DIVIDEND POLICY OF MANJUSHREE FINANCE LIMITED

A Project Work Report

By
Pratiksha Rimal
Saraswati Multiple Campus
Lekhnathmarg, Kathmandu
T.U. Regd. No. -7-2-32-175-2020
Submitted to

The Faculty of Management

Tribhuvan University
Kathmandu

In Partial Fulfilment of the Requirement for the Degree of

Bachelor of Business Studies (BBS)

Kathmandu, Nepal
February, 2025
 Declaration
I hereby declare that the project work entitled DIVIDEND POLICY OF
MANJUSHREE FINANCE LIMITED Submitted to the Faculty of Management,
Tribhuvan University, Kathmandu is an original peace of work under the supervision of
Mr. Narayan Prasad Aryal, faculty member, Saraswati Multiple Campus and is
submitted in partial fulfilment of the requirements for the award of 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.

……………………….
Pratiksha Rimal
T.U. Regd. No. -7-2-32-175-2020
Date: …………...

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 Supervisor’s Recommendation

The project work report entitled, DIVIDEND POLICY OF MANJUSHREE FINANCE

LIMITED submitted by Pratiksha Rimal of Saraswati Multiple Campus , is prepared
under my supervision as per the procedure and format requirements laid of the Faculty of
Management , Tribhuvan University , as partial fulfilment of the requirement for the
award of the degree of Bachelor of Business Studies (BBS).I, Therefore, recommend the
project work report for evaluation.

...........................
Mr. Narayan Prasad Aryal
Supervisor
Date.......................

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 Endorsement

We hereby endorse the project work report entitled, DIVIDEND POLICY OF

MANJUSHREE FINANCE LIMITED Submitted by Pratiksha Rimal of Saraswati
Multiple Campus in partial fulfilment of the requirement for award of the Bachelor of
Business Studies (BBS) for external evaluation.

……………………..

………………..

Prem Bahadur Budhathoki Dr. Gol Man Gurung

Chairman, Research Committee Campus Chief
Saraswati Multiple Campus Saraswati Multiple Campus
Date: Date:

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 ACKNOWLEDGEMENTS

It is a pleasure to experience own creation that adds value to others actually this project
work report is the partial fulfilment of requirements for bachelor’s degree of business
studies (BBS) and I gained a lot of knowledge while doing it. This report is of course the
result of my self-endeavour and hard work, but this would not have been completed
without helpful hand of intellectuals. The completion of the present study is a result of
help and support of several hands.
Firstly, owe a debt of gratitude to my respected thesis supervisor Mr. Narayan prasad
Aryal Lecturer, Saraswati Multiple Campus for his help and excellent guidance right
from the time of selection of the topic and throughout the course of the study.

I want to express my special thanks to my parents for their valuable help and motivation.
Very-very heartfelt thanks to all the intellectuals and for their suggestion throughout the
course of the study.

Lastly, I would like to conclude that I am very grateful to all my lectures, professors and
well-wishers who have directly or indirectly contributed to accomplish this task.

Pratiksha Rimal
BBS4th year

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 TABLE OF CONTENT
Title page i
Declaration ii
Supervisor’s Recommendation iii
Endorsement iv
Acknowledgements v
Table of Content vi
List of Table vii
List of Figure viii
Abbreviation ix
CHAPTER-I INTRODUCTION 1
1.1 Background of the Study 1

1.2 Profile of Organizations 2

1.3 Statement of the Problem 4

1.4 Objectives of the Study 4

1.5 Rational of the study 5

1.6 Literature Review 6

1.7 Research methodology 8

1.8 Limitation of the Study 14

1.9 Report Structure 14

CHAPTER- II RESULT AND ANALYSIS 15

2.1 Data presentation Analysis 15

2.2 Major Findings 29

CHAPTER III SUMMARY AND CONCLUSION 31

3.1 Summary 31

3.2 Conclusion 33

BIBLIOGRAPHY

APPENDIX

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 LIST OF TABLES

Table No. Title Page No.

Table 2.1 Dividend Policy of Manjushree Finance Limited 16

Table 2.2 Earning Per Share 17
Table 2.3 Dividend per Share 19
Table 2.4 Dividend Payout Ratio 21
Table 2.5 Market Price Per Share 23
Table 2.6 Price Earnings Ratio 25
Table 2.7 Earning Yield of Finance 26
Table 2.8 Dividend Yield 28

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 LIST OF FIGURES

Figure No. Title Page No.

Figure 2.1 Dividend Policy of Manjushree Finance Limited 17

Figure 2.2 Earnings Per Share (EPS) 18
Figure 2.3 Dividend per Share (DPS) 20
Figure 2.4 Dividend Payout Ratio (DPR) 22
Figure 2.5 Market Price per Share (MPS) 24
Figure 2.6 Price Earnings Ratio (P/E Ratio) 26
Figure 2.7 Earning Yield (EY) 27
Figure 2.8 Dividend Yield (DY) 29

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 Abbreviation

NIDC Nepal Investment and Development Corporation

NCMI NIDC Capital Market Ltd

NEPSE Nepal Stock Exchange

NRB Nepal Rastra Bank

SEBON Securities Board of Nepal

TA Technical Analysis

SMA Simple Moving Average

NATS NEPSE Automated Trading System

OTC over the counter

IPO Initial Public Offering

RWH Random Walk Analysis

ATS Automated Screen Based Trading System

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 1

CHAPTER I
INTRODUCTION
1.1 Background of the Study
The term dividend refers to that part of profits of a company which is distributed by the
company among its shareholders. Dividend .is paid out of the earning made by company.
Hence, dividend can also be defined as the portion part of earning that is distributed to
shareholders, against their investment. Dividend is paid by corporation to its shareholders
usually as the distribution of profit. A dividend is allocated as fixed amount per share,
with shareholders receiving dividend in the proportion on their shareholding.

In real world all the business firms are established with the purpose is paid out of the
earning made by company of generating high earnings. More or less their objective is
profit earning. Traditionally, the only one objective of firm used to be profit
maximization. So, most of the firms are running with profit motive. In the course of
carrying out business activities firms have to face two unavoidable situations, either they
suffer from loss or earn profit. In case of profit, management of the corporate business
firms can take three alternative decisions: they can pay that profit out to shareholders,
expand their business through reinvestment and reduce debt or repurchase share or both.
When companies distribute certain percent of profit among its shareholders and retain the
remaining in business for investment in profitable projects in future, the portion of
earnings that is given to the shareholders (investor) in return to their investment in the
shares is known as dividend. Dividend is one of the major reasons for which public are
interested to invest money on the shares of any business corporations. Dividend can be
paid in the form of cash or bonus shares or composition of both.

There is an ongoing debate about whether a company should pay out its earnings as
dividends or retain them for the firm’s growth. Generally, growing firms pay low or no
dividends and mature firms pay high or increasing dividends. In such situation
management must make an appropriate decision regarding keeping net income within the
firm as retained earnings as opposed to paid out as dividends.

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Thus, deciding how much to pay to shareholders as dividend and how much to retain in
the business is dividend decision. And the firm’s decision regarding the size of dividends
it will pay to its shareholders refers to dividend policy. Any change in dividend policy
has both favourable and unfavourable effects on the firm’s stock price. Higher the
dividend means higher the immediate cash flows to investors, which is good but lower
future growth, which is bad. So, the dividend policy should be optimal which balances
the opposing forces and maximizes stock price. Determining the part of earnings to be
distributed as dividends is a key decision that affects the value of the firm’s common
stock value in the marketplace. That’s why the firm should establish and implement
effective dividend policy that leads to stockholders’ wealth maximization.

Dividend is equally critical as much as it is complex. Any company is a corporate body

owned by the shareholder and managed by the BOD. Company raises large portion of
their capital their capital from shareholders by issuing different equity instruments which
grant shareholders the ownership interest in the company. Being the owner shareholders
also bear the risk of the company. In that sense, shareholders are the true owner of
company. Return or the income to shareholders mainly comes from dividend after capital
gain. Dividend is major element that’s creates shareholder value. It’s even more
significance lies in determination of share price. Many experts believe that dividend
payment has impact on market value of share. Company with the constant and consistent
flow of the dividend is always viewed as sound one. Such flow can trigger the
shareholders into purchase which is believed to impact on market value of share.

1.2 Profile of Organizations

Manjushree Finance Ltd
Manjushree is a Class C Financial institution licensed by Nepal Rastra Bank, established
in 28 Ashoj 2064 as a National level Finance Company. The vision of Manjushree
finance is to become the country’s premier financial and services in providing superior
financial solution to customer.

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Manjushree equipped with a strong capital base, a term of competent and dedicated
management professional, strong IT infrastructure and system, wider and deeper
connection in the market, we now stand as a very modern and efficient financial
institution. It provides customer-focused financial service to you in a very friendly
environment.

A team of young and dynamic professional with a very successful track record in banking
marketing, and IT is responsible for the management of the company. Each and every
professional at Manjushree is decided to be helping achieve the goals with the paid-up
capital of NRs. 804 million, Manjushree is one of the largest finance companies in the
country.

Promoted by a team of eminent people with long experience and reputation in banking
business, government, education and development sector. Manjushree is committed to
lead in meeting our financial needs and expectation. It optimizes all its strength expertise
advance and service in a very flexible and effective manner in serving our financial need.

The finance has set vision of the “the finance for all”. It is committed to provide the
largest standard of service to the customer for all regions and societies. It has been
stretching its effort to achieve its mission which says to win respectable market share
through customers focused quality products and service, innovative business solution and
technology driven finance company.

Vision:
To become a premier financial institution known for its expertise and service in providing
superior financial solution to our customer.
To established as the most trustworthy finance company.
To become one of the most respectable finances in Nepal based on honourable conduct
and long-term financial performance.

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Mission
To become a lending finance in Nepal by providing complete financial solutions to our
customers, superior value to our shareholders and promising growth opportunities to our
employee.
To optimize all the resources provided by our customers, local and business communities,
and regulatory bodies to meet the expectations of all stakeholders.

1.3 Statement of The Problem

Small investors have already suffered much from the investment in equity shares.
Investment in government securities also has become a low yield investment portfolio.
As such, degree of risk has gone up in each of the investment areas. In such a situation,
an investor has to take much precaution in deciding investment portfolios. Global and
international economic slowdown has swallowed many investment opportunities.

The dividend decision, however, is still a crucial as well as controversial area of

managerial finance.

 There is no consensus among the financial scholars on this subject matter and its
relationship with stock price.?
 Some financial scholars says that stock price is least influenced by dividend per
share while some other believe that its relevance to the stock prices is quite
significant.
 What is the dividend policy of Manjushree Finance Limited through dividend
payout and retention ratio?
 What is the ratio of Manjushree Finance Limited that are concerned with the
dividend policy?

1.4 Objectives of the Study

The main purpose of this study is to overview the dividend related aspect of concerned
finance i.e. Manjushree finance limited. This report analyses the pattern of dividend
related financial indicators and provides insight into the financial health and performance
of Manjushree finance limited. It also analyses the interrelationship between dividend

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policy and market price of share as well as earning with dividend payment. Overall,
objectives of this study can be pointed out as follows:
 To analyse the dividend policy of Manjushree finance limited through dividend
payout and retention ratio.
 To evaluate the ratio of Manjushree finance limited that are concerned with the
dividend policy.
 To finalize what kind of relationship, exist between dividend payout and market
price per share.

1.5 Rational of the study

This study has been carried out to analyse the dividend aspect of Manjushree finance
limited. Thus, this report will be helpful to take insight into dividend related matter of
concerned finance. This report may provide shareholders the information about dividend
related matter of the concerned finance and thereby may help them to make investment
decision in it. For finance companies, it may help them to access their own dividend
policy with that of concerned finance and make necessary change. Dividend policy is an
integrated part of every company and organization. Overall, this may be significant for
following reason:
 This study will reflect soundness and weakness of Manjushree Finance limited
from viewpoint of dividend
 It helps to understand the impact of dividend on share price
 This study can be used as reference for other studies on similar topic in future.
 This study can provide base for the comparison to competitor firms to evaluate
their dividend policy with the Manjushree finance limited.

It reveals that people have expectation on getting higher return from investment made in
shares. So, the dividend decision is one effective tool to attract new investors and
maintain present investors along with controlling financial position of the firm. However,
in Nepalese context, it is found that there exist almost none of the companies adopting
consistent dividend policy. It exhibits the significance of the study of dividend policy.
Considering all these facts, the study is undertaken, which will help to meet deficiency of
the literature relating to dividend decision.

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The study will be beneficial for many parties such as shareholders, management of the
financial institution, public (depositors, prospective customers, investors etc.) and other
policy making bodies which are concerned with finance company. It is believed that it
will provide valuable inputs for future research scholars. Its helps to be familiar with the
financial transaction and the policy of the finance.

1.6 Literature Review

Literature consists of any relevant books, report, articles, etc. that are source of
knowledge. Theoretically, it is defined as the study of any book previous research works,
articles websites etc. that can be informational to the topic of research.A literature review
is both a summary and explanation of the complete and current state of knowledge on a
limited topic or area of enquiry. It explains the current state of knowledge of intended
research question. It also covers all sorts of established knowledge or facts as secondary
data. It is done through the help of previous research work and book with the purpose of
knowledge the research issue in detail

Dividend policy is one of the most enduring issues in corporate finance. A number of
researchers have provided insights, theoretical as well as empirical, into the dividend
policy puzzle. However, the issues of dividend policy are unresolved a yet due to lack of
unanimity among researchers. Dividend policy refers to the policy that company uses to
decide how much it will pay out to the shareholder as dividend, and it is of their choice
whether to pay its shareholder a cash dividend or retain its earning. A number of studies
have been carried out in order to examine the issue of dividend policy. The discussion
was embarked from 1950s and has been tested by many researchers (Linter, 1956;
Miller and Modigliani 1961; Black and Scholes (1973); Baskin, 1989; Allen and
Rachim, 1996 and etc.) It is still open for discussions and investigations due to
contradictory findings about the relationship between dividend policy and stock price
movement

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MM theorized that the dividend policy is irrelevant like in the capital-structure

irrelevance proposition with no taxes or bankruptcy costs. This is known as the
“dividend-irrelevance theory”, indicating that there is no effect from dividends on
company’s capital structure or stock price. MM argued that the value of the firm is based
on its basic earning power and its business risk, not how it distributes earnings to
shareholders.

In context of Nepal, few research works have been conducted in dividends payout. This
study has been expected to find a pathway in dividend policy to affect market price per
share providing useful information for all financial scholars. Moreover, the earlier studies
on dividend policy need to be updated due to the rapid changes in financial market of
Nepal.

Manandhar (1998) studied on dividend policy and value of firm to identify the
determinants of dividend policy in the context of Nepal. The study found that dividend
per share and return on equity have positive impact on market capitalization while
earning per share, price-earnings ratio, and dividend yield have negative impact. It was
also found a positive relationship between dividends and market capitalization.

Pradhan (2003) also carried out a study to determine the relative importance of dividend
and retained earnings in determining the market price of stock. He found that dividend
payment is more important as opposed to retained earnings in Nepal. The results revealed
the customary strong dividends effect and a very weak retained earning effect indicating
the attractiveness of dividends among Nepalese investors. The findings suggest that
Nepalese stock market has not started recognizing the impact of retained earnings.

Chhetri (2008) has explained that there are differences in financial position of high
dividend paying and low dividend paying companies. The study revealed that there is a
positive relationship between dividends and stock prices. Further, the coefficient of
dividends is higher as compared to the coefficient of retained earnings.

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The empirical findings of dividend research have produced mixed results. Some found
positive relationship between the dividend theories and the corporate dividend policy,
while others did not. The theories on behaviour of corporate dividend policy suggest that
dividend policy is a residual decision. The price reactions to dividend changes are
stronger for high dividend-yields stock. Similarly, evidence are found on the existence of
dividend signalling effects. The initiation and increase in dividends have a significant
positive impact on stock price. From the above studies, it is obvious that studies were
more concerned with impact of dividends on stock price and dividend policy. The
findings of these studies are not unanimous across all sectors and time periods for
explanatory variables and its impact on stock price. The reason behind this is the
difference in methodology, sample size, and time. However, studies found that the
dividend has a significant impact on market stock prices than other explanatory variables.
Since both investors and management are concerned about the movements of stock price,
this study has focused on discovering what moves stock price, as well as the important
factors investors should consider before making investment decisions and by
management in formulating dividend policies for their firm

1.7 Research methodology

Research methodology is a systematic way to solve the research problem. The method
which is use in the research is called research methodology. How the data is collected,
and which source the research use for getting the data is under the research methodology.
It describes the methods and process applied on the entire aspect of the study. There are
verities of techniques and tools available to accomplish the study. Among such different
available, the financial and statistical tools are used to analyse the collected data. The
analysis is useful to reflect the financial position of the concerned Finance. Microsoft
word and excel were used for editing, coding, classifying and tabulation of collect data.
Research Design

A research design is a conceptual structure within which research is conducted. It is the

blueprint of research for collection, measurement and analysis of data. It is consists of
framework for completing research work beginning to end. It can be descriptive, causal

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comparative and Experimental and Exploratory research design. It is a plan, structure and
strategy of investigation, which is conceived to obtain answers to research question and
to control variance. Research design includes definite procedures and techniques that
guides toward using appropriate methods for analysing and evaluating the findings of the
research. So, the research design of this study is based on descriptive and analytical data.
For the study, six years data till fiscal year 2071/72 have been collected and analysed to
reach at valid conclusion. This study has been designed to know about dividend policy of
Manjushree finance limited.

Qualitative Research Design

It is naturalistic approach that seeks to understand phenomena in context specific setting

such as “real world setting where the researcher does not attempt to manipulate the
phenomenon of interest”. They seek in depth understanding of specific topic which gives
some meaning to readers. In this research qualitative design is used because qualitative
research techniques are essential in exploring individual attitudes, perceptions,
conceptions and priorities while dealing with sensitive topics in depth.

Quantitative Research Design

This is the approach of collecting data by focusing on quantitative data rather than
qualitative one. More priority is given to numeric values or the data that can be expressed
mathematically. It provides exact data. In this report quantitative research design is used
to find out the Dividend policy of Manjushree finance limited.

Population and Sample

From the viewpoint of research population means entire collection of observations. Due
to time and cost constraint, research can’t be conducted in entire group of population.
Rather research is done on specific proportion of population for convenience. That
portion of population is known as sample. Nowadays, much finance is operating in
Nepal. Likewise, there is much finance whose shares are traded actively in the stock
market. Therefore, random sampling technique has been used here for selecting sample
from population.

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Sources of Data
In research, field work is the central and important method for collecting the primary
information. Secondary information also plays an important role while analysing and
giving inference of some empirical knowledge. This study is largely based on primary
and secondary data. Regarding primary data, information is collected directly from
people through series of questionnaire.
In this study, secondary information is collected from various published and unpublished
source like books, newspapers, articles, annual report of concerned Finance company etc.

Data Collection Techniques

The study is based on both primary and secondary data. The secondary data has been
collected from concerned bank’s annual reports, financial statement published by Nepal
Stock exchange and Ministry of Finance and related websites. Furthermore, primary data
has also been collected through questionnaire to get the actual view of general people
regarding the dividend policy adopted by Finance company in Nepal.
The following tools which will be used for data presentation and analysis:
 Tabulation
 Bar Diagram
 Pie chart etc.

1.6 Data Analysis Tools

A. Financial Tools

Financial tools and techniques are used to define the internal and external analysis of a
finance company. The technique like profitability ratio analysis is done for the study of
ratios of Finance company.

i. Market Price Per Share (MPPS)

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MPS is the value of share in the market. It is the amount that investors are willing to pay
for one share of company’s stock. Market price per share of stock of each sample denotes
the monthly and the yearly-ended value and has been brought here from NEPSE Annual
Report and denoted by MPS. It is the output of interacting forces of demand and supply
at given time in relation to price and volume.
Total markets capitalization
MPS=
No . of Common Shares Outstanding

ii. Earnings Per Share (EPS)

EPS is the net income per share available to the common stockholders after paying
preferred dividends. It is extracted from individual company’ annual report and is the
proportion of earning after tax divided by the number of shares outstanding. It is the most
important ingredient for determining MPPS. High value of EPS results in higher market
price. In this study, it is denoted by EPS.

Total Earning of Company

EPS=
No . of Common Shares Outstanding

iii. Dividend Per Share (DPS)

DPS is the rupee amount of dividend per share of common stock. Dividend per share is
that portion of EPS which is distributed to the shareholders but is varied according to the
company’s policy. It is also another important factor affecting MPS. In short, it is
denoted by DPS which is obtained by dividing the total dividend by the number of
equities shares outstanding.

Total Dividend Paid

DPS=
No. of Common Shares Outstanding

iv. Dividend Payout Ratio

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It is the portion of the earning used for the payment of dividend. The dividend payout
ratio is the earnings paid to the equity holders from the earnings of a firm in a particular
year. This ratio shows what percentage of the profit is distributed as dividend and what
percentage is retained as reserve and surplus for the growth of the banks. This ratio is
calculated by dividing dividend per share by the earning per share. Thus,

DPS
DPR=
EPS
V. Dividend Yield (DY)
Dividend yield is a percentage of dividends per share on market price per share. It shows
that how much is the dividend per share on market price per share. It measures the
dividend in relation to market value of share. This ratio is calculated by dividing dividend
per share by market price of the stock.

DPS
DY Ratio=
MPS

The amount of total net income of a company that is not distributed as a profit and
dividend is called as retained earnings. The amount that is not paid out in dividends to
stockholders is held by the company for growth. The amount that is kept by the company
is called retained earnings.

Statistical Tools

In this study, the following statistical tools have been extensively used.
i. Arithmetic Mean
The arithmetic mean is also termed as average or measure of central tendency.
Arithmetic mean is the number which is obtained by adding the various numbers of all
the items of a series and dividing the total by the number of items. Arithmetic mean is a
useful tool in statistical analysis. The most popular and widely used measure of
representing the entire data by one value is what most laymen call an average and what
the statisticians call the arithmetic mean.

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Formula,

X=
∑X
N

ii. Standard Deviation

Standard deviation is defined as a positive square root of Arithmetic mean of square of
deviation taken to measure their mean the standard deviation measures the absolute
dispersion, the greater the standard deviation the greater will be the magnitude of the
deviation means a high degree of uniformity of the observation as well as homogeneity of
a series and a large standard deviation means just the opposite. Standard deviation is
extremely useful in judging the representativeness of the mean.
Formula,

σ= √ ∑ ( X −X )2
N

iii. Coefficient of Variation

Coefficient of variation is the relative measure of dispersion. Coefficient of variation is
the percentage variation in means standard deviation being considered as the total
variation from the mean.
σ
Coefficient of variations (C.V) = × 100
X

iv. Correlation Coefficient

It is a useful statistical tool for measuring the intensity of the magnitude of linear
relationship between two variables. The most important method of measuring the
correlation between the two variables is “Karl person’s coefficient of correlation. “If the
values of the variables are directly proportional then the correlation is said to be positive.
On the other hand, if the values of the variables are inversely proportional, then the
correlation is said to be negative. The correlation coefficient always remains within the
limit of +1 to -1.

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Formula,
N ∑ XY −∑ X ∑ Y

r= √ N ∑ X 2−(∑ X )2 √ N ∑ Y 2−(∑ Y )2
Proprieties:
a) It lies between -1 and +1
b) If r = +1, then there is perfect positive correlation.
c) If r = -1, then there is perfect negative correlation.
d) If r = 0, then there is no correlation.
e)If r = 0.7 to 0.99 (or- 0.7 to -0.99) then there is high degree positive or negative
correlation.

1.8 Limitation of the Study

Every study has its own limitations, and the following are the limitations of the present
study:
 This study is mainly conducted on the secondary data, so the result depends on
the reliability of the secondary data.
 There are many factors that affect dividend decision and valuation of the firm.
However, only those factors related with dividend will be considered in this
field.
 The study of research covers only five years period data.
 The data being taken from secondary source; therefore authenticity of the data is
dependent on the accuracy of the information used.
 Among the different aspect of dividend policy only cash dividend is taken for the
analysis.
 This report is only for the academic purpose.

1.9 Report Structure

A report structure is a structure a reporting clause or a quote. The main features of report
structure are listed below:
Chapter - I Introduction

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Financial analysis is the process of evaluating business, projects, budgets and others
finance-related entities to determine their performance and suitability. Typically,
financial analysis is used to analyse whether an entity is stable, solvent, liquid or
profitable enough to warrant a monetary investment.
Chapter II Results and analysis This is the presentation and analysis part of the study.
The data are presented in the graphic and the tabular form those data are analysed by
using statistical &financial tools.

Chapter III Summary and conclusion

The last chapter is summary despite various initiatives taken in financial reforms, the
economic growth rate and inflation rate suggest that there has been a situation of
stagflation in the country for many years. Similarly, slow down on business activities.

CHAPTER- II
RESULT AND ANALYSIS

This is an analytical chapter where various relevant data that are collected during the
study are analyzed and evaluated in order to achieve the specified objective. For the
presentation and analysis of data collected from various sources, different tools and
techniques have been used.

2.1 Data presentation Analysis

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The major objective of this study is to analyse the dividend relevant aspect of concerned
finance and see if any relationship exists between dividend and market price of shares as
well as earnings and dividend payment. In order to achieve this objective required data
are collected from secondary source (online search), as mentioned earlier in the first
chapter .Gathered data are evaluated with the use of different financial and statistical tool
and then are presented in table and chart. This chapter beings with descriptive analysis of
dividend per share, earning per share, market price per share ,dividend yield ,dividend
payout ratio and retention ratio .After that statistical analysis will fallow. Central
tendencies and dispersion including mean standard deviation and coefficient of variation
of each indicator will analyse. At the end correlation coefficient will be calculated
between DPS & MPS and DPS &EPS to analyse relationship between them.

2.2.1 Analysis of Data

The relevant data and information necessary for the study are presented and analysed
keeping the objectives set in mind. To make our study e ffective and precise as well as
easily understandable this chapter is categorized in three parts: presentation, analysis and
interpretation. In presentation section data are presented in term of table and chart
according to the need.

Table 2.1 Dividend Policy of Manjushree Finance Limited

Total Dividend
Years Cash Dividend (%) Stock Dividend (%) (%)

2074/75 5.5 18 23.5

2075/76 9.8 1.75 11.55

2076/77 2.9 0 2.9

2077/78 0.32 5.71 6.03

207879 0.74 14 14.74

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25

20

15
Cash Dividend (%)
Stock Dividend (%)
10 Total Dividend(%)

0
2074/75 2075/76 2076/77 2077/78 207879

Figure 2.1 Dividend Policy of Manjushree Finance Limited

Financial Analysis:
2.2.2 Earnings Per Share (EPS)
EPS is one of the factors that affect the dividend policy and stock price of the firm. EPS
is calculated by dividing the net profit after taxes (NPAT) by the total number of
common shares outstanding. EPS shows the profitability of any firm on a per share basis.
Higher EPS indicates better financial performance and high degree of achievement. In
other words, higher EPS denotes the financial strength, and lower EPS indicates financial
weakness of any firm. Here, EPS has been computed to know the earning capacity of the
concerned finance. The EPS of Manjushree finance Ltd under the study has been
tabulated as follows:
Table 2.2 Earning Per Share

Year EPS
2074/75
13.14
2075/76
7.07
2076/77
11.99
2077/78
9.52

17
 18

2078/79 21

Mean 11.93

S.D 4.18

C.V 0.35
(Source: Annual Reports of Manjushree Finance Limited)

From the observation of the table 1, the EPS of Manjushree has oscillated during the
observed periods. The EPS of the finance has ranged from Rs.9.25 in the fiscal year
2077/78 to Rs.8.86 in average EPS is Rs.11.93, standard deviation is 4.18, and the
coefficient of variation is 0.35. C.V is a relative measure of risk to return and measure
risk in terms of per unit of return. Lower C.V is preferable. This coefficient of variation
clarifies that there is 0.35 fluctuations in EPS, which means there is acceptable
consistency in EPS. Higher the EPS higher will be the performance of any finance or
financial sector.

EPS
25

20

15

10

0
2074/75 2075/76 2076/77 2077/78 2078/79

Figure 2.2EarningsPer Share (EPS)

In the figure no.1 EPS and financial year are measured along X-axis and Y-axis
respectively. after that it increases to 13.14 but after that year the EPS slightly started to
decrease in the coming years which shows negative effects to the investor but in the years

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 19

2078/79 it increases rapidly reaches Rs. 21 respectively. The average EPS of Manjushree
Finance Ltd during the period of the study is Rs.11.93. The S.D is 4.18 and CV is 0.35,
which indicates low fluctuation in EPS of Manjushree Finance Limited.

2.2.2 Dividend Per Share (DPS)

Dividend per share indicates the proportion of earning distributed to owner (shareholder)
on per share basis. Generally, the higher DPS creates positive attitude among the
shareholders toward the firm, which accordingly helps to increase the market value of the
share. The DPS also works as the indicator of better performance of the management of
the company. It measures the dividend distribution to each equity shareholders. The DPS
of Manjushree Finance Limited under study are presented in the table below:

Table 2.3 Dividend per Share

Year DPS(Rs)
2074/75 56.59
2075/76 9.47
2076/77 3.19
2077/78 13.51
2078/79 76.14
Mean 28.84
S.D 25.33
C.V(%) 0.88
(Source: Annual Report of Manjushree Finance Limited)

The table reveals that Manjushree Finance Limited lacks strong dividend policy to entice
the investors toward the finance. The DPS of the finance has swung over the periods. For

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the first year, the finance distributed Rs.14.16 as DPS, then the finance slightly decreased
its DPS to Rs.3.19 in the fiscal year 2076/77, then in the fiscal year 2075/76 its DPS
increases to Rs.9.47 and finally the finance distributed Rs.13.51 as DPS in the year
2077/78. In average, Manjushree Finance limited has paid Rs.28.84 as dividend per
share, including both cash dividend and bonus share dividend. The standard deviation and
the coefficient of variation of the finance are 25.33 and 0.88 respectively.

DPS(Rs)
80

70

60

50

40

30

20

10

0
2074/75 2075/76 2076/77 2077/78 2078/79

Figure 2.3 Dividend per Share (DPS)

In the given bar-diagram DPS and Year are measured are along x-axis and y-axis
respectively. Here the DPS of the Manjushree finance limited in the followed by decrease
in the year to Rs.9.47. After that year the DPS .increase next year and reaches to Rs.14.7
in the fiscal year 2077/78.After next year the DPS increase rapidly to Rs.76.14. The
average DPS of Manjushree Finance Ltd during the period of the study is Rs. 28.84. The
S.D is 25.33 and CV is 0.88, which indicates moderate fluctuation in DPS Manjushree
Finance Ltd.

2.2.3 Dividend Pay-out Ratio (DPR)

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 21

The dividend ratio is the fraction of net income a firm pays to its stockholder in
dividends. Investors seeking high current income and limited capital growth prefer
companies with high Dividend payout ratio. The dividend payout ratio reflects what
percentage of the profit is distributed as dividend and what percentage is retained as
reserve and surplus for the growth of the business firm. This ratio shows the amount of
dividend as the percentage of earning available for equity share. The DPR depends upon
the earnings made by the company. So, higher earning enhances the ability to pay more
dividends and vice versa. There is an inverse relationship between DPR and retention
ratio. The DPR of Manjushree Finance Limited under study are stated in the table as
follows:

Table 2.4 Dividend Payout Ratio

Year DPR (Rs)

2074/75 4.31

2075/76 1.34

2076/77 0.27

2077/78 1.42

2078/79 3.63

Mean 2.095

S.D 1.302

C.V 0.6214
(Source: Annual Report of Manjushree Finance Ltd)

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 22

The average DPR of Manjushree during the period of the study is 2.095. The S.D 1.302
and CV is 0.6214, which indicates moderate fluctuation in DPR of Manjushree Finance
Ltd. Generally, the DPR can be classified under 3 categories of dividend policy as
conservative (0-20), moderate (21-50) and aggressive (51-100). If we analyse the above
data according to these criteria then it shows that Manjushree Finance Ltd has followed
aggressive dividend policy.

DPR (Rs)
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
2074/75 2075/76 2076/77 2077/78 2078/79

Figure 2.4Dividend Payout Ratio (DPR)

In the given pie chart DPR of the Manjushree Finance Ltd in the DPR increases rapidly in
the next year and reaches to Rs.4.13 in the fiscal year 2074/75. But next the year DPR of
Manjushree started to fall till the year 2075/76 and reaches to Rs.1.34. The average DPR
of Manjushree Finance Ltd during the period of the study is 2.09. The S.D is 1.302 and
CV is 0.6214, which shows that Manjushree Finance Ltd has followed aggressive
dividend policy.

2.2.4. Market Price Per Share (MPPS)

MPPS is the price of share on which shares are traded in the secondary market i.e. stock
exchange. Once the shares issued in the primary market are listed in the stock exchange,

22
 23

investors are able to buy and sell the shares among themselves with the help of brokerage
firms. The prices of shares are fixed in the stock market on the basis of demand and
supply position for the shares of specified company. The average market price per share
of Manjushree Finance Limited under study is presented in the table as follows:

Table 2.5 Market Price Per Share

Year MPS(Rs)

2074/75 385

2075/76 157

2076/77 110

2077/78 117

2078/79 324

Mean 213.5

S.D 96.72

C.V 0.45
(Source: Annual Report of Manjushree Finance Ltd)

The table shows that the market price per share of Manjushree Finance Ltd has increased
up to the fiscal year 2078/79 i.e. from Rs.324 in the fiscal year 2077/78 to Rs.117 in the
fiscal year 2078/79. However from the fiscal year 2077/78, the MPS of the bank has
followed decreasing trend and finally reached to Rs110 in the fiscal year 2076/77. In
average, the market price per share of Manjushree Finance Ltd has remained to be
Rs.201.83, and the variation on the MPS is 0.45.

23
 24

MPS(Rs)
450
400
350
300
250
200
150
100
50
0
2074/75 2075/76 2076/77 2077/78 2078/79

Figure 2.5 Market Price per Share (MPS)

In the given bar-diagram MPS and Year are measured are along X-axis and Y-axis
respectively. Here the MPS of the Manjushree Finance Ltd stock in the next year to
Rs.385. After that year the MPS decrease rapidly in next year and reaches to Rs.157 in
the fiscal year 2075/76. But after that year the MPS of Manjushree Finance Ltd started to
increase till the year 2078/79 and reaches to Rs.324. So, there seems great price volatility
in the stock market.

2.2.5 Price Earnings Ratio (P/E Ratio)

This ratio reflects the market value per share for each rupee of currently reported earnings
per share. It is also known as earning multiplier. P/E ratio is the ratio between the market
price per share and earnings per share. It represents the amount which investors are
willing to pay for each rupee of the firms earning. The P/E ratio of Manjushree Finance
Ltd under study is presented in the table as follows:

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 25

Table 2.6 Price Earnings Ratio

Year P/E ratio (%)

2074/75 29.3

2075/76 22.22

2076/77 9.17

2077/78 12.29

2078/79 15.43

Mean 18.27

S.D 6.24

C.V(%) 0.34

(Source : Annual Report of Manjushree Finance Ltd)

In the above table the P/E ratio of the Manjushree Finance Ltd in the Similarly, in the
FY2075/76 P/E slightly increases to 22.22 and in the next year 2074/75 it reaches to
highest level among six year with the value of 29.3, and after that year there is small
increase and decrease in the P/E ratio. Here, the average P/E ratio of the Manjushree
Finance Limited is 18.27 while standard deviation and coefficient of variation of P/E
ratio are 6.24 and 0.34 respectively

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 26

P/E ratio (%)

35

30

25

20

15

10

0
2074/75 2075/76 2076/77 2077/78 2078/79

Figure 2.6 Price Earnings Ratio (P/E Ratio)

In the above figure the trend line of P/E ratio of Manjushree Finance Ltd is shown. the
FY 2074/75 and reaches to only 29.30 times. but in next year P/E ratio fall till the year
2075/76 and reaches to 22.22 And after that it is in decreasing trend to the FY 2076/77
and next fiscal year 2077/78 it reaches 12.29. the highest P/E of around 29.30 times. So,
we can say that there in volatility in P/E ratio of the Manjushree.

2.2.6 Earning Yield (EY)

EY may be defined as the ratio of earning per share to the market price per share at a
particular time. It is the percentage of earning per share to market price per share in the
secondary market. It gives an idea of how much an investor might get for his money. So,
the share with higher earning yield is worth to buy. The EY of Manjushree Finance Ltd
under study is stated in the table as follows

Table 2.7 Earning Yield of Finance

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Year EY (%)
2074/75 2.10
2075/76 4.52
2076/77 2.53
2077/78 3.84
2078/79 5.83
Mean 18.05
S. D 1.0977
C.V 0.6001
(Source: Annual Report of Manjushree Finance Ltd)

In the above table the Earning Yield of the Manjushree Finance Ltd in the Similarly, in
the FY 2074/75 Earning Yield slightly decreases to 2.10, and in the next year 2075/76 it
reaches 4.42, and after that year there is small increase and decrease in the Earning Yield
of Manjushree Finance Ltd. Here, the average Earning Yield of the Manjushree Finance
Ltd is 18.05 while standard deviation and coefficient of variation of Earning Yield are
1.0977 and 0.06001 respectively.

EY(%)
7

0
2074/75 2075/76 2076/77 2077/78 2078/79

Figure 2.7Earning Yield (EY)

In the given pie-chart shows that Earning Yield of Manjushree Finance Limited is
fluctuating. two year earning yield ratio has decreased to 2.10% and increase next year

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4.25% respectively. After that in year 2076/77 decrease 2.53% and increase in 2077/78
3.84% slowly and for next year 2076/75 rapidly increase 5.845 respectively. The average
EY of Manjushree during the period of the study is 18.05. The S.D is 1.0997 and CV is
0.06001, which indicates slightly fluctuation in EY of Manjushree Finance Ltd.

2.2.7 Dividend Yield (DY)

DY is the percentage of dividend per share on market price per share. It measures the
dividend in relation to the market value of share. So, it is the dividend received by the
investors as the percentage of market price per share in the stock market. This ratio
highly influences the market price per share because a small change in dividend per share
can bring effective change in the market value of the share. The share with higher
dividend yield is worth to buy. The DY of Manjushree Finance Ltd under study is
presented in the table below:
Table 2.8 Dividend Yield

Year DY (%)

2074/75 14.7

2075/76 6.03

2076/77 2.9

2077/78 11.55

2078/79 23.5

Mean 11.035

S.D 6.2402

C.V 0.5654
(Source: Annual Report of Manjushree Finance Ltd)

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DY (%)
25

20

15

10

0
2074/75 2075/76 2076/77 2077/78 2078/79

Figure 2.8 Dividend Yield (DY)

In the given diagram the Dividend yield of Manjushree finance ltd in the Similarly, in
the FY 2075/76 dividend slightly decreases to 2.09 and next year 2076/77 it reaches
6.03and increase to 14.7 next year 2077/78 and slightly decrease in 7.53 next year
2078/79and after that year is small increase and decrease in the Dividend yield of
Manjushree Finance Ltd. The average DY of Manjushree Finance Ltd during the period
of the study 2.29%. The S.D is 1.30and CV is 0.5654, which indicates fluctuation in DY
of Manjushree Finance Ltd.

2.2 Major Findings

Every task is conducted in order to solve problems. This field work report entitled
‘Impact of Cash Dividend on Stock Price’ Manjushree Finance Ltd is prepared to find out
the amount of dividend distributed by Manjushree Finance Ltd using various financial
and statistical tools. After completion of this field work report, the main findings are:

 The EPS of Manjushree Finance Ltd has oscillated during the observed periods.
This coefficient of variation clarifies that there are 0.35 fluctuations in EPS,
which means there is acceptable consistency in EPS.

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 The Manjushree Finance Ltd lacks strong dividend policy to entice the investors
toward the Finance The DPS of the finance has swung over the periods. For the
first year, the finance distributed Rs.14.16 as DPS.

 The average DPR of Manjushree during the period of the study is 28.84. The S.D
is 25.33 and CV is 0.88, which shows that Manjushree has followed aggressive
dividend policy.
 The MPS of the Manjushree stock followed by decrease in the next year to110 in
2076/77. So, there seems great price volatility in the stock market.

 the FY 2074/75 and reaches to only 29.30 times. And after that it is in increasing
trend to the FY 2074/75 and the highest P/E of around 29.30 times. And slightly
down to 9.17 in 2076/77So, we can say that there in volatility in P/E ratio of the
Manjushree Finance Ltd.

 The average EY of Manjushree during the period of the study is 18.05. The S.D is
1.0997 and CV is 0.06001, which indicates slightly fluctuation in EY of
Manjushree Finance Ltd.

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CHAPTER III
SUMMARY AND CONCLUSION

This chapter focuses on summarizing the whole study carried out with the objective of
deriving a valid conclusion on the basis of findings presented in the previous chapter.
Therefore, to fulfil the basic purpose of this chapter, the chapter has been divided into
two parts as Summary and Conclusion.

3.1 Summary
In reality, the objective of almost all business organization is to earn profit. The business
firms may have other objective of satisfying their shareholders who make investment on
the company. The dividend policy of a firm becomes the choice of financial strategy
when investment decision are taken as given. It is also imperative to know whether the
firm will go for internal and external sources of financing for its investment project. So,
dividend distribution is regarded as one of the important factors to any organization for
effective goal achievement by satisfying the shareholders. The company's total net
income can be divided into two parts, earning to be distributed to the equity shareholders
and earning to be kept in the organization. The portion of earning that is distributed to the
shareholders in return to their investment in shares is known as dividend and the portion
of earning that is kept in the organization is known as retained earnings. The dividend is
decided upon and declared by the board of directors. The dividend policy determines the
division of total earning between payment to shareholders and reinvestment in business
expansion projects of the firm. Therefore, the decision regarding how much profit to
distribute to the shareholders and how much to keep in the organization is the dividend
policy. The dividend decision is guided by number of factors such as legal rules, liquidity
position, investment opportunity, desire of shareholders, access to capital markets etc.
And the company should always consider all the relevant factors at the time of making
dividend decision to get better result.

Dividend policy is concerned with the determination of dividend payment. Laydown the
decision regarding whether or not to pay dividend and if dividend is to be paid then how
much? It decides how much of earning is to be paid as dividend and how much is to be

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retained. Since , dividend is expected to affect share price , dividend policy is also
directly or indirectly connected with share price and it has order numerous implication in
firms. Hence, dividend policy of any corporation is crucial topic.

Dividend policy decision is one of the major decisions of financial management. The
dividend policy decision effects on the operation of the organization because it has the
power to influence other two decisions of the organization i.e. capital structure decision
and investment decision. An investor expects two types of return namely, capital gain and
dividend by investing in equity or ordinary share. So, payment of dividend to the
shareholders is an effective way to attract new investors and maintain the present
investors. It is important to have clearly defined and effectively managed dividend policy
so as to fulfil the shareholders' expectations and corporate growth. Nowadays, paying
dividend can be taken as an important tool to attract new investors because dividend
paying ability reflects the financial position of the organization in the market.

In order to study this crucial topic, this study has conducted. This study selects
Manjushree Finance Ltd one of the “C” class finance companies in Nepal as a sample.
This study focusses on analysing dividend related aspects of concerned finance with the
help of different financial indicators. It has attempted to see soundness of concerned
finance from view of dividend payment and its consistency. Furthermore, it has attempted
to answer the well-known questions. Does dividend payment impact share price? Does
high earning mean more dividends.

This study covers the dividend policy one Finance company of Nepal namely Manjushree
Finance Ltd considering 6 years data from fiscal year 2071/72 to 2078/79. Different types
of analysis have been carried out to find the appropriate relationship between market
price and other factors affecting dividend. The available secondary data have been
analysed using various financial and statistical tools. So, the reliability of the conclusion
of this study depends on the accuracy of secondary data.

From the study, it is found that finance is paying dividend but there is no consistency in
dividend distribution pattern followed by the sample finance company. The study shows

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that none of the finance have well defined and appropriate policy regarding dividend
payment. In the same way the finance does not seem to follow optimum dividend policy
of paying regular dividend as expected by the shareholders. In addition, the finance
should pay dividend only after financing in all investment opportunity. Shareholders are
not in different whether company pays dividend or does not pay dividend. Shareholders
are not indifferent whether company pays dividend or does not pay dividend. Company
should pay scrip dividend if it has no cash dividend to pay. Also, dividend distribution
influences the liquidity position of the firms. With regard to dividend should be
adequately planned and maintained. Most of the people invest in share capital in order to
utilize the surplus

3.2 Conclusion
The results of the analysis made on relevant data collected, has helped to study the
dividend policy followed by selected Nepalese finance company from different
dimension. However, the analysis cannot give the wholesome conclusion of present
dividend practices that are being followed by the finance sector in Nepal. After analysing
the financial and statistical indicators of finance chosen for the study, following
conclusions have been drawn:
 The situation of capital market in Nepal is improving day by day. As a result, the
capital market seems to be more efficient than previous years. But in reality, the
capital market of Nepal is still immature.
 The dividend practice followed by the Nepalese finance company is neither stable
nor constantly growing as dividend is being distributed on situational basis.
 The market price per share is mainly affected by the dividend related financial
variable, i.e. DPS, DPR and DY. The nature of effect is different for different
finance. In case of sample finance, there exists positive relation between dividend
and market price per share.
 Beside dividend, other factors also affect the market price per share such as
earning per share, price earnings ratio etc.

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 34

 There is no certain criterion developed by the government for paying regular

dividend by the Nepalese finance in favour of the shareholders.

In conclusion, there is uncontrollable growth in number of financial institutions in

Nepalese market within a short span of time. This has raised reasonable doubts and
confusions among common people regarding their investment decisions. However,
the financial institutions who are providing dividend to their shareholders regularly
and honestly according to their capacity are running successfully.

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BIBLIOGRAPHY

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Chen, N. Roll, R., & Ross, S.A. (1986).“Economic forces and stock market.”
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Fama, E.F. (1970). Efficient capital market: A review of theory and empirical
work. Chicagoan journal, 25(2), 383-417.

Fama, E.F. (1990). “Stock returns, expected returns and real activity.” American
Economic Review.Vol. 45. pp. 1089-1108.

Feldsrein, M. (1980).“Inflation and the stock market.”American Economic

Review. Vol. 70 (5). pp.839-847.

Fisher, I. (1930). The theory of interest. New York: Macmillan. Journal of

monetary Economic, 19(1), 3-24.

Gay, R. D. (2008). “Effects of macro-economic variables on stock market returns

for four emerging economies: Brazil, Russia, India, and China.”
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Geske, R. & Roll, R. (1983). “The fiscal and monetary linkage between stock
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Masum, A. A. (2014). Dividend policy and its impact on stock price – A study on
commercial banks listed in Dhaka stock exchange. Global Disclosure of
Economics and Business, 3(1), 9-17.
 Cash Stock Total DP
Dividen Dividen Dividend R MPS(R P/E ratio EY
Years d (%) d (%) (%) EPS (Rs) s) (%) )
2074/7
13.1 29.
5
0.74 14 14.74 4 4.31 385 3 2.1
2075/7
22.
6
0.32 5.71 6.03 7.07 1.34 157 22 4.5
2076/7
11.9 9.1
7
2.9 0 2.9 9 0.27 110 7 2.5
2077/7
12.
8
9.8 1.75 11.55 9.52 1.42 117 29 3.8

2078/7 15.
9 5.5 18 23.5 21 3.63 324 43 5.8
Appendix
(Source: Annual Report Of Manjushree Finance Limited)

Market Price Per Share (MPS)

Total markets capitalization
MPS=
No . of Common Shares Outstanding
Earnings Per Share (EPS)

Total Earning of Company

EPS=
No . of Common Shares Outstanding

Dividend Per Share (DPS)

Total Dividend Paid

DPS=
No. of Common Shares Outstanding
Dividend Payout Ratio
DPS
DPR=
EPS
Dividend Yield (DY)

DPS
DY Ratio=
MPS

Arithmetic Mean

X=
∑X
N

Standard Deviation
 σ= √ ∑ ( X −X )2
N
σ
Coefficient of variations (C.V) = × 10
X