and statistical
analysis are used.

2.2 Analysis of Results

Financial statement analysis is the process of analyzing a company’s financial statement for
decision making purposes and to understand the overall health of an organization. Financial
statement analysis is done by applying various financial tools in order to have clear picture
on the viability of the project. It is the method of evaluating past, present, and projected
performance of a company. The financial statement analysis is done to ascertain the
liquidity, profitability, leverage, debt servicing and interest servicing ability of the firm. The
concept of financial statement analysis has been already discussed in previous chapter. Here,
we study and analyze the data by using accounting tools.

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.
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
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income. It refers to the ability of the company to use its resources to generate revenues in
excess of its expenses. Profitability ratios are generally considered to be the basic bank
financial ratio in order to evaluate how well bank is performing in terms of profit.

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. 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.

a) Cash and Bank Balance to Total 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 to Total Investment =

Cash∧bank balance
Total investment

Table No. 1: Cash and Bank Balance to Total Investment Ratio (Amount in Rs.)
Fiscal Year Cash and bank balance Total Investment Ratio Percentage (%)

2019/20 13,172,782,867 6,504,185,769 2.0 -

2020/21 25,116,482,060 15,102,674,197 1.7 -15%

2021/22 23,117,394,498 18,198,739,944 1.3 -24%

2022/23 21,383,490,030 11,964,561,347 1.8 38%

2023/24 32,295,170,501 15,554,185,400 2.1 17%

Mean 1.76

SD 0.28

CV 16%
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Source: Annual report of NBL

Figure No. 1: Cash and Bank Balance to Total Investment Ratio

Ratio
2.5

2.1
2
2
1.8
1.7

1.5
1.3 Ratio

0.5

0
2019/20 2020/21 2021/22 2022/23 2023/24

The above Table no. 1 and Figure no. 1 reveals that the Cash and Bank Balance to Total
Investment ratio is increasing since 2022/23 and 2023/24. NBL’s Cash and Bank Balance to
Total Investment ratio is the highest of 2.1 times in 2023/24 and lowest in year 2021/22 of
1.3 times. Ratios over the past five years are found to be decreased in the year 2020/21 and
2021/22. However, the ratios are found to be increased in the year 2022/23 and
2023/24.

The average is 1.76 times which is greater than 1. Thus, it means that NBL is able to meet the
demand of current depositors during the research period.

Similarly, the standard deviation of the data analyzed is 0.28 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
16 percent which means that the ratio of standard deviation to mean is low. Lower the ratio of
standard deviation to mean, the better the risk return trade off. A risk averse investor
 20

expecting low degree of volatility and high degree of return, in relation to overall market and
industry may want to invest in the bank.
b) 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 as the investment of the
bank.
Cash∧bank balance
Cash and bank balance to total deposit ratio =
Total deposit

Table No. 2: Cash and Bank Balance to Total deposit Ratio (Amount in Rs.)
Fiscal Year Cash and bank balance Total deposit Ratio Percentage (%)
2019/20 13,172,782,867 62,108,135,754 0.21 -
2020/21 25,116,482,060 83,093,789,957 0.30 43%
2021/22 23,117,394,498 93,735,480,708 0.25 -17%
2022/23 21,383,490,030 95,094,461,030 0.22 -12%
2023/24 32,295,170,501 115,511,705,922 0.28 27%
Mean 0.25
SD 0.034
CV 14%
Source: Annual report of NBL

Figure No. 2: Cash and Bank Balance to Total deposit Ratio

 21

Ratio
0.35
0.3
0.3 0.28
0.25
0.25
0.22
0.21
0.2 Ratio

0.15

0.1

0.05

0
2019/20 2020/21 2021/22 2022/23 2023/24

The above Table no. 2 and Figure no. 2 shows that the cash and bank balance to total deposit
ratio of NBL is in fluctuating trend. NBL’s cash and bank balance to total deposit ratio is
highest of 0.3 times in 2020/21 and lower in the year 2019/20 of 0.21 times. Ratio over the
past five years in terms of percentage also reveals the fluctuation. Ratio are found to be
increased in the year 2020/21 whereas decreased in the year 2021/22 and 2022/23. However,
the ratio has subsequently increased in the year 2023/24.

The average is 0.25 which is lower than 1. It means that NBL 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 the 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 0.034 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.

Likewise, the CV shows the extent of variability of the data in relation to the mean of the
population. The CV obtained here is 14% which means that the ratio of SD to mean is low.
 22

Lower the ratio of SD to mean, better the risk return trade off.

c) Cash and Bank Balance to Total Assets Ratio

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

Cash∧bank balance
Cash and bank balance to total assets =
Total assets

Table No. 3: Cash and Bank Balance to Total assets Ratio (Amount in Rs.)
Fiscal Year Cash and bank balance Total assets Ratio Percentage (%)

2019/20 13,172,782,867 70,445,082,845 0.19 -

2020/21 25,116,482,060 99,152,806,017 0.25 32%

2021/22 23,117,394,498 113,885,046,402 0.20 -20%

2022/23 21,383,490,030 116,510,445,575 0.18 -10%

2023/24 32,295,170,501 144,811,151,443 0.22 22%

Mean 0.21

SD 0.024

CV 12%

Source: Annual report of NBL

Figure No. 3: Cash and Bank Balance to Total assets Ratio

 23

Ratio
0.3

0.25
0.25
0.22
0.2
0.2 0.19
0.18
Ratio
0.15

0.1

0.05

0
2019/20 2020/21 2021/22 2022/23 2023/24

In the Table no. 3 and Figure no. 3 shows that the cash and bank balance to total assets ratio
of NBL is in fluctuating trend. NBL’s cash and bank balance to total deposit ratio is highest
of 0.25 times in 2020/21 and lower in the year 2022/23 of 0.18 times. Ratio over the past five
years in terms of percentage also reveals the fluctuation. Ratio are found to be positive in the
year 2020/21 by 32% whereas decreased in the year 2021/22 by 20 percent and 2022/23 by
10%. However, the ratio has subsequently increased in the year 2023/24 by 22%.

The average is 0.21 which is lower than 1. It means that NBL will not be able to pay off all
its liabilities with available cash and cash equivalents.

Similarly, the standard deviation of data analyzed is 0.024 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 12 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.
 24

d) 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 with in one year.
Current assets
Current Ratio =
Current liabilities

Table No. 4: Current Ratio (Amount in Rs.)

Fiscal Year Current assets Current liabilities Ratio Percentage (%)
2019/20 63,313,902,806 64,519,090,385 0.98 -

2020/21 83,419,734,448 91,193,583,991 0.91 -7%

2021/22 95,007,318,559 104,302,113,291 0.91 0%
2022/23 11,964,561,347 103,897,018,696 0.99 9%
2023/24 15,554,185,400 127,607,799,028 0.99 0%

Mean 0.96
SD 0.038
CV 4%
Source: Annual report of NBL
Figure No. 4: Current Ratio

Ratio
1
0.99 0.99
0.98
0.98

0.96

0.94 Ratio

0.92
0.91 0.91

0.9

0.88

0.86
2019/20 2020/21 2021/22 2022/23 2023/24
 25

The above Table no. 4 and Figure no. 4 shows that the current ratio of NBL is fluctuating
over the past five years. NBL’s current ratio is highest of 0.99 times in 2022/23 and 2023/24
and lower in the year 2020/21 and 2021/22 of 0.91 times. Ratio over the past five years in
terms of percentage also reveals the fluctuation. Ratio are found to be decreased in the year
2020/21 whereas no change in the year 2021/22, increasement in the year 2022/23 and again
no change in the year 2023/24.

The average is 0.96 which is lower than 1. This shows that the current asset of the company is
a bit not sufficient to meet its current liabilities.

Similarly, the standard deviation of data analyzed is 0.038 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
4 percent which means that the ratio of SD to mean is low. Lower the ratio of SD to mean,
better the risk return trade off.
e) 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 average shareholder’s fund.
Net profit after tax
Return on shareholder's fund = ' x 100
shareholde r s fund

Table No. 5: Return on Shareholder’s Fund (Amount in Rs.)

Fiscal Year Net profit after tax Shareholder's fund Ratio Percentage (%)
2019/20 1,549,698,560 5,457,147,460 28% 0%
2020/21 1,574,352,443 6,890,377,025 23% -18%
2021/22 1,730,207,025 8,514,088,112 20% -13%
2022/23 2,006,247,780 11,544,581,880 17% -15%
2023/24 2,581,681,778 16,134,507,415 16% -6%
Mean 20.8%
SD 4.35%
 26

CV 21%
Source: Annual report of NBL

Figure No. 5: Return on Shareholder’s Fund

Ratio
30%
28%

25%
23%

20%
20%
17%
16% Ratio
15%

10%

5%

0%
2019/20 2020/21 2021/22 2022/23 2023/24

The above Table no. 5 and Figure no. 5 shows that the Return on shareholders fund of NBL is
in decreasing trend. NBL’s Return on shareholders fund is the highest of 28% in 2019/20 and
lowest in year 2023/24 of 17%. Ratios over the past five years are found to be decreased
every year. The return on shareholder’s fund is found to be minimum in 2023/24 at 17
percent.

The average is 20.8 percent which means that the return on shareholders fund is 20.8% of net
profit on average.

Similarly, the standard deviation of the data analyzed is 4.35% 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.
 27

Likewise, the CV represents the ratio of standard deviation to mean. The CV obtained here is
21% which means that the ratio of standard deviation to mean is low. Lower the ratio of
standard deviation to mean, the better the risk return trade off. A risk averse investor
expecting low degree of volatility and high degree of return, in relation to overall market and
industry may want to invest in the bank.

f) 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 as
certain whether assets are being utilized properly or not.

Net profit after tax

Return on total assets = x 100
Total Assets

Table No. 6: Return on Total Assets (Amount in Rs.)

Fiscal Year Net profit after tax Total Assets Ratio Percentage (%)

2019/20 1,549,698,560 70,445,082,845 2.2% 0%

2020/21 1,574,352,443 99,152,806,017 1.6% -27%

2021/22 1,730,207,025 113,885,046,402 1.5% -6%

2022/23 2,006,247,780 116,510,445,575 1.7% 13%

2023/24 2,581,681,778 144,811,151,443 1.8% 6%

Mean 1.76%

SD 0.00058%

CV 0.033%

Source: Annual report of NBL

 28

Figure No. 6: Return on Total Assets

Ratio
2.50%

2.20%

2.00%
1.80%
1.70%
1.60%
1.50%
1.50%
Ratio

1.00%

0.50%

0.00%
2019/20 2020/21 2021/22 2022/23 2023/24

The above Table no. 6 and Figure no. 6 shows that the Return of Total Asset of NBL is in
fluctuating trend. NBL’s return on total assets is highest of 2.2% in 2019/20 and lower in the
year 2021/22 of 1.5%. Ratio over the past five years in terms of percentage also reveals the
fluctuation. Ratio are found to be decreased in the year 2020/21 and 2021/22 where as
increase in the year 2022/23 and 2023/24.

The average is 1.76% which means that NBL needs to increase the efficiency of assets
utilization to increase the earning.

Similarly, the standard deviation of data analyzed is 0.00058% 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 0.033% which reveals that the ratio of SD to mean is
 29

low. Lower the ratio of SD to mean, better the risk return trade off.

g) 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
EPS = x 100
No .of Share

Table No. 7: Earning per share (Amount in Rs.)

Fiscal Year Net profit after tax No. of Share EPS Percentage (%)
2019/20 1,549,698,560 18,012,391 86 0%
2020/21 1,574,352,443 20,173,878 78 -9%
2021/22 1,730,207,025 20,173,878 86 10%
2022/23 2,006,247,780 60,352,269 33 -62%
2023/24 2,581,681,778 60,352,269 43 30%
Mean 65.2
SD 22.62
CV 35%
Source: Annual report of NBL
Figure No. 7: Earning per share
 30

EPS
100

90 86 86

80 78

70

60
EPS
50
43
40
33
30

20

10

0
2019/20 2020/21 2021/22 2022/23 2023/24

The above Table no. 7 and Figure no. 7 shows that the earning per share of NBL is in
fluctuating trend. NBL’s earning per share is highest of Rs.86 in 2021/22 and lowest in the
year 2022/23 of Rs.33.

Ratio over the past five years in terms of percentage also reveals the fluctuation. Ratio are
found to be decreased in the year 2020/21 by 9 percent whereas increase in the year 2022/23
by 10%. Again, there has been decrease in the year 2021/22 by 62% and further increase by
30% in the year 2023/24 as compare to the relative previous year.

The average is Rs. 65.2 which means that NBL shows promising return in terms of EPS in
future. Similarly, the standard deviation of data analyzed is Rs. 22.62 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 35% which reveals that the ratio of SD to mean is
medium.
h) Dividend Per Share (DPS)
 31

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

DPS = = Dividend payable ¿ equity shareholders No . of equity share outsatnding x

¿

100

Table No. 8: Dividend Per Share (Amount in Rs.)

Fiscal Year Dividend payable to No. of equity share DPS Percentage (%)
equity shareholders outstanding
2019/20 920,395,772 18,012,391 51 0%
2020/21 141,122,877 20,173,878 7 -86%
2021/22 106,495,939 20,173,878 5 -29%
2022/23 110,422,513 60,352,269 2 -60%
2023/24 1,600,000,000 60,352,269 27 1250%
Mean 18.4
SD 18.52
CV 101%
Source: Annual report of NBL

Figure No. 8: Dividend Per Share

DPS
60
51
50

40
DPS
30 27

20

10 7 5
2
0
2019/20 2020/21 2021/22 2022/23 2023/24

The above Table no. 8 and Figure no. 8 shows that the dividend per share of NBL is in
fluctuating trend. NBL’s dividend per share is highest of Rs.51 in 2019/20 and lowest in the
 32

year 2022/23 of Rs.2. Ratio over the past five years in terms of percentage also reveals the
fluctuation. Ratio are found to be decreased in the year 2020/21, 2021/22, and 2022/23.
However, the ratio has highly increased in the year 2023/24.
The average is Rs. 18.4 which means that NBL has distributed favorable income as dividend
to the investors.

Similarly, the standard deviation of data analyzed is Rs. 18.52 which is higher than the mean,
it means that the numbers are more spread out. And the volatility is higher 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 101% which reveals that the ratio of SD to mean is very
high.

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∧advances
Loan and advances to fixed deposit ratio =
¿ deposit

Table No. 9: Loan and advances to fixed deposit ratio (Amounnt in Rs.)
Fiscal Year loan and advance Fixed deposit Ratio Percentage (%)
2019/20 47,572,024,207 14,528,858,311 31% 0%
2020/21 54,482,465,225 19,784,889,538 36% 16%
2021/22 67,955,107,021 25,999,038,315 38% 6%
2022/23 77,287,764,142 36,311,502,599 47% 24%
2023/24 94,182,247,596s 54,063,678,682 57% 21%
Mean 41.9
SD 9.2
CV 22%
Source: Annual report of NBL
 33

Figure No. 9: Loan and advances to fixed deposit ratio

Ratio
60% 57%

50% 47%

40% 38%
36%
31% Ratio
30%

20%

10%

0%
2019/20 2020/21 2021/22 2022/23 2023/24

The above Table no. 9 and Figure no. 9 shows that the loan and advances to fixed deposit
ratio of NBL is in increasing trend. NBL’s loan and advances to fixed deposit ratio is highest
of 57% in 2023/24 and lowest in the year 2019/20 of 31%. Ratio over the past five years in
terms of percentage also reveals the increasing trend. Ratio are found to be increased
continuously since 2019/20 to 2023/24.

The average is 41.9% which means earning of NBL is insufficient to cover unforeseen fund
requirement.

Similarly, the standard deviation of data analyzed is 9.2% 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 22% 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.

j) Loan and Advances to Total Deposit Ratio

Loan and advances is the investing activities of the bank and total deposit is the deposit
 34

amount of the bank collected from its customers. This 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.
However, it should be noted that too high ratio might not be better from liquidity point of
view.
Loan∧advances
Loan and advance to total deposit ratio =
Total deposit

Table No. 10: Loan and advances to total deposit ratio (Amount in Rs.)
Fiscal Year loan and advance Total deposit Ratio Percentage (%)
2019/20 47,572,024,207 62,108,135,754 77% 0%
2020/21 54,482,465,225 83,093,789,957 66% -14%
2021/22 67,955,107,021 93,735,480,708 72% 9%
2022/23 77,287,764,142 95,094,461,030 81% 13%
2023/24 94,182,247,596 115,511,705,922 82% 1%
Mean 75.6%
SD 6%
CV 8%
Source: Annual Report of NBL

Figure No. 10: Loan and advances to total deposit ratio

Ratio
90% 82%
81%
80% 77%
72%
70% 66%
60%
50% Ratio
40%
30%
20%
10%
0%
2019/20 2020/21 2021/22 2022/23 2023/24

The above Table no. 10 and Figure no. 10 shows that the loan and advances to total deposit
ratio of NBL is fluctuating trend. NBL’s loan and advances to total deposit ratio is highest of
 35

82% in 2023/24 and lowest in the year 2020/21 of 66%. Ratio over the past five years in
terms of percentage also reveals the fluctuating trend. Ratio are found to be decreased in the
year 2020/21. However, the ratios have continuously increased since 2021/22 to 2023/24.

The average of loan and advances to total deposit ratio is 75.6% which means credit
management of NBL is in good position.

Similarly, the standard deviation of data analyzed is 6% 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 8%
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.

k) 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 is the part of total assets. This ratio helps to find out that how much
proportion of credit & advances to total assets.
Loan∧advances
Loan and advances to total assets ratio =
Total Assets

Table No. 11: Loan and advances to total assets ratio (Amount in Rs.)
Fiscal Year loan and advance Total Assets Ratio Percentage (%)
2019/20 47,572,024,207 70,445,082,845 68% 0%
2020/21 54,482,465,225 99,152,086,017 55% -19%
2021/22 67,955,107,021 113,885,046,402 60% 9%
2022/23 77,287,764,142 116,510,445,575 66% 10%
2023/24 94,182,247,596 144,811,151,443 65% -2%
Mean 63%
SD 4.7%
CV 8%
Source: Annual Report of NBL
 36

Figure No. 11: Loan and advances to total assets ratio

Ratio
80%

70% 68%
66% 65%
60%
60%
55%

50%
Ratio
40%

30%

20%

10%

0%
2019/20 2020/21 2021/22 2022/23 2023/24

The above Table no. 11 and Figure no. 11 shows that the loan and advances to total asset
ratio of NBL is in fluctuating trend. NBL’s loan and advances to total asset ratio is highest of
68% in 2019/20 and lowest in the year 2020/21 of 55%. Ratio over the past five years in
terms of percentage also reveals the fluctuating trend. Ratio are found to be decreased in the
year 2020/21 by 19% whereas ratio has increased in the year 2021/22 and 2022/23 by 9% and
10% respectively and further ratio has decreased by 2% in the year 2023/24.

The average of loan and advances to total asset ratio is 63% which shows that the capability
of utilizing the asset of the bank is good.

Similarly, the standard deviation of data analyzed is 4.7% 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 8%
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.
 37

2.3 Major findings of the study

Major findings from the study leads 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 which means that NBL is able to
meet the demand of current depositors during the research period.
 Considering the Cash and Bank balance to total deposit ratio of NBL, it shows that total
deposit of NBL is increasing as compare to cash and bank balance. The mean ratio is
0.25 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.
 Cash and Bank Balance to Total Assets Ratio of the bank depicts that NBL is able to
maintain satisfactory financial condition. The current ratio of the bank is 0.96 which
shows that the current liabilities of the bank is higher than the current assets. Thus, the
bank either needs to decrease its current liabilities or increase its current assets, so that
the current ratio would be equal or greater than one.
 Return on shareholders fund shows that the bank is earning 20.8% of net profit after tax
against shareholders fund on average which shows good profitability position.
 The average of Return on total assets is 1.76% which means that NBL needs to increase
the efficiency of assets utilization to increase the earning.
 EPS of the bank has decreased significantly in the year 2022/23. However, it has been
observed that the EPS has increased by 30% in the year 2023/24, which shows that NBL
has promising return in terms of EPS in future.
 Considering the DPS, it is seen that dividend distributed by the bank has increased
significantly in the year 2023/24 to Rs.27 per share from Rs.2 per share of 2022/23.
From the study it is known that the bank distributes favorable portion of income as
dividend to the shareholders. However, the huge fluctuation does not show promising
security to the shareholders in terms of dividend.
 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 41.9%
which means earning of NBL 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
 38

generation. A high ratio indicates better mobilization of collected deposit and vice-versa.
The average of loan and advances to total deposit ratio is 75.6% which means credit
management of NBL 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 ratio is
63% which shows that the capability of utilizing the asset of the bank is good.
 39

CHAPTER III
SUMMARY AND CONCLUSION

3.1 Summary
The study is mainly based on secondary sources. All data are taken from NBL 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. In
an attempt 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 chart are
also used.

This study suffers from different Limitation; it considers study of only NBL because of time
and resource are the constraints of the study. For the purpose of our study, here we have
analyzed the financial statement of Nepal Bank Limited over the period of FY 2019/20 to
2023/24. To evaluate the financial statement of the bank, we have divided the whole report to
different chapters. In every chapter, there are several sub-chapters. The first Introduction
chapter gives background information about the project work, introduction of Nepal Bank
Limited, Review related studies etc. The second chapter called Presentation and Analysis of
Data; we tried to analyze the financial statement 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.
 40

3.2 Conclusion
After evaluating the financial statements of Nepal Bank Limited across five fiscal years, the
following conclusions can be drawn:

Sustained Profitability: The bank has demonstrated improving profitability through

increasing ROA and ROSF, indicating efficient utilization of both assets and equity.

Improved Asset Utilization: A declining cash-to-asset ratio and an increasing loan-to-asset

ratio reflect strategic deployment of assets into income-generating sectors.

Stable Liquidity Position: The consistent current ratio and moderate cash reserves show that
the bank is managing its liquidity efficiently without compromising profitability.

Credit Dominated Strategy: High loan and advance ratios show that NBL is focused on
aggressive lending strategies, which, while profitable, require careful monitoring of non-
performing assets.

Moderate Shareholder Return: EPS and DPS reveal mixed outcomes. While profits have
generally increased, dividend payouts have not always followed suit, indicating a retained
earnings strategy.

Compliance and Prudence: All the major financial ratios have remained with in the
guidelines of the Nepal Rastra Bank (NRB), reflecting sound governance and compliance.

Thus, Nepal Bank Limited appears to be in a strong financial position with balanced liquidity,
improving profitability, and growth-focused strategies. However, the bank must continue
monitoring credit risks, asset quality, and ensure consistent returns to shareholders to
maintain long-term sustainability.
 41

BIBLIOGRAPHY

 Annual Report of Nepal Bank Limited for the fiscal year 2019/20 to 2023/24.
 Ahmed, M., B. (2020). “Measuring the Performance of Islamic Banks by Adapting
Conventional Ratios German University in Cairo Faculty of Management
Technology”.
 Almumani (2023). "Evaluating the Financial statement of Banks Using Financial
Ratios- A Case Study of Erbil Bank for Investment and Finance", European Journal of
Accounting Auditing and Finance Research.
 Haque, I. (2019). “Comparative Study between Public Sector Banks & Private Sector
Banks”, International Journal of Management & Innovation.
 Hannan, A.S. and Shaheed, A. (2021). “Financial Position and statement analysis of
Bangladesh Shilpa Bank, Islamic University Studies”.
 Kiyota, H. (2020). “Efficiency of Commercial Banks in Sub-Saharan Africa: A
Comparative Analysis of Domestic and Foreign Banks”, A paper prepared for the
CSAE conference 2009 on “Economic Development in Africa” held at the University
of Oxford.
 Peterson P. and Fabozzi F. (2022). “Analysis of the financial statements”, Volume 54
of F. J. Fabozzi series, Publishers: John wiley & Sons.
 Sinha G. (2019). “Financial Statement Analysis”, India.

Website
www.nepalbank.com.np
www.investopedia.com
 42

APPENDIX-I

Financial Statement position of annual report of Nepal Bank Limited of 2019/20 to 2023/24

F C T T T C C N S
i a o ot ot u u e h
s s t al al r rr t a
c h a d as r e r
a l e se e nt p e
l a I p ts n li r h
n n os t a o o
Y d v it a bi f l
e e s lit i d
a b s s ie t e
r a t e s r
n m t a '
k e s f s
n t f
b t e u
a r n
l d
 43

a t
n a
c x
e
2 1 6 6 7 6 6 1 5
0 3 , 2, 0, 3 4, , ,
1 , 5 1 4 , 5 5 4
9 1 0 0 4 3 1 4 5
/ 7 4 8, 5, 1 9, 9 7
2 2 , 1 0 3 0 , ,
0 , 1 3 8 , 9 6 1
7 8 5, 2, 9 0, 9 4
8 5 7 8 0 3 8 7
2 , 5 4 2 8 , ,
, 7 4 5 , 5 5 4
8 6 8 6 6
6 9 0 0 0
7 6
2 2 1 8 9 8 9 1 6
0 5 5 3, 9, 3 1, , ,
2 , , 0 1 , 1 5 8
0 1 1 9 5 4 9 7 9
 44

/ 1 0 3, 2, 1 3, 4 0
2 6 2 7 8 9 5 , ,
1 , , 8 0 , 8 3 3
4 6 9, 6, 7 3, 5 7
8 7 9 0 3 9 2 7
2 4 5 1 4 9 , ,
, , 7 7 , 1 4 0
0 1 4 4 2
6 9 4 3 5
0 7 8
2 2 1 9 1 9 1 1 8
0 3 8 3, 1 5 0 , ,
2 , , 7 3, , 4, 7 5
1 1 1 3 8 0 3 3 1
/ 1 9 5, 8 0 0 0 4
2 7 8 4 5, 7 2, , ,
2 , , 8 0 , 1 2 0
3 7 0, 4 3 1 0 8
9 3 7 6, 1 3, 7 8
4 9 0 4 8 2 , ,
, , 8 0 , 9 0 1
4 9 5 2 1
 45

9 4 2 5 1 5 2
8 4 9
2 2 1 9 1 1 1 2 1
0 1 1 5, 1 1 0 , 1
2 , , 0 6, , 3, 0 ,
2 3 9 9 5 9 8 0 5
/ 8 6 4, 1 6 9 6 4
2 3 4 4 0, 4 7, , 4
3 , , 6 4 , 0 2 ,
4 5 1, 4 5 1 4 5
9 6 0 5, 6 8, 7 8
0 1 3 5 1 6 , 1
, , 0 7 , 9 7 ,
0 3 5 3 6 8 8
3 4 4 0 8
0 7 7 0
2 3 1 1 1 1 1 2 1
0 2 5 1 4 5 2 , 6
2 , , 5, 4, , 7, 5 ,
3 2 5 5 8 5 6 8 1
/ 9 5 1 1 5 0 1 3
2 5 4 1, 1, 4 7, , 4
 46

4 , , 7 1 , 7 6 ,
1 1 0 5 1 9 8 5
7 8 5, 1, 8 9, 1 0
0 5 9 4 5 0 , 7
, , 2 4 , 2 7 ,
5 4 2 3 4 8 7 4
0 0 0 8 1
1 0 0 5
 47

APPENDIX-II

Earning per share (Amount in Rs.)

Fiscal Year Net profit after tax No. of Share EPS Percentage (%)
2019/20 1,549,698,560 18,012,391 86 0%
2020/21 1,574,352,443 20,173,878 78 -9%
2021/22 1,730,207,025 20,173,878 86 10%
2022/23 2,006,247,780 60,352,269 33 -62%
2023/24 2,581,681,778 60,352,269 43 30%
Mean 65.2
SD 22.62
CV 35%
Source: Annual report of NBL
 48

APPENDIX-III

Dividend Per Share (Amount in Rs.)

Fiscal Year Dividend payable to No. of equity share DPS Percentage (%)
equity shareholders outstanding
2019/20 920,395,772 18,012,391 51 0%
2020/21 141,122,877 20,173,878 7 -86%
2021/22 106,495,939 20,173,878 5 -29%
2022/23 110,422,513 60,352,269 2 -60%
2023/24 1,600,000,000 60,352,269 27 1250%
Mean 18.4
SD 18.52
CV 101%
Source: Annual report of NBL
 49

APPENDIX-IV

Loan and advances to fixed deposit ratio (Amounnt in Rs.)

Fiscal Year loan and advance Fixed deposit Ratio Percentage (%)
2019/20 47,572,024,207 14,528,858,311 31% 0%
2020/21 54,482,465,225 19,784,889,538 36% 16%
2021/22 67,955,107,021 25,999,038,315 38% 6%
2022/23 77,287,764,142 36,311,502,599 47% 24%
2023/24 94,182,247,596s 54,063,678,682 57% 21%
Mean 41.9
SD 9.2
CV 22%
Source: Annual report of NBL
 50

APPENDIX-V

Loan and advances to total deposit ratio (Amount in Rs.)

Fiscal Year loan and advance Total deposit Ratio Percentage (%)
2019/20 47,572,024,207 62,108,135,754 77% 0%
2020/21 54,482,465,225 83,093,789,957 66% -14%
2021/22 67,955,107,021 93,735,480,708 72% 9%
2022/23 77,287,764,142 95,094,461,030 81% 13%
2023/24 94,182,247,596 115,511,705,922 82% 1%
Mean 75.6%
SD 6%
CV 8%
Source: Annual Report of NBL
 51

APPENDIX-VI

Loan and advances to total assets ratio (Amount in Rs.)

Fiscal Year loan and advance Total Assets Ratio Percentage (%)
2019/20 47,572,024,207 70,445,082,845 68% 0%
2020/21 54,482,465,225 99,152,086,017 55% -19%
2021/22 67,955,107,021 113,885,046,402 60% 9%
2022/23 77,287,764,142 116,510,445,575 66% 10%
2023/24 94,182,247,596 144,811,151,443 65% -2%
Mean 63%
SD 4.7%
CV 8%
Source: Annual Report of NBL