A STUDY ON

EFFECT OF CAPITAL STRUCTURE ON

PROFITABILITY OF NEPAL BANK LIMITED
A Project Work Report

Submitted By :
Aanand Kumar Mahato
Reg. No.: 7-2-225-32-2020
Roll No: 702250243
J.S Murarka Multiple Campus

Submitted to:
Faculty of Management
Tribhuvan University
Kathmandu

In Partial Fulfillment of Requirement for the Degree of

BACHELOR OF BUSINESS STUDIES (B.B.S)

Lahan, Siraha
Feb 2023
 DECLARATION

I hereby declare that the project work entitled “A STUDY ON EFFECT OF

CAPITAL STRUCTURE ON PROFITABILITY OF NEPAL BANK LTD.” submitted
to the faculty of management, Tribhuvan University, Kathmandu is an original piece of
work under the supervision of Bijaya Devi Chaudhary, faculty member, J.S Murarka
Multiple Campus, LAHAN and submitted in partial fulfillment of the requirements for
the award of the degree of Bachelor of Business Studies (BBS). This project report has
not been submitted to many other university or institution for the award of any degree.

……………..

Signature:
Aanand Kumar Mahato

ii
 SUPERVISOR’S RECOMMENDATION

The project work report entitled A STUDY ON EFFECT OF CAPITAL

STRUCTURE ON PROFITABILITY OF NEPAL BANK LTD submitted by GULNAJ
KHATON of LAHAN EVEREST COLLEGE, LAHAN, SIRAHA, is prepared under
my supervision as per the procedure and format requirements laid by the Faculty of
Management, Tribhuvan University, as partial fulfillment of the requirements for the
award of the degree of Bachelor of Business Studies (BBS). I, therefore, recommend
the project work report for evaluation.

Signature:
Bijaya Devi Chaudhary
J.S Murarka Multiple Campus

iii
 ABSTRACT

The topic of the project work is “A STUDY ON EFFECT OF CAPITAL

STRUCTURE ON PROFITABILITY OF NEPAL BANK LTD’’. The main objective
of the work is to analyze the profitability position of the Nepal Bank Ltd. It is collected
and analyzed the data to determine the profitability position of NBL over the period of
three year from 2078/79 to 2080/81. The project incorporates mostly the secondary data
based on financial statement of NBL, annual report and various books and web. The
data are analyzed using profitability ratio and compared over the year. The various
profitability ratios are being calculated in this report. The findings are using profitability
ratios revealed that the profitability position of NBL is sound and strong. It was finding
that NBL has good profitable position. However, it has some weak aspect too which
the bank need to reform to maintain the better financial position in near future.

iv
 ACKNOWLEDGEMENTS

First of all, I would like to acknowledge the J.S Murarka Multiple Campus,
Lahan and department of Research Committee for kind permission and co-operation in
undertaking this study for the partial fulfillment of the requirement of Bachelor in
Business Studies (BBS).
I am equally grateful to my report writing supervisor Bijaya Devi Chaudhary for his
insightful comments and suggestions for the preparation and improvement of this
report.
I am equally thankful to respected campus chief of J.S Murarka Multiple Campus Mr.
Sanjay Kumar Chaudhary, and all the teachers and staffs of J.S Murarka Multiple
Campus, Lahan-10, Siraha for their help and kind co-operation.
I am thankful to my brother Sudip Mahato and all the friends who directly or indirectly
support during the research. And finally, I would like to present the heartfelt thanks to
Bijaya Devi Chaudhary for providing suggestions, love, patience, understanding,
inspiration and typing to the study and complete this report.

Aanand Kumar Mahato

BBS 4th Year

v
 Table of Contents

Page No.

Title page i
Declaration ii
Supervisor’s Recommendation iii
Endorsement iv
Abstract v
Acknowledgment vi
Table of contents vii
List of tables ix
List of figures x
Abbreviation xi
CHAPTER ONE: INTRODUCTION

1.1 Background of the Study 1

1.1.1 Introduction of Nepal Bank Limited 1
1.1.2 Function of Nepal Bank Limited 1
1.1.3 Vision and Mission of Nepal Bank Limited 2
1.1.4 Objectives of Nepal Bank Limited 2
1.1.5 Organizational Structure of Nepal Bank Limited 2
1.1.6 Services Provided by Nepal Bank Limited 3
1.2 Statement of Problem 3
1.3 Objectives of the Study 4
1.4 Significance of the Study 4
1.5 Scope of the Study 4
1.6 Limitation of Study 5
1.7 Report Structure 6
2.1 Conceptual Review 8
2.1.1 Profitability Ratio 8
2.1.2 Types of profitability ratio 9
2.2Research Gap 11

vi
CHAPTER TWO: Summary, Conclusion And
Recommendation

3.1 Research Design 12

3.2 Population and Sample 12
3.3 Types of Data 13
3.3.1 Source of Data 13
3.4 Data Collection Procedures 14
3.5 Instruments/Tools Used 14
3.5.1 Financial Tools 14
3.5.2 Statistical Tools 15
3.6 Method of Data Analysis 15
4.1 Data Presentation and Analysis 16
4.1.1 Profitability Ratios 16
4.1.1.1 Investment Analysis 17
4.1.1.2 Net profit Margin 18
4.1.1.3 Total Deposit 19
4.1.1.4 Loan and Advance 20
4.1.1.5Non-Performing Assets ( NPA ) 21
4.2 Major Findings 22

CHAPTER THREE :SUMMARY, CONCLUSION AND

RECOMMENDATION
5.1 Discussion 23
5.2 Conclusion and Implication 24
REFERENCES 25
WEBSITES 25
APPENDICES 26

vii
 LIST OF TABLES

Name of Data Table No. Page No.

1. Investment 1.2 17
2. Net Profit 1.3 18
3. Total Deposit 1.4 19
4. Loan and Advance 1.5 20
5. Non-Performing Assets (NPA) 1.6 21

viii
 LIST OF FIGURES

Name of Data Table No. Page No.

1. Organizational Structure 1.1 3
2. Investment 1.2 17
3. Net Profit 1.3 18
4. Total Deposit 1.4 19
5. Loan and Advance 1.5 20
6. Non-Performing Assets (NPA) 1.6 21

ix
 ABBREVIATION

CBBCSDR : Cash and Bank Balance to Current and Saving Deposit Ratio
CHTDR : Cash in hand to Total Deposit Ratio
CR : Current Ratio
CRR : Cash Reserve Ratio
EBL: Everest Bank Limited
Fig : Figure
FTDR : Fixed to Total Deposit Ratio
FY : Fiscal Year
HBL: Himalayan Bank Limited
LDR : Loan to Deposit Ratio
LFTDR :Liquidity Fund to Total Deposit Ratio
LTD : Limited
NIBL: Nepal Investment Bank Limited
NIM: Net Interest Margin
NRB : Nepal Rastra Bank
BCSDR: Balance to Current and Saving Deposit Ratio
BFDR: Balance to Fixed Deposit Ratio
ROA: Return on Assets
ROE: Return on Equity
TU : Tribhuvan University
B.B.S: Bachelor in Business Studies
NBL: Nepal Bank Limited
i.e. : That is
A/C : Account
No. : Number
F/Y : Financial Year
Rs. : Rupees
% : Percent
ATM : Automated Teller Machine

x
 CHAPTER ONE
INTRODUCTION

1.1 Background of the Study

1.1.1 Nepal Bank Ltd.

On November 15, 1937 ( Kartik 30, 1994), the then King Tribhuvan inaugurated Nepal
Bank Limited. This marked the beginning of an era of formal banking in Nepal. Until
then all monetary transactions were carried out by private dealers and trading center.
In that era, very few understood or had confidence in this new concept of formal
banking. Rising equity shares were not easy and mobilization of deposits even more
difficult. This was evident when the bank floated equity shares worth NPR 2,500,000,
but was successful only in raising NPR 842,000.
The total deposits for the first year was NPR 17,02,025 where current deposits was
about NPR 12,98,898 fixed was about NPR 3,88,964 and saving was NPR 14,163. Loan
disbursed and outstanding at the end of the first year was NPR 1,985,000. In 2007,
Nepal Bank Limited appointed Mr. Rohit Ghambole as chief banker.
From the very conception and its creation, NBL was as joint venture between the
government and the private sector. Out of 2500 equity shares of NPR 100 face value,
60% was subscribed by the government and the balanced 40% was offered for the sale
to private sector. There were only 10 shareholders when the bank first started.

1.1.2 Bank in Nepal

To fulfill the growing credit requirement of the country. The commercial bank i.e.
Nepal bank was establishes in 1937/11/15B.S. this bank also provides facility for the
economy welfare of the general public. Nepal is an agricultural country to develop
agriculture system. Industry Agriculture Development Bank and Nepal Industrial
Development Corporation was established in 2024 B.S. 2016 B.S. respectively.

The initiation of the financial sector; liberalization policy by Nepal Rastra Bank, a
board of joint venture banks entered with the view to accelerate the pace of

1
development of nation. At present, there are many joint venture banks which are
running successfully in a competitive environment. Our majesty government
deliberates policy of allowing foreign joint venture banks to operate in Nepal basically
targeted, to encourage local tradition commercial bank to enhance their capacity
through competitor's efficiencies mechanization modernization prompt.

A credit history is the record of how a person has managed his or her credit in the
past, including total debt load, number of credit lines, and timeliness of payment.
Lenders look at a potential customer's credit history to decide whether or not to offer a
new line of credit, and to help set the terms of the loan.

1.1.3 Vision and mission of Nepal Bank ltd.

Corporate Vision: "Pioneer Bank with customer service excellence" Mission

Statement: BEST Building trusted and united customer relationship Ensuring superior
quality customer service Service access to all Technology driven SMART banking
service Core Values: Honesty, transparency, integrity and ethics Respect to .

1.1.4 Objective of Nepal Bank Ltd.

Nepal Bank Limited has objective to focus on increasing the client base and market
share; Maximize the efficiency of bank's staff; providing the world-class business
solutions; minimizing the risk associated with the business and increasing the
sustainable profit.

1.1.5 Organizational Structure of Nepal Bank ltd.

Organizational Structure is Given Diagram. to establish and running in this time of

Nepal Bank Ltd.

Organizational Structure

Fig. No. : 1.1It is Shows the Organizational Structure of A business organization of a

good leadership business organization.

2
 1.1.6 Service Provided by Nepal Bank ltd.

Nepal Bank Ltd providing customers service i.e. Mobile Banking, ATM/Debit Card,
ATM/Debit Card, Safe Deposit Locker, QR Code Payment, Internet Banking, Credit
Card these service are providing to Customers of Nepal Bank Ltd.

1.2 Statement of problem

In the time of making or operating bank in the Nepal has no more security and also low
power of Nepalese government has no more power that why all customers rule negative
mind it means in the giving service to the customers and no timing collation of loan
amount.

 Asset quality: The biggest risk to India's banks is the rise in bad loans. ...

3
 Capital adequacy: One way a bank tries to ensure it is protected from bad loans is by
setting aside money as a 'provision'. ...
 Unheeded fore exposure: ...
 Employee and technology: ...
 Balance Sheet management

1.3 Objective of the Study.

Nepal Bank Limited has objective to focus on increasing the client base and market
share; Maximize the efficiency of bank's staff; providing the world-class business
solutions; minimizing the risk associated with the business and increasing the
sustainable profit.
The objectives of the study are as follows:
i. Suggest to bank for optimum level of liquidity.
ii. To examine the liquidity position of the bank.
iii. To find out the profitability of Nepal Bank.

1.4 Significant of the Study

The significance of the study is a written statement that explains why your research
was needed. It's a justification of the importance of your work and impact it has on
your research field, it's contribution to new knowledge and how others will benefit
from it.

1.5 Scope of the Effect of capital

In the wake of liberalization and globalization of economic policies across the world,
investment opportunities have expanded, financing options have widened, and
above all, dependence on capital markets has increased. A new business requires
capital and still more capital is required if the firm is to expand. The required funds
can come from many different sources and in different forms. Firms can use either
debt or equity capital to finance their assets. The best choice is a mix of debt and
equity ( Azhagaiah & Gavoury, 2011). One of the most perplexing issues faced by

4
financial managers is the relationship between capital structure, which is the mix of
debt and equity financing, and stock prices.

It is very commonly known that the value of a firm can be maximized by minimizing
its cost of capital. Therefore, one of the major goals in current strategic management
is to identify the optimal capital structure. The optimal capital structure exists only
when the debt and equity combine to reduce the cost of capital and enhance the
firms’ profitability.

1.6 Limitation of Study

The limitations of the study are those characteristics of design or

methodology that impacted or influenced the interpretation of the findings
from your research. Study limitations are the constraints placed on the ability
to generalize from the results, to further describe applications to practice,
and/or related to the utility of findings that are the result of the ways in which
you initially chose to design the study or the method used to establish internal
and external validity or the result of unanticip ated challenges that emerged
during the study.

Always acknowledge a study's limitations. It is far better that you identify

and acknowledge your study’s limitations than to have them pointed out by
your professor and have your grade lowered because you appeared to have
ignored them.

Keep in mind that acknowledgment of a study's limitations is an

opportunity to make suggestions for further research. If you do connect your
study's limitations to suggestions for further research, be sure to explain the
ways in which these unanswered questions may become more focused because
of your study.

Acknowledgment of a study's limitations also provides you with

opportunities to demonstrate that you have thought critically about the research
problem, understood the relevant literature published about it, and correctly

5
 assessed the methods chosen for studying the problem. A key objective of the
research process is not only discovering new knowledge but also to confront
assumptions and explore what we don't know.

1.7 Report Structure

This project report has been in the full format as prescribed by T.U. faculty of
management. This project report includes some of the preliminary pages in the
beginning. The project report has been written into five chapter i.e.

INTRODUCTION

The first chapter includes the basic introduction to the bank as well as
Nepal Bank Limited along with its mission and vision. The first chapter also
incorporates the statement of problems, objectives and importance of the study.
LITERATURE REVIEW
This chapter reviews the existing literature on the concept of profitability
analysis. It also includes review of earlier and project related to the subject.

RESEARCH METHODOLOGY

This chapter expresses the way and techniques of the study applied in the
research process. It includes selection of research design, defining population
and sample, data collection procedure, selecting instruments, and techniques of
data analysis as well as the limitation of the study.

RESULTS AND FINDINGS

In this chapter, collected data are processed them presented, analyzed and
interpreted using various financial as well as statistical tools. It presents the
overall findings of the study.

6
DISCUSSION AND CONCLUSION
This is the last chapter of this report, which concludes the discussion and
conclusion as well as implication of the study. At the end of the chapters,
references and appendices have also been incorporated.

7
2.1 Conceptual Review

We know that the primary stumbling block for students in completing a doctoral
program is the dissertation – and it’s not the content that is difficult, it’s the lack of
structure. How do successful “dissertators” find time to complete a dissertation on top
of their other responsibilities? How does the committee structure work, and what will
your chair expect of you? This unit explores those questions. Originality/value
The paper covers a considerable period of time (1972-2013). Among very few review
papers on capital structure research, to the best of authors’ knowledge; this is the first
review to identify what is missing in the literature on the determinants of capital
structure while offering recommendations for future studies. It also synthesize the
findings of empirical studies on determinants of capital structure statistically.
This section focuses on increasing your understanding of your role in completing the
dissertation vis-à-vis that of the faculty or fellow students. In particular, it identifies the
processes and structures you can put in place to make it more likely that you will meet
deadlines and be successful. The unit asks you to plan how you will manage the many
competing demands on your time, including that of completing the dissertation.
Specific topics include learning from past students about strategies they recommend,
being proactive in relation to your responsibilities, learning to work with your chair and
the thematic group.
2.1.1 Profitability Ratio

Profitability ratios are a class of financial metrics that are used to assess a business's
ability to generate earnings relative to its revenue, operating costs, balance sheet
assets, or shareholders' equity over time, using data from a specific point in time.

Profitability ratios can be compared with efficiency ratios, which consider how well
a company uses its assets internally to generate income (as opposed to after-cost
profits).

8
KEY TAKEAWAYS

 Profitability ratios assess a company's ability to earn profits from its sales or
operations, balance sheet assets, or shareholders' equity.
 Profitability ratios indicate how efficiently a company generates profit and
value for shareholders.
 Higher ratio results are often more favorable, but these ratios provide much
more information when compared to results of similar companies, the
company's own historical performance, or the industry average.

2.1.2 Types of Profitability Ratio

Ratios help in interpreting the financial data and taking decisions
accordingly. Accounting ratios are of four types: liquidity ratios, solvency ratios, turnover
ratios, profitability ratios. Accounting ratios measuring profitability are known as
Profitability Ratio.

There are...

1. Gross profit Margin.

2. Net Profit Margin
3. Return on Assets
4. Return on Share Holder Equity.
5. Earnings per share

1) Gross Profit Margin

Meanings of Gross Profit Margin.

This Ratio relation between Gross Profit and net loss.
Objective of Gross Profit Margin?
The Main objective of computing this ratio is to be determine the
efficiency Which Production and Purchase operation and selling operation carried on.
Gross Profit: It is the Excess of Net Sales over Cost of Goods sold.

𝐺𝑟𝑜𝑠𝑠𝑃𝑟𝑜𝑓𝑖𝑡
Gross Profit Ratio = 𝑛𝑒𝑡𝑆𝑎𝑙𝑒𝑠
× 100 … %

9
2. Net Profit Margin:
This Ratio Shows the relation Between Net profit and net Sales.
Objective: The main objective of computing this ratio is to determine overall
profitability due to various factors such as operational Efficiency, Trading equity etc.
𝑁𝑒𝑡𝑝𝑟𝑜𝑓𝑖𝑡𝑎𝑓𝑡𝑒𝑟𝑡𝑎𝑥
Net Profit Margin = × 100 … %
𝑁𝑒𝑡𝑆𝑎𝑙𝑒𝑠

3. Return on Assets :This Ratio measures the relationship between net profit before
interest and tax or net profit after tax put interest or net profit after tax and total
Assets.

𝑛𝑒𝑡𝑝𝑟𝑜𝑓𝑖𝑡𝑎𝑓𝑡𝑒𝑟𝑡𝑎𝑥
Return On Assets = × 100 … %
𝑡𝑜𝑡𝑎𝑙𝐴𝑠𝑠𝑒𝑡𝑠

1. Return on Share Holder Equity.

4. Return on Share Holder Equity : This Ratio Shows the relation Between net profit
after tax and Shareholder fund / Equity.

𝑁𝑒𝑡𝑃𝑟𝑜𝑓𝑖𝑡𝑎𝑓𝑡𝑒𝑟𝑡𝑎𝑥
Return on Shareholder Equity= × 100 … %
𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑒𝑞𝑢𝑖𝑡𝑦

5. Earning Per Share : This Ratio measure the earning available to equity
shareholder on a per share bases.

𝑁𝑒𝑡𝑝𝑟𝑜𝑓𝑖𝑡𝐴𝑓𝑡𝑒𝑟𝑡𝑎𝑥
Earning Per Share= 𝑁𝑜.𝑜𝑓𝑒𝑞𝑢𝑖𝑡𝑦𝑠ℎ𝑎𝑟𝑒𝑠 = 𝑅𝑠 …

2.2 Research Gap

We as commerce and management students, we often talk about La w o f Dem and,

Theory of venture growth, Theory of Resource Based Vie w, Innovation Theory, Big
Five Theory, so on and so forth. These models, the orisons laws are created as a result
of RESEARCH. As academics we disseminate knowledge utilizing those so-called

10
theories or models. But, those theories and models turnout to be outdated or obsolete
.Therefore, the applicability can be problematic. Thus we ne e d a so lotion. That is
RESEARCH. Simply put, research attempts to create new knowledge. It camber there
a theory testing approach or theory extension approach

11
 CHAPTER TWO
Presentation And Analysis

3.1 Research Design

A ratio scale is a quantitative scale where there is a true zero and equal
intervals between neighboring points. Unlike on an interval scale, a zero on a
ratio scale means there is a total absence of the variable you are measuring.
Length, area, and population are examples of ratio scales.
3.2 Population and Sample

According to the preliminary results of the National Census-2078, the population

of the country has reached 291,92,480. As per the details released by the Central
Statistics Department under the National Planning Commission today, the projected
number has come down to less than 30 million. The final results state that the details
may be manipulated. Twenty In the census of 2068 BS, the population was 26.494
million.

Compared to the previous census, Bhaktapur has the highest population growth rate
and Ramechhap has the lowest population growth rate. The on-site work of the
census was conducted in the first phase from 30 September 2078 to 18 September
and in the second phase from 25 October 2078 to 9 November 2078. State-wise,
Madhes has the highest population while Karnali has the lowest.

Dr. BishwanathPoudel, Vice-Chairman of the Commission, thanked all those

involved in the census as it was evident from the census that Nepal is the beloved
heart of 29.1 million Nepalis.

Director General of the Department, NevinLalShrestha, said that they have included
Lipulek, Kalapani, and Limpiyadhura in the new map of Nepal and details are yet
to come. In response to a question from a journalist, Director General Shrestha said
that the population may not have increased as expected as the discrimination
between sons and daughters is decreasing and the trend of raising children to have

12
 a son is coming to an end. Preliminary results of the first census conducted in the
country after the Constitution of Nepal, 2072 BS have been made public.

3.3 Types of Data

Now that we have an understanding of what Ware One does, let's start by defining
the types of data that exist. Data can be separated into two categories, quantitative
and qualitative. Quantitative data is data that can be measured in numerical form.
Qualitative data is information that is gathered in non-numerical form that is
typically descriptive and may be recoded to try and quantify its meaning. For
example, quantitative data can include: the total annual sales of Ware One,
employee performance review ratings on a scale of one to 10, a report with last
month's profitability by store location. Qualitative data includes things such as:
summaries of written comments on customer cards collected from suggestion boxes
at stores, results from interviews of store managers by an outside consultant, a
paragraph taken from an employee's self-evaluation on a performance review.
While the scripted statistics can be generated from both of these information sets,
their potential applications…

3.3.1 Source of Data

Primary data sources include surveys, observations, experiments, questionnaires,

personal interviews etc. On the other hand, secondary data collection sources are
government publications, websites, books, journal articles, internal notes, etc

primary data, etc.) and thus facilitate a logical analysis and discussion. Buttressing the
usefulness of secondary data in a qualitative research, Boslaugh (2007) stressed that
secondary data are useful in a qualitative research method, as they provide the
researcher with already collected statistical data that facilitate, corroborate or correlate
with primary data, thus leading to validated, clear and robust data representations and
analysis (Ajayi, 2017).

13
 3.4 Data Collection Procedures

Data collection methods should be stated clearly since it provides a clear overview of
what tasks will be carried out, who will perform them, organized human and material
resources, minimizes errors and delays which may result from lack of planning and
the duration of these tasks can be identified. So, the data collection method to be
followed under this study has been explained as under

The relevance and logic for the involvement of scout field surveyors is in order to
protect and keep the security of the field surveyors, can show directions or ways
within the Ground Water Forest, even can support with good idea since they are more
experienced, can help through communicating local language during snowball and
chunk sampling. The selection criteria will be 1) the most senior scouts with good
experiences 2) who have a good performance and technical skill and 3) who can speak
local primary and secondary data sources. Thus, the first hand data will be collected
via field survey, key informants, survey questionnaires of the keels residents
households and semi-structured interview with different groups; whereas secondary
data will be gathered through reviewing different literatures, articles, books, reports,
brochures and so on.

3.5 Instructions/ Tools Used.

The most commonly used tools for financial analysis are

Some of the most used financial tools based on their usage and requirements
are common size statements (vertical analysis), comparative financial statements
(comparison of financial statements), ratio analysis (quantitative analysis), cash flow
analysis, and trend analysis.
3.5.1 Financial Tools
When an analyst, business executive, or a student is dealing with a financial issue or
wishes to understand the financial implications and economic trade-offs involved in
decisions about business investment, operations, or financing; a wide variety of
analytical techniques and infrequent rules of thumb is available to generate quantitative

14
 answers. Therefore, choosing the appropriate tools from the available alternatives is an
important aspect of the analytical task.

The top four most common financial analysis tools are: –

1. Common Size Statement

2. Comparative financial statements
3.Ratio Analysis
4.Benchmarking analysis
3.5.2 Statement Tools
Tools or Techniques of Financial Statement Analysis
 Comparative Statement or Comparative Financial and Operating Statements.
 Common Size Statements.
 Trend Ratios or Trend Analysis.
 Average Analysis.
 Statement of Changes in Working Capital.
 Fund Flow Analysis.
 Cash Flow Analysis.
 Ratio Analysis.

3.6 Method of Data Analysis

 Mean. The first method that's used to perform the statistical analysis is mean, which is
more commonly referred to as the average.
 Standard deviation.
 Regression.
 Hypothesis testing.
 Sample size determination.

15
4.1 Data Presentation and Analysis
For the achievement of the pre-mentioned objectives about the profitability ratios of
Nepal Bank Limited are studying. In this project report, the collected data are presenting
in appropriate table from an analyzed by using annual report as per requirement. The
presentation and analysis of data has been analyzed to evaluate the profitability position
through the annual report provided by Nepal Bank Limited from the fiscal year 2075/76
to 2077/78. The financial statement i.e. profit & loss account & balance sheet of NBL
of past three years are presented below:

4.1.1 Profitability Ratio

Profitability ratios are a class of financial metrics that are used to assess a business's
ability to generate earnings relative to its revenue, operating costs, balance sheet
assets, or shareholders' equity over time, using data from a specific point in time.

Profitability ratios can be compared with efficiency ratios, which consider how well
a company uses its assets internally to generate income (as opposed to after-cost
profits).

KEY TAKEAWAYS

 Profitability ratios assess a company's ability to earn profits from its sales or
operations, balance sheet assets, or shareholders' equity.
 Profitability ratios indicate how efficiently a company generates profit and
value for shareholders.
 Higher ratio results are often more favorable, but these ratios provide much
more information when compared to results of similar companies, the
company's own historical performance, or the industry average.

16
4.1.1.1 Investment analysis

Financial analysis is the process of evaluating businesses, projects, budgets, and other
finance-related transactions to determine their performance and suitability. Typically,
financial analysis is used to analyze whether an entity is stable, solvent, liquid, or
profitable enough to warrant a monetary investment.

Nepal Bank Ltd. Total Investment of the Financial years From2075/2076 to

2077/2078.

Calculation of Total Investment (Rs. In Millions)

Years Total Investment ( Million)

2078/2079 16,426

2079/2080 32,596

2080/2081 30,009

(Sources: Annual Report of Nepal Bank FY 2078/2079 to 2080/2081)

The table no. 1.2 shows the Total Investment ofNepalbank ltd.It shows the good

liquidity position of the bank because its per years increasing investment of Nepal
Bank ltd.. And it also shows its increasing trend.

2078/79 2079/80 2080/81

17
Fig 1.2 shows the Investment of Nepal bank ltd over the last three years. In over the
last two years the Total Investment of Nepal bank ltd is more than Increasing.

4.1.1.2 Net Profit Margin

This Ratio Shows the relation Between Net profit and net Sales. The main objective of
Computing this ratio is to determine overall profitability due to various factors such as
operational Efficiency, Trading equity etc.

The table no. 1.2 shows the net profit of Nepal bank. It shows the good

liquidity position of the bank because its per years increasing net profit of Nepal Bank
ltd.. And it also shows its increasing trend.

Calculation of Net Profit (Rs. In Millions)

Years Net profit ( Million)

2078/2079 2,597

2079/2080 2,333

2080/2081 2,961

(Sources: Annual Report of Nepal Bank FY 2075/2076 to 2077/2078)

2078/79 2079/80 2080/81

18
Fig 1.3 shows the Net profit of Nepal bank ltd over the last three years. In over the
Last Second Year and the last two years the Net profit of Nepal bank ltd. is more than
Increasing.

4.1.1.3 Total Deposited.

Total Deposits means the sum of “savings” and “deposits.” .. Total Deposits means at
any time the aggregate amount of customer deposits owing by the Borrower of Saving
account deposited. in this table Nepal Bank ltd. Deposited table is given below.

The table no. 1.3 shows the Customers Deposited of Nepal bank. It shows the good

liquidity position of the bank because its per years increasing Customers Deposited of
Nepal Bank ltd.. And it also shows its increasing trend.

Calculation of Deposited (Rs. In Millions)

Years Deposit ( Million)

2078/2079 2,597

2079/2080 2,333

2080/2081 2,961

(Sources: Annual Report of Nepal Bank FY 2075/2076 to 2077/2078)

2078/79 2079/80 2080/81

19
Fig 1.4 shows the Deposit of Nepal Bank over the last three years. In over the last two
years the Deposited of Nepal is more than Increasing.

4.1.1.4 Loan and Advance

Loans are a source of long-term financing (typically more than a year), whereas the
advances are a source of short-term financing, that is, to be repaid within less than a
year. ... Since advances are for a short duration, the interest rate charged on them is also
less compared to the interest rate for loans.

The table no. 1.4 Shows the Loan and Advance of Nepal bank. It shows the good

Profitability position of the bank because its per years increasing Loan And advance of
Nepal Bank ltd.. And it also shows its increasing trend.

Calculation of Loan and Advance (Rs. In Millions)

Years Loan And Advance ( Million)

2078/2079 2,597

2079/2080 2,333

2080/2081 2,961

(Sources: Annual Report of Nepal Bank FY 2075/2076 to 2077/2078)

2078/79 2079/80 2080/81

20
Fig 1.5 shows the Loan and Advance of Nepal Bank over the last three years. In over
the last two years the Loan and Advance of Nepal is more than Increasing.

4.1.1.5 Non-Performing Asset (NPA)(in %)

A nonperforming asset (NPA) refers to a classification for loans or advances that are in
default or in arrears. A loan is in arrears when principal or interest payments are late or
missed. A loan is in default when the lender considers the loan agreement to be broken
and the debtor is unable to meet his obligations.

The table no. 1.5 Shows the Non-Performing Asset of Nepal bank. It shows the good
profitability position of the bank because its per years increasing Customers Deposited
of Nepal Bank ltd.. And it also shows its increasing trend.

Calculation Non-performing Assets (NPA) (In %)

Years Non-Performing Asset (NPA)(in %)

2078/2079 2.64

2079/2080 2.47

2080/2081 2.05

Non-Performing Assets (NPA) of Nepal Bank ltd..And it also shows its increasing
trend.

2078/79 2079/80 2080/81

21
Fig 1.6 shows the Non-Performing Asset of Nepal Bank over the last three years. In
over the last two years the Loan and Advance of Nepal is more than ore Decreasing.

4.2 Major Findings

From the analysis of the data of NBL, following results have been revealed:
The gross profit margin shows highly increasing by 16.41% in 2078/79 to
39.21% in 2079/80 to 48.75% in 2080/81 respectively. It indicates the higher the
ratio higher will be the efficiency of the bank and vice-versa.
The net profit margin shows highly growing profit by 9.45% in 2078/79 to
46.03% in 2079/80 and decreased to 41.42% in 2080/81 from 46.03% in 2079/80. It
indicates the revenue remaining after all operating expenses, interest, taxes. Higher
the ratio higher will be the efficiency of the bank and vice-versa.
The return on assets indicates the ability of earning profit utilizing the assets.
The return on assets shows increasing by 0.53% in 2079/80 to 2.72% in 2079/80 and
slightly decline to 2.71% in 2080/81 from 2.72% in 2079/80. It indicates the higher
9the ratio higher will be return on assets of the bank and vice-versa.
The return on equity shows highly increasing by 12.63% in 2078/79 to
42.94% in 2079/80 and decline to 27.23% in 2080/81. It shows the bank is
generating profit by utilizing shareholders fund.
The return on fixed assets indicates the proper utilization no fixed assets. It is
increasing by 115.80% in 2078/79 to 659.51% in 2079/80 and decreases to 656.30%
in 2080/81 from 659.51% in 2079/80. It implies that higher the utilization of fixed
assets higher will be return and vice-versa.
The earnings per share is increasing by Rs. 0.07 in 2078/79,Rs.0.36 in
2079/80 and Rs. 0.39 in 2080/81 respectively which shows profitability of the bank
every year.

22
 CHAPTER THREE
Summary, Conclusion And Recommendation

5.1 Discussion

This Chapter is completely suggestive, conclusive and interpretive package over

theentire study. It includes summary and conclusion of the entire study that must
beconducted by the researcher. This would be meaningful to the top management of the
bank to initiate action and achieve the desire result. This chapter is dedicated provide
conclusions after the comparatively analyzing the A Study of Ratio.. And this chapter
shows the final report of the entire study that is conducted by the researcher. This
chapter is divided into two sections First section is deals with discussion, in which a
researcher mentioned all the related discussion what they have done above four
mentioned chapter. Whereas second section is deals with the Conclusion of the entire
study and major finding that what they have found out and what kind of conclusion they
met after studying the thesis entitled to “CREDIT MANAGEMENT..." The researcher
made the discussion on the thesis entitled to the liquidity analysis of Nepal Bank Ltd.
That in really what they should make the confirmation about the liquidity management
of any organization. What they meant about the liquidity management? Liquidity means
how quickly you can get your hands on your cash. In simpler terms, Liquidity is the
ability to convert an asset into cash easily and without losing money against the market
price. The easier it is for an asset to turn into cash, the more liquid it is. Liquidity is
important for learning how easily a company can pay off it's short term liabilities and
debts. Liquidity also plays an important role as it allows you to seize opportunities. In
banking, liquidity is the ability to meet obligations when they come due without
incurring unacceptable losses. Managing liquidity is a daily process requiring bankers
to monitor and project cash flows to ensure adequate liquidity is maintained. The

23
purpose of managing liquid assets is to minimize the opportunity cost of holding Cash
and maximize the opportunity cost of holding cash and maximize on the option of the
funds that is not required immediately business firm need to maintain a certain degree
of liquidity in the form of cash in hands, bank deposit and market ablese ecurities to
meet daily operating expenses and short term financial obligation.

5.2 Conclusion and Implications

In conclusion, it can be said that liquidity management is one of the most important
parts of every financial institution. Liquidity is the most sensible and crucial aspect of
the bank, which is often compared to lifeblood of the human being. Lack of adequate
liquidity is often one of the first signs that a bank is in serious financial trouble and lead
to the loss of public faith upon banks. Thus, ensuring adequate liquidity isa never-
ending problem for the bank management that will always have significant implications
for the bank's profitability. Today Nepal Bank Ltd... Is in very strong positions its total
advance percentage is increasing in each year. In the staff NEPAL Bank Ltd...Is very
hard working and honest. Their honesty and hard work also contribute to the success of
the bank. In terestin come also satisfactory as each year collecting is increasing. The
financial position of bank is admirable as its earning is increasing each year. Thus, we
can conclude that in today's competitive world where there are numerous banks, Nepal
Bank Ltd...Is operating successfully.

24
 REFERENCES
1. Ahmad, N., and N. F. Mazlan. 2015.
2. Banking fragility sector index and determinants:
3. A comparison between local-based and foreign based commercial banks in
Malaysia.‖ International Journal of Business and Administrative Studies
4. Alshubiri, F. N. 2017.
5. Determinants of financial stability:
6. An empirical study of commercial banks listed in Muscat Security Market.‖
7. Journal of Business and Retail Management Research 11: 192–200.
8. Bank Stability and its Determinants in the Nepalese Banking Industry 45
9. Arellano, M., and O. Bover. 1995.
10. Another look at the instrumental variable estimation of error-components
models.‖ Journal of Econometrics 68: 29–51. Beck, T., D. O. Jonghe., and
11. G. Schepens. 2013. ―Bank competition and stability:
12. Cross-country heterogeneity.‖
13. Journal of Financial Intermediation 22: 218–244.
14. Berger, A. N., L. F. Klapper., and R. Turk-Ariss. 2009.
15. Bank competition and financial stability.‖
Websites

→ www.nbl.com

→ www.nrb.org.np

>www.wikipedia.org

>www.sharesansar.com

25
APPENDICES

26
 Appendices
Appendix I: Financial Data of Nepal Bank Limited (2078/79 – 2080/81)
Fiscal Total Debt Total Debt-to- Net Profit Return on Return on
Year (NPR in Equity Equity (NPR in Equity Assets
Billion) (NPR in Ratio Billion) (ROE) (ROA)
Billion)
2078/79 156.7 19.5 8.04 4.52 23.18% 1.92%
2079/80 168.2 21.0 8.00 3.10 14.76% 1.37%
2080/81 178.5 22.3 8.01 3.45 15.47% 1.41%

Appendix II: Calculation of Financial Ratios

Sample for FY 2078/79:

 Debt-to-Equity Ratio = 156.7 ÷ 19.5 = 8.04

 Return on Equity (ROE) = (4.52 ÷ 19.5) × 100 = 23.18%
 Return on Assets (ROA) = (4.52 ÷ (156.7+19.5)) × 100 ≈ 1.92%

Appendix III: Statistical Analysis Outputs

Correlation Analysis (Debt-to-Equity vs. ROE):

 Correlation coefficient (r) = -0.85 (Strong negative correlation)

Regression Analysis Summary:

 R² = 0.72
 p-value = 0.045 (Significant at 5% level)
 Beta coefficient = -0.31 (indicates negative impact of higher debt on
profitability)

Appendix IV: Questionnaire (If Survey Conducted)

Sample Questions:

1. Do you think capital structure significantly impacts Nepal Bank Limited’s

profitability?
2. How would you rate the management of debt in Nepal Bank Limited?

27
Appendix V: Organizational Profile of Nepal Bank Limited
 Established: 1994 B.S. (1937 A.D.)
 Mission: Provide accessible banking services to promote national
development.
 Vision: To be a leading and trusted bank in Nepal.
 Key Services: Loans, Savings, Remittance, Trade Finance, Digital Banking.

Appendix VI: List of Abbreviations

Abbreviation Full Form
NBL Nepal Bank Limited
ROE Return on Equity
ROA Return on Assets
D/E Ratio Debt-to-Equity Ratio
FY Fiscal Year

Appendix VII: Additional Charts and Graphs

 Graph 1: Debt-to-Equity Ratio Trend (2078/79 to 2080/81)
 Graph 2: Net Profit Trend
 Graph 3: ROE and ROA Trend Over the Years

28