A REPORT ON FINANCIAL POSITION ANALYSIS OF KIST BANK BRANCH OFFICE, JANAKPUR DHAM (BHANU CHOWK)

SUMBITTED BY: RANJIT KUMAR SAH SYMBOL NO. : 250591 P.U. REGD NO. : 112-2-2-05291-2010

A FIELD REPORT
SUMBITTED TO:

WORK

MODEL PURBANCHAL COLLEGE JANAKPUR DHAM PURBANCHAL UNIVERSITY

In partial fulfillment of the requirement for the degree of Bachelor of Business Administration (B.B.A) of Purbanchal University. Janakpur July/2013

Acknowledgement

This is my immense delectation to present the report of Bachelor in Business Administration ( BBA 5th semester ) assigned by Purbanchal University. This fieldwork report entitled A REPORT ON FINANCIAL POSITION ANAYLSIS OF KIST BANK LIMITED BRANCH JANAKPUR is prepared for the partial fulfillment of requirement for the Bachelor of Business Administration under Purbanchal University. The objective of this report is to be familiar with the practical and theoretical knowledge. I would like to express my sincere gratitude and acknowledgement to all supporters who provided me very informative and precious as well as proper information on making of this report. I am highly obliged to lecturer Mr. Saroj Kumar Thakur for his assignment and proper instruction. I am also grateful to the staff of KIST Bank who have kindly more available the data and related information required for the preparation of report. At last, my sincere thanks go to my all friends and staff members of college for their kind co-operation and help for report preparation.

Name:- RANJIT KUMAR SAH Symbol No.:-250591 PU Regd. No.:-112-2-2-05291-2010 Model Purbanchal college Janakpur dham

The Executive Summary This is the report prepared on the KIST Bank branch office, Janakpur Dham (Bhanu Chowk) Nepal. The main objective of this study is to measured the ability of a firm to meet, its short-term obligations and reflect the financial solvency of the firm. In my report I have three categories: Part one deals with Introducation. I have presented Introducation of banking, Purpose of study, Importance of study, Organization Structure, Limitation of the study, and etc are also presented in the part one. The part two includes presentations and analysis of data. Analysis comprises of Financial Ratios. This analysis is very helpful and plays a vital role for the conclusion and recommendations that are needed to be drawn out of this report. The part three is concerned with the summary conclusion and recommendations. This recommendation is very necessary for the bank to overcome from its weaknesses and to built its advantage over the other banks. The bank has been successfully overcome from economic and competitive barriers to establish it as a financially sound unit, skills, manpower, strong organizational culture, strong top managerial team are some of its key success indications.

Contents TITLE RECOMMENDATION ACKNOWLEDGEMENT EXECUTIVE SUMMARY TABLE OF CONTENT LIST OF TABLE LIST OF FIGURE ABBRIVIATION

Table of Contents CcontentCCont ents

Chapter-1

S.N. INTRODUCATION Page No.

1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.8.1 1.9 1.9.1 1.9.2

Background of Bank1 Introduction of Kist Bank1 Purpose of Study3 Importance of Study..4 Organization Structure4 Limitation of Study5 The Field Work Procedure.6 Literature Review6 Review of Previous Study7 Data Collection..7 Primary Data..7 Secondary Data..7 Chapter-2

DATA PRESENTATION & ANALYSIS

2.1 2.2 2.2.1. 2.3 2.3.1 2.3.2 2.3.3 2.3.4 2.3.5 2.4 2.5

Data Presentation and Analysis...8 Financial Analysis...8 A ) Balance Sheet..........................................................................8 B) Income Statement8 Financial Ratio Analysis..9 Types of Financial Ratios9 Liquidity Ratio .9 Assets Management Ratio12 Debt Management Ratio...13 Profitability Ratio18 Other Ratios.23 Comparison study of different ratios from the F.Y. 2064/65 to 2066/6725 Comparison study of different ratios from the F.Y. 2066/67 to 2068/6926 Chapter-3

SUMMARY AND CONCLUSION & RECOMMENDATION

3.1 3.2 3.3 Summary28 Conclusion.29 Suggestion and Recommendation..30

Other Contents
BIBLIOGRAPHY APPENDIX

List of table
TABLE NO. PAGE NO.
1. Current ratio of Kist Bank Ltd. From the F.Y.2064/065 to 2068/06910 2. Quick ratio of Kist Bank Ltd. From the F.Y.2064/065 to 2068/06911 3. AU Ratio of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069..13 4. Debt ratio of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069..14 5. FL ratios of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069...16 6. LTD to TC ratios of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069..17 7. BEP ratios of Kist Bank Ltd. From the F.Y.2064/065 to 2068/06919 8. ROA of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069.20 9. ROE of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069.22 10. EPS of Kist Bank Ltd. From the F.Y.2064/065 to 2068/06923 11. The comparison studies of diff. ratios from F.Y. 064/065 to 066/67...25 12. The comparison studies of diff. ratios from F.Y. 066/67 to 068/69.26

List of Figure
FIGURE NO. NO. PAGE
1. Current ratio of Kist Bank Ltd. From the F.Y.2064/065 to 2068/06910 2. Quick ratio of Kist Bank Ltd. From the F.Y.2064/065 to 2068/06912 3. AU Ratio of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069..13 4. Debt ratio of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069..15 5. FL ratios of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069...16 6. LTD to TC ratios of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069..18 7. BEP ratios of Kist Bank Ltd. From the F.Y.2064/065 to 2068/06919

8. ROA of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069.21 9. ROE of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069.22 10. EPS of Kist Bank Ltd. From the F.Y.2064/065 to 2068/06924

ABBRIVIATION

A/C AUR B.B.A. B.S. BOD BPS Diff. DSO EBIT EPS FL FWR F.Y. KBL LTD M.P.C. MPS NEPSE NPAT NRB P.U. Pd ROA ROE TC TIE

= = = = = = = = = = = = = = = = = = = = = = = = = =

Account Assets Utilization Ratio Bachelor of Business Administration Bikram Sambat Board of Director Book Value Per Share Difference Days Sales Outstanding Earning Before Interest and Tax Earning Per Share Financial Leverage Field Work Report Financial Year Kist Bank Limited Long Term Debt Model Purbanchal college Market Price Per Share Nepal Stock Exchange Limited Net Profit After Tax Nepal Rastra Bank Purbanchal University Preference dividend Return on Assets Return on Common Equity Total Capitalization Time Interest Earned

TOR

Total Operating Revenue

Chapter - 1
1.1
INTRODUCATION

of

Background Bank :

1.2 Introduction of Kist Bank :-

A bank is an institution, which deals with money and credit. It accepts deposits from business institution and individuals, which mobilized into productive sectors mainly business and consumer lending. The bank is also known as a dealer of the money because it also provides remittance facility to transfer money from the one place to another. Todays, bank is not only confined to accepting deposits and disbursing loan it also may be engaged in different types of function i.e. remittance, exchange currency, joint venture, underwriting, bank guarantee, discounting bill etc. Bank is a financial intermediary accepting deposits and granting loans. It offers the widest menu of services of any financial institution. In fact, a modern bank performs such a variety of functions that it is difficult to give a precise and general definition of a bank. It is because of this reason that different economist give different definition of bank. They are: Prof. Kinley tells, A bank is an establishment which makes to individual such advance of money as may be required and safely made and to which individual entrust money when not required by them for use. According to Oxford Dictionary, Bank is an organization or place that provides a financial service. Bank and Financial Institution Act (of Nepal), A commercial bank is a bank which deals in exchanging currency, accepting deposits and giving loans and doing commercial transaction. In conclusion, Bank is an institution, which accepts deposits from the public and provides, advance loan to business and personal customers. It is a financial institution, which provides, wide range of banking service i.e. saving, credit payment, remittance etc. So, a bank provides all kinds of monitory service, which is necessary for the industrialization and economic development of a country.

With its vision of becoming the best bank on operational excellence and superior financial performance, Kist Bank was initially incorporated as a C class financial performance, Kist Bank was initially incorporated as Bank started commercial banking activities from May 7,2009 after complying with all the conditions of Nepal Rastra Bank (Central Bank of Nepal) for becoming a Commercial Bank. 1 A Field work Report The Bank is a public limited company incorporated under the Bank and Financial Institution Act 2006 and the Companies Act 2006. The Bank is licensed by NRB to undertake commercial banking services and merchant banking activities in the country. The Authorized Capital of the Bank is Rupees 5 Billion and the Issued and Paid-Up Capital is Rupees 2 Billion. 60 Percent of the Paid-Up Capital is held by the promoter and remaining 40% is held by the general public. The share of the Bank is listed at Nepal Stock Exchange Limited (NEPSE), the only Stock Exchange in the country, as A category share. The Bank has a seven member Board of Directors (BOD) out of which three represents the promoters group, two represents the general public and one represents the Professional Director. Till the end of fiscal year 2066/67 (2009/10) the bank has 51 branches across country. Kist Bank stands for Customers convenience and support: The Bank is driven by values of efficiency in operations, integrity and a strong focus on catering the needs of every customer by offering high quality and cost effective products and services. The professional management team along with dedicated employees is always looking forward to serve the customers, understand their needs and design tailored products. The Bank operates in highly automated environment in terms of information technologies and communication systems, thus enabling delivery of prompt and quality services. It has put in substantial efforts and investments in acquiring the best technologies available to build necessary banking infrastructure. Future Plans of Kist Bank Ltd: As the Kist Bank has set its vision to be the best bank in terms of operational excellence and superior financial performance, it has action plan in place in order to accomplish it. The Bank has given prime focus in physical infrastructure and human resources development, acquiring of state of art information technology to equip the Bank in order to make it competitive, satisfy customers and have the most secured transactions, enhance the distribution outlet so that the Bank could reach to the un-banked area and serve the needy people and contribute to the economic development of the country. A few key future plans, which the Bank has, are: Have own Bank buildings at possible Branches locations. Currently, the Bank has been providing services to customers from its own buildings located at

Anamnagar, Birtamod, Damak, Biratnagar and Narayangarth. The Bank has planned to construct own multi storey building equipped with modern technology within Kathmandu Valley for its main Branch and Head Office. The dream building should be spacious for more than 500 employees. This dream building has been 60% completed at Anamnagar.
A Field work Report

Develop own man power to take the higher responsibilities. Due to increase in number of players, lack of quality human resources has been felt in the market. The Bank has therefore planned to hire qualified individuals in large quantity and train the staffs, in Kist Culture, both theoretically and practically and prepare them to take the responsibilities. For this, the Bank has established Training and Development Department at Head Office. Increase customer base from existing 250 thousand to 300 by Fiscal Year 2068/69 (2011/12). Launch international Debit and Credit Cards like Visa, Master and Others. Expand the remittance business making accessible to the large strata of people. Develop and launch innovative and customer friendly products to meet the actual needs of the people who are deprived of banking services. For this, Bank has established Research and Development Department to carry out research and develop market oriented products and services.

1.3 Purpose of Study :A Field Work Report is a systematic study of specific situation in financial organization. The main objective of this Field Work Report is to fulfill its partial requirement of Bachelor of Business Administration (B.B.A.) 5 th semester of Model Purbanchal College under concentration area which is designed by faculty of management, Purbanchal University. It provides first hand knowledge to students about the world of work and other hand it develop interpersonal and communication skill through interacting with people working in organization. To every work of study there must be objective and goal. The general earning ability, Profitability, Liquidity Position etc. through various financial statements and reports i.e. Income Statement balance sheet of KBL. Beside this, it has following objectives: To know the financial Position of KBL. To find out strength and weakness of KBL. To simplifies accounting figures and facts. To find liquidity position of KBL. To compare performance

To the banks organization structure. To understand about the services that is provided by KBL. To know about the different achievement and branch office of KBL. To know how financial data can be used to analyze a banks past performance and asserts its present financial strength. To develop research skill in the student. 3 A Field work Report To identify the problem and probable reasons for the arise of problem. To find the possible solution of the problem.

1.4 Importance of Study :Writing of this report is the very crucial part of our course, without this report we cant complete our 5 th semester of (B.B.A.) bachelor. The study of this field work report is very important for student life. It provides to know the opportunities of behavior knowledge i.e. how do a work, what do, where do? It develops both the internal and external qualification of the student. By which, a student can make easily a qualified field report in the future. Effective management of organization requires effective management of finance. Nepalese organization must give considerable attention to financial function, if they want to improve performance and effectiveness of their organization. This report is not beneficial to us only but it also to the other sector of society mentioned as bellow: Easy for bank to know their financial strength and to absorbed losses and protect depositor and other creditor. Easy for general public to know about the condition of bank where they are gaining or bearing losses. Easy for bank management to evaluate their efficiency in present competitive environment. Easy for stockholders to know the net benefit of bank that they have received from investing their capital in banks. Support for policy maker while changing their ambiguous policy. Reference for the coming student while preparing report in this subject.

1.5 Organization Structure :Location Kist Bank Ltd is a commercial bank and is competitor of several other commercial banks like Nepal Bangladesh Bank, Nabil Bank, Everest Bank Ltd 4

etc. This bank is located near in Bhanu chowk, Janakpurdham, by the right side of Radio Mithila 100.8 MHz. There are many others commercial banks located in Bhanu chowk as its competitor i.e. Nabil Bank, Laxmi Bank, Nepal Bangladesh Bank, Citizens Bank & other commercial banks. The centrals organization structure of KBL did not provided by the manager of janakpur branch because he told me that it available only on head office and he provided me the organization structure of janakpur Branch that is given below:A Field work Report

The Organization Structure of Kist Bank Ltd, Janakpur Branch Branch Manager

Operating Department

Credit Department

Account Department

Customer Service Department

Guard

1.6 Limitation of study :To complete any report writing we should be concentrated to the subject matter or surrounded by the boundary. Similarly, this report writing have also some boundary, besides the boundary the topic concentration is not diversified. These boundaries are called limitation of the study. Time constraint is the major issue of the present study. Due to lack of given period of time the report could not be prepared of the expected quality. It has also many limitations that are mentioned below:-

The topic must be unique. The field work report must be within 2500-4000 words. Necessary for partial fulfillment for degree of BBA 5th semester student. The five years data must be available in continuous form for creating this report. Not allowed to compare with the other organization. 5 A Field work Report Non availability of required books for the preparation of field work report in spite of facilities of library. Shortage of time, lack of source and means. Non financial help in another problem. Every student is not financially strong to expend heavy money for this work. Even after getting authority letter, the firm and organizations hesitate to give data due to the fear of violation of secrecy, so this report is likely to be incomplete. Non availability of right person as right time. Lack of knowledge and experience.

1.7 The Field Work Procedure:The Field work is specially meant for the partial fulfillment of BBA course it falls under the core course study area. It includes field work report in titled core course area. The objective of BBA Programme is to develop students into competent manager of any sector. Therefore for, the students are given opportunities to obtain broad knowledge of the concepts and reality based skills, reports writing also falls one of these. For preparing this field work report, First of all orientation class is conducted by our field work report lecturer Mr. Saroj Kumar Thakur till 48 teaching hours period. Thereafter, I have selected topic for FWR and with this topic included an application and a bill of Rs.300 also for registered this to subjected lecture Mr. Saroj Kumar Thakur. I got authority letter for my concerned Organization i.e. Kist Bank Limited. With that letter I went to bank. Letter, the bank related persons provided me various data is required for my work. Then I prepared field work report based on data and informations provided by Kist Bank Ltd with consulting my teacher where problem.

1.8 Literature Review:-

Review of previous writing and study relevant to the problem being explored and within the frame work of the theory structure which are called literature review. For preparing this report different kind of books of banking related area has been followed. I also studied previous local, national and newspaper to collect information about the Kist Bank Ltd.

A Field work Report

1.8.1 Review of Previous Study:-

K.R. Joshi in A study on Financial performance of commercial banks has concluded the satisfactory liquidity position of the commercial banks. Local commercial banks have been found relatively highly leveraged compared to other joint venture bank. Loan and advance have been the main form of the investment. Two third of the assets has been used for earning purpose.

1.9 Data Collection:For the purpose collection required information for the completion of the report writing assignments, I have relied on both primary and secondary information after as possible. 1.9.1

Primary Data:-

The data required for a statistical enquiry collected by the investigator himself his agent for the first time and are original in are based on interview, questionnaire, observation, employees, service provided, where receive through the manager and accountant of KBL. 1.9.2

Secondary Data:-

The data used is once is called secondary data. It becomes easier to collected secondary data from the primary once. The secondary data in this study are Annual report i.e. Income statement and Balance sheet of Kist Bank Ltd and Newspaper. In Secondary data 5 years consolidated balance sheet and income statement of Kist Bank from F.Y. 2064/65-2068/69 are downloaded from banks website (www.kistbank.com). Parts from this data are also collected from Kist Bank, Janakpur branch. I also collected from different newspapers and magazines.

During my study period secondary data becomes a supportive source to conduct the result and analyze them. Thus annual balance sheet and income statement was provided by bank through magazine; bulletins and the annual report; the required data were collected. Therefore on over all contexts secondary data has been used in maximum number.

A Field work Report

Chapter 2

DATA PRESENTATION AND ANALYSIS 2.1 Data Presentation and Analysis:This chapter analyzes and interprets the financial performance of KBL. In this regards various calculation have been completed in order to assets the strength and weakness of the company with widely used tools of financial ratios analysis.

2.2 Financial Analysis:The main objective of financial analysis is to evaluate the financial strength and weakness of the company by calculating various types of ratios with the help of the items of balance sheet and income statement. So we have to calculate different types of ratios by taking the items of balance sheets and income statements. A) Balance sheet: Balance sheet shows the position of assets and liabilities at the end of an accounting period or an interim period. It represents firms resources or assets on one side and owners equity and liabilities on other side. At a particular point of time, the balance sheet is prepared. Assets must be equal to sum of liabilities and share holders equity. The assets and the liabilities side of balance sheet consists of current assets, fixed assets and other assets and the liabilities side of balance sheet consists of current liabilities, long term liabilities and share holders equity. B) Income Statement: Income statement is a vertical sheet which provides the profit or loss starting from sales or revenues. It represents a summary of revenues and expenses and shows profit or loss of firm for the specific period such as a month, a quarter or a year. It is also called profit and loss A/c. The income statement is co piled on accrual basis,

which means that on attempt is made to match the firms revenues from the period of operation with the expenses incurred in generating those revenues. Income statement is important for the organization itself in order to evaluate its work performance as well as also importance for investor because investors can take the decision that the money will be invested in the organization or not the basis of analyzing the income statement.

A Field work Report

2.2.1

Financial Ratio Analysis:-

The mathematical relationship between two numerical figure expressed in same unit is known as ratio. It shows the relationship between two numerical figures. It can be expressed in proportion of percentage. Financial analysis is a technique of evaluating and analysis the financial statement by creating ratio between the figure of income statement and balance sheet. Ratio analysis is helpful in evaluating the liquidity, solvency, profitability and efficiency position of the firm. It provides essential information to takes decision. It is helpful for creditors, owners, investors management, government etc.

2.3 Types of Financial Ratio:There are various types of financial ratio to analyze financial statements. They can be grouped into following types:-

2.3.1

Liquidity Ratio:-

Liquidity ratios are calculated to judge the liquidity or shot term solvency position of the firm. Liquidity position means the firms ability to pay short term obligation. Generally, short term creditors are interested liquidity ratios. In liquidity ratios includes current ratio and quick ratio. A) Current Ratio:The relationship between current assets and current liabilities is known as current ratio. High current ratio indicates better liquidity position. However, it also indicates the excess investment in current assets which have less or no earning power.

Current Ratio =

Current Assets Current Liabilities (Standard = 2:1)

times

Where, Current Assets = Cash Balance + Balance with NRB + Balance with Bank Current Liabilities = Bills payable + Proposed & Dividend pay

A Field work Report

Table No.:-1 Current ratio of Kist Bank Ltd. from the year 2064/65 to 2068/069: Years Current Assets Current Calculated Liabilities Ratios 2064/065 466619283 10714616 4.35:1 2065/066 320516489 20957116 15.29:1 2066/067 948561213 42289746 22.43:1 2067/068 1228158215 93128203 13.19:1 2068/069 1675319537 109030316 15.37:1 Sources: From the Annual Report of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069 The Above table shows that the current ratios of different F.Y. from 2064/065 to 2068/069 are higher than its standard. High current ratio is better for the banks. The ratio is going an increasing trend per year till 2066/067 but thereafter it decreases and again increases in last year 2068/069. High current ratio indicates better liquidity position. However, it also indicates the excess investment in current assets which have less or no earning power. Figure:-1 Current ratio of Kist Bank Ltd. from the financial year 2064/065 to 2068/069
Current Ratios

Times

Years from 2064/65 to 2068/69

In the given figure x-axis shows the years from 2064/65 to 2068/69 in which the position of current ratios and y-axis shows the times of current ratios which is calculated in above table. The current ratio is high in F.Y. 066/067. So, it means this year the liquidity position of KBL is better.
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10

B) Quick Ratio The relationship between quick assets and current liabilities is known as quick ratio. Its also called liquid ratio or acid test ratio. This judges the firms ability to pay current liabilities immediately. High quick ratio indicates better liquidity position and vice-versa. Quick Ratio = Current Assets Current Liabilities (Standard = 2:1) times 1 0

Note: There is no available of Inventory, Prepaid expenses. So the current assets and quick assets are the same. Table No.:-2 Quick ratio of Kist Bank Ltd. from the year 2064/65 to 2068/069: Years 2064/065 2065/066 2066/067 2067/068 2068/069 Quick Assets 466619283 320516489 948561213 1228158215 1675319537 Current Liabilities 10714616 20957116 42289746 93128203 109030316 Calculated Ratios 4.35:1 15.29:1 22.43:1 13.19:1 15.37:1

Sources: From the Annual Report of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069 The Above table shows that the Quick ratios of different F.Y. from 2064/065 to 2068/069 are higher than its standard. The ratio is going an increasing trend per year till 2066/067 but thereafter it decreases and again increased in last year 2068/069. High quick ratio is good for the organizations. High quick ratio indicates better liquidity position and vice-versa.

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Figure:-2

11

Quick ratio of Kist Bank Ltd. from the financial year 2064/065 to 2068/069
Quick Ratios

Times

Years from 2064/65 to 2068/69

In the given figure x-axis shows the years from 2064/65 to 2068/69 in which the position of current ratios and y-axis shows the times of quick ratios which is calculated in above table. The quick ratio is high in F.Y. 066/067. So, it means this year the liquidity position of KBL is better.

2.3.2

Assets Management Ratio:-

Assets Management ratio is also called efficiency or activity turnover ratio. Assets management ratios are calculated to test the efficiency of management in managing the firms resources in generating sales revenue.

A) Assets Utilization Ratio Assets utilization ratio is the ratio of total operating revenue and total assets. The high ratio is prefer for the company.

Assets Utilization Ratio =

TOR Total Assets

X100

= .%

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12

Table No.:-3 Assets Utilization Ratio of Kist Bank Ltd. from the year 2064/65 to 2068/069: Years 2064/065 2065/066 2066/067 2067/068 2068/069 TOR 46059164 71468589 130622622 323765877 655911133 Total Assets 896192608 1740429848 3972615135 11151537301 18946218662 Calculated Ratios 5.14 % 4.11 % 3.29 % 2.90 % 3.45 %

Sources: From the Annual Report of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069 The Above table shows that the assets utilization ratios of different F.Y. from 2064/065 to 2068/069 are 5.14%, 4.11%, 3.29%, 2.90% and 3.45% respectively. Which indicates the ratios is going on decreasing trend from 2064/65 to 2067/68 which is not good for the KBL. Figure:-3
Assets Utilization ratio of Kist Bank Ltd. from the financial year 2064/065 to 2068/069
Assets Utilization Ratios

Percentage

Years from 2064/65 to 2068/69

In the given figure x-axis shows the years from 2064/65 to 2068/69 and y-axis shows the percentage of assets utilization ratio which is calculated in above table. The ratio is high in F.Y. 064/065, it reflect the better position of assets utilized.

2.3.3

Debt Management Ratio:-

This ratio is also called capital structure or leverage or solvency ratio. Leverage ratios are calculated to test the solvency position or long-term financial position of a firm. Solvency means companys ability to pay all creditors. A Field work Report 1 Leverage ratios are used to indicate the extent to which a firm has financed 3 its assets with borrowed funds. We will discuss leverage ratio in terms of two categories i.e. Balance sheet based on ratio and coverage ratios. Balance sheet based ratio simply indicate proportion of a firms assets financed by a particular source of fund, while coverage ratio reflect the ability of the firms earning to convert its fixed finance payment. A) Debt ratio / Debt to total Assets Ratio The relationship between borrowed capital and total assets is known as debt ratio. This ratio measures the percentage of firms assets financed by creditors. Creditors prefer low debt ratio since it provided security to their investment in event of liquidation. On the other hand, share holders like high leverage either to get more earning or selling new stock. Debt Ratio (D/A ratio) = Where, Total Debt = LTD + Borrowing + Current Liabilities High ratio is not preferable for the company because at some point of time, company will not get loan without issuing new shares. Total Debt Total Assets = . %

X100

Table No.:-4 Debt Ratio of Kist Bank Ltd. from the year 2064/65 to 2068/069: Years 2064/065 2065/066 2066/067 2067/068 2068/069 Total Debt 104246073 383104891 292553083 223128203 809030316 Total Assets 896192608 1740429848 3972615135 11151537301 18946218662 Calculated Ratios 11.63 % 22 % 7.36 % 2% 4.27 %

Sources: From the Annual Report of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069 The Above table shows that the debt ratio of different F.Y. from 2064/065 to 2068/069. The high debt ratio is not preferable for the company. The
A Field work Report

14 Highest Debt ratio is 22% which incurred in the year 2065/066 and the lowest debt ratio 2% which incurred in the year 067/068. Creditors prefer low debt ratio since it provide security to their investment in event of liquidation. Figure:-4 Debt Ratio of Kist Bank Ltd. from the financial year 2064/065 to 2068/069
Debt Ratio

Percentage

Years from 2064/65 to 2068/69

In the given figure x-axis shows the years from 2064/065 to 2068/069 and y-axis shows the percentage of debt ratio which is calculated in

above table. The ratio is high in F.Y. 065/066, it means this year the bank is utilized more debt than other years. B) Equity Multiplier It is also called financial leverage ratio. The relationship of total assets to equity of the firm is called equity multiplier. It measures the extend to which the total assets of firm is greater than the firms equity capital. Financial leverage ratio = Total Assets Total Equity

times

Total Equity = Equity share + Reserve & Surplus

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15

Table No.:-5 Financial leverage Ratio of Kist Bank Ltd. from the year 2064/65 to 2068/069: Years 2064/065 2065/066 2066/067 2067/068 2068/069 Total Assets 896192608 1740429848 3972615135 11151537301 18946218662 Total Equity 101988764 219051845 826322511 2045118881 2089257112 Calculated Ratios 8.79 times 7.95 4.81 5.45 9.09

Sources: From the Annual Report of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069 The Above table shows that the equity multipliers of different F.Y. from 2064/065 to 2068/069 are 8.79, 7.95, 4.81, 5.45 and 9.09 times respectively. The highest equity multiplier is 9.09 times in year 2068/069 and the lowest is 4.81 in year 2066/067. Figure:-5
Financial leverage Ratio of Kist Bank Ltd. from the financial year 2064/065 to 2068/069

Financial leverage Ratio

Times

Years from 2064/65 to 2068/69

In the given figure x-axis shows the years from 2064/065 to 2068/069 and y-axis shows the times of equity multiplier which is calculated in above table. The ratio in high in F.Y. 068/069, it means this year total assets of bank is greater than the firms equity capital.

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16

C) Long term debt to Total Capitalization Ratio The relationship between the long-term debts and total capitalization is known as long term debt to Total Capitalization Ratio. Long-term Debt to Total Capitalization Where, Total Capitalization = Share holders Equity + Borrowing Table No.:-6 Long term debt to total capitalization Ratio of Kist Bank Ltd. from the year 2064/65 to 2068/069: Years 2064/065 Long term Debt 93531457 Total Capitalization 195520221 Calculated Ratios 47.84 % = Long-term Debt X100 Total Capitalization

= . %

2065/066 2066/067 2067/068 2068/069

362147775 250263337 130000000 900000000

581199620 1076585848 2175118881 2989257112

62.23 23.25 59.77 30.11

Sources: From the Annual Report of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069 The Above table shows that the ratio of long term debt to total capitalization of different F.Y. from 2064/065 to 2068/069 are 47.84%, 62.23%, 23.25%, 59.77% and 30.11% respectively. The highest ratio is 62.33% in year 2065/066 and the lowest ratio is 23.55% in year 2066/067. The high ratio represent is greater risk to creditors as well as to share holders. Where as the low ratio represents security to creditors in extending credit.

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17 Figure:-6

Long term debt to total Capitalization ratios of Kist Bank Ltd. from the financial year 2064/065 to 2068/069

Long term debt to Total capitalization Ratio

Percentage

Years from 2064/65 to 2068/69

In the given figure x-axis shows the years from 2064/065 to 2068/069 and y-axis shows the percentage of long term debt to total capitalization ratios which are calculated in above table. The ratio is high in F.Y. 064/065, and it represent the bank has greater risk to creditors as well as to share holders in this year.

2.3.4

Profitability Ratio Profitability Ratios are used overall measures of the efficiency effectiveness of the firms managements. Profitability ratios show the combined effect of liquidity, assets management and debt management on operating results. It measures the earning of the company for a short term period. A) Basic Earning Power Ratio This is the ratio of EBIT to total assets. The ratio indicates the ability of firms assets to generate operating income. Basic Earning Power ratio = EBIT Total Assets X100 = . %

(The increasing ratio is favorable.)

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Table No.:-7 Basic earning power ratios of Kist Bank Ltd. from the year 2064/65 to 2068/069: Years 2064/065 2065/066 2066/067 2067/068 2068/069 EBIT 26505224 37460387 64893678 136863407 217551364 Total Assets 896192608 1740429848 3972615135 11151537301 18946218662 Calculated Ratios 2.96% 2.15 1.63 1.23 1.15

Sources: From the Annual Report of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069 The Above table shows that the ratio of basic earning power of different F.Y. form 2064/065 to 2068/069 are 2.96%, 2.15%, 1.63%, 1.23% and 1.15% respectively. The highest ratio is 2.96% in year 2064/065 and the lowest ratio is 1.15% in year 2068/069. The high ratio indicates ability of firms assets to generate high operating income but there are low ratios of KBL.

Figure:-7
Basic earning power ratios of Kist Bank Ltd. from the financial year 2064/065 to 2068/069

Basic Earning Power Ratio

Percentage

Years from 2064/65 to 2068/69

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19 In the given figure x-axis shows the years from 2064/065 to 2068/069 and y-axis shows the percentage of long term debt to total capitalization ratios which are calculated in above table. The ratio is high in F.Y. 2064/065, and this year indicates the ability of KBLs assets to generate operating income than other years. B) Return on Total Assets The ratio of net income to total assets is called return on total assets. It measures the return on all firms assets after interest and tax. It also measures the profitability of all financial resources invested in the firms assets. ROA = Net income Total Assets X100 = . %

(The increasing ratio is favorable.) Table No.:-8 Return on assets of Kist Bank Ltd. from the year 2064/65 to 2068/069: Years Net income Total Assets Calculated

2064/065 2065/066 2066/067 2067/068 2068/069

16505526 26058081 47270666 89663093 144138231

896192608 1740429848 3972615135 11151537301 18946218662

Ratios 1.84% 1.50 1.19 0.80 0.76

Sources: From the Annual Report of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069 The Above table shows that the ratio of return on assets on different F.Y. from 2064/065 to 2068/069 are 1.84%, 1.50%, 1.19%, 0.80% and 0.76% respectively. The highest ratio is 1.84% in year 2064/065 which implies that the available resources and tools are employs efficiently. And the lowest ratio is 0.76% in year 2068/069 which implies that the available resources and tools are not employs efficiently.

A Field work Report

20 Figure:-8

Return on assets of Kist Bank Ltd. from the financial year 2064/065 to 2068/069

Return on Assets

Percentage

Years from 2064/65 to 2068/69

In the given figure x-axis shows the years from 2064/065 to 2068/069 and y-axis shows the percentage of return on assets which are calculated in above table. The

return on assets ratios of KBL are in decreasing trend per year which is not preferable for the KBL. C) Return on Common Equity The ratio of net income to equity is known as return on common equity. It measures the rate of return an equity holders investment. ROE Where, Equity = Share Capital + Accumulated profit + Reserve (Increasing ratio is favorable for the company.) = Net income Total Assets = . %

X100

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Table No.:-9 Return on common equity of Kist Bank Ltd. from the year 2064/65 to 2068/069: Years 2064/065 2065/066 2066/067 2067/068 2068/069 Net income 16505526 26058081 47270666 89663093 144138231 Common Equity Calculated Ratios 101988764 16.18% 219051845 11.90 826322511 5.72 2045118881 4.38 2089257112 6.90

Sources: From the Annual Report of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069 The Above table shows that the ratio of return on common equity on different F.Y. from 2064/065 to 2068/069 are 16.18%, 11.90%, 5.72%, 4.38% and 6.90% respectively. The highest ratio is 16.18% in year 2064/065 which implies that the rate of return an equity holders investment is good. And the lowest ratio is 4.38% in year 2067/068 which indicates that the rate of return on investment is low.

Figure:-9
Return on common equity of Kist Bank Ltd. from the financial year 2064/065 to 2068/069

Return on Common Equity

Percentage

Years from 2064/65 to 2068/69

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22 In the given figure x-axis shows the years from 2064/065 to 2068/069 and y-axis shows the percentage of return on common equity which is calculated in above table. The return on equity of KBL is in decreasing trend per year from 2064/065 to 2068/069 which is not preferable for the KBL but in year 2068/069 it is increased.

2.3.5 Other ratios: A) Earning Per Share (EPS) The relationship between net income after tax and number of equity shares outstanding is known as EPS. It shows the rupee value of per share. High EPS is preferable for the company. EPS = NIAT No. of equity shares outstanding = . times

Table No.:-10 Earning per share of Kist Bank Ltd. from the year 2064/65 to 2068/069:

Years 2064/065 2065/066 2066/067 2067/068 2068/069

Net income 16505526 26058081 47270666 89663093 144138231

No. of shares Outstanding 889950 2000000 8000000 20000000 20000000

Calculated Ratios Rs. 18.55 13.03 5.91 4.48 7.21

Sources: From the Annual Report of Kist Bank Ltd. From the F.Y.2064/065 to 2068/069 The Above table shows that the ratios of return on common equity on different F.Y. from 2064/065 to 2068/069 are Rs.18.55, Rs.13.03, Rs.5.91, Rs.4.48 and Rs.7.21 respectively. The highest EPS is Rs.18.55 in year 2064/065 which implies that the good performance of KBL. And the lowest EPS is Rs.4.48 in year 2067/068 which indicates that the KBLs performance is low than other years.

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23

Figure:-10
Earning per share of Kist Bank Ltd. from the financial year 2064/065 to 2068/069

Earning Per share

Rupees in Rs.

Years from 2064/65 to 2068/69

In the given figure x-axis shows the years from 2064/065 to 2068/069 and y-axis shows the Rupees in Rs. of EPS which is calculated in above table. The more per share return, the more excellent it is and less per share return, the worse it is. The above EPS show that the KBL performance is getting low from 2065/066 to 2066/067. But it managed to its figure last year because its EPS is increased from Rs.4.4s to Rs.7.21.

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2.4

24 comparison study of different ratios from the F.Y.2064/65 to 2066/67

Table No.:-11 Comparison studies of different ratios from F.Y.2064/65 to 2066/67 Years Ratios 1. Current Ratios 2. Quick Ratios 3. Assets Utilization Ratios 4. Debt to Total Assets 5. Financial Leverage Ratios 6. Long term debt to Total Capitalization Ratios 7. Basic Earning Power Ratios 8. Return on Assets 9. Return on Equity 10. Earning Per Share 2064/65 4.35:1 4.35:1 5.14 % 11.63 % 8.79 times 47.84 % 2.96 % 1.84 % 16.18 % Rs. 18.55 2065/66 15.29:1 15.29:1 4.11 % 22 % 7.95 times 62.23 % 2.15 % 1.50 % 11.90 % Rs. 13.03 2066/67 22.43:1 22.43:1 3.29 % 7.30 % 4.81 times 23.25 % 1.63 % 1.19 % 5.72 % Rs. 5.91

In above table, the current ratio is an increasing trend from F.Y. 2064/065 to 2066/067 and the highest current ratio is 22.43:1 in year 2066/067 it indicates, better liquidity position in this year. The quick ratio is also same as current ratio. Assets utilization ratio is in decreasing trend from 2064/065 to 2066/067 per year by more than 1% which is not good for the KBL. The debt to total assets ratio is increased by double in year 2065/066 and suddenly dropped 7.30% which is good for the KBL because the creditors prefer low debt ratio since it provide security to their investment in event of liquidation. For financial leverage ratio, it is high in year first i.e. 8.79 times and there after it seems to be in decreasing trend. The LTD to total capitalization ratio is more than year 2064/065 in year 2065/066 i.e. 62.23%>47.84% which represent is greater risk to creditors as well as to share holders then it decreased in 23.25% whereas in year 2066/067 shows the low ratio 23.25% which indicates security to creditors in extending credit. Next, basic earning power ratios is in decreasing trend per year, it shows the earning power on total assets is high in 1 st year there after the ability of firms assets to generate operating income is getting low. The ROA is also in decreasing trend per year it indicates, the starting year was good for the KBL because in that year the banks return on total assets 1.84%. In ROE, it is also in decreasing way which indicates that the rate of return on investment is getting low per year but the percentage indicates better return on last 2 year. And in last, the
A Field work Report

25 EPS is also in decreasing trend it is high in F.Y. 2064/065 i.e. Rs. 18.55 in this year the KBL shares price was high because the high EPS is better performance for the company and vice-versa. After comparing above ratios, the KBLs performance is better in F.Y. 2064/065 than other F.Y. 2065/066 and 2066/067 because all the ratios are preferable in this year. 2.5 comparison study of different ratios from the F.Y.2066/067 to 2068/069 Table No.:-12 Different ratios from F.Y.2066/067 to 2068/069 are explained below Years Ratios 1. Current Ratios 2. Quick Ratios 3. Assets Utilization Ratios 4. Debt to Total Assets 5. Financial Leverage Ratios 2066/67 22.43:1 22.43:1 3.29 % 7.30 % 4.81 times 2067/68 13.19:1 13.19:1 2.90 % 2% 5.45 times 2068/69 15.37:1 15.37:1 3.45 % 4.27 % 9.09 times

6. Long term debt to Total Capitalization Ratios 7. Basic Earning Power Ratios 8. Return on Assets 9. Return on Equity 10. Earning Per Share

23.25 % 1.63 % 1.19 % 5.72 % Rs. 5.91

59.77 % 1.23 % 0.80 % 4.38 % Rs. 4.48

30.11 % 1.15 % 0.76 % 6.90 % Rs. 7.21

In above table, the current ratio on year 2067/068 and 2068/069 are less than year 2066/067. The highest current ratio is 22.43:1 in year 2066/067 it indicates, better liquidity position in this year. The quick ratio is also same as current ratio, the ratio on year 2066/067 is good for the KBL than other F.Y. The Assets utilization ratio is high in F.Y. 2068/069 than other 2 year. The debt to total assets ratio is 7.30% in F.Y. 2066/067 which is good for KBL because the creditors prefer low debt ratio since it provide security to their investment in event of liquidation. For financial leverage ratio, it is increasing trend 2066/067 to 2068/069 and it is high in year 2068/069 i.e. 9.09 times which means the total assets of firm is greater than the firms equity capital in this year. The LTD to total capitalization ratio is high in year 2067/068 than year 2066/067 and year 2068/069 i.e. 59.77%>23.25%>30.11%, the high ratio represent is greater risk to creditors as well as to share holders in year 2067/
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26 068 and low ratio in year 2067/068 indicates security to creditors in extending credit. Next, basic earning power ratios is in decreasing trend per year, it shows the earning power on total assets is high in 1st year there after the ability of firms assets to generate operating income is getting low. The ROA is also in decreasing trend per year it indicates, the F.Y. in 2066/067 was good for the KBL because in that year the banks return on total assets 1.19%. In ROE, it is high in year 2068/069 which indicates better return between 2066/067 and 2067/068, ratio is good when it is more than 1%. And in last, the EPS is in decreasing trend before 2068/069 but in F.Y. 2068/069 it increased in Rs.7.21 than Rs.5.91 and Rs.4.48. So, in year 2068/069 the KBL shares price was high because the high EPS shows better performance for the company and vice-versa. After comparing above ratios, the KBLs performance is better in F.Y. 2067/068 than other F.Y. 2066/067 and 2067/068 because all the ratios are preferable in this year.

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27

Chapter - 3
SUMMARY AND CONCLUSION

3.1 SUMMARY :A bank is a financial institution, which accepts deposits from the public and in turn, advance loan to business and personal customer and also provides banking service i.e. savings, credit payment, remittance etc. Kist Bank was initially incorporated as a C class financial institution in 2003 for undertaking limited banking activities and it commercial banking activities from May 7, 2009 after complying with all the conditions of Nepal Rastra Bank (Central Bank of Nepal) for becoming a Commercial Bank. The Authorized Capital of the Bank is Rupees 5 Billion and the Issued and Paid-Up Capital is Rupees 2 Billion. 60 Percent of the Paid-Up Capital is held by the promoter and remaining 40% is held by the general public. It has a seven member Board of Directors (BOD) out of which three represents the promoters group, two represents the general public and one represents the Professional Director. Till the end of fiscal year 2066/067 (2009/10) the bank has 51 branches across the country.

Its liquidity position, assets management position, debt management position, profitability position and other ratios position have been thoroughly calculated and evaluated. On the basis of analysis and finding specific suggestions are provided which will be beneficial for the bank for improvement in their future performance of KBL. For financial position, financial analysis is the process of identifying the financial strength and weakness of the firm by properly establishing the relationship between the items of balance sheets and income statements. In this study, statements covering five years from 2064/065 to 2068/069 have been received, reviewed and analyzed. For analyze the financial data of the KBL. The financial ratios have been used. As financial analysis is the most widely used tools for the financial position, five categories of financial ratios i.e. liquidity ratios, assets management ratios, debt management ratios, profitability ratios and other ratios has been calculated, analyze and intercept to evaluate the financial performance of KBL. This study is based on secondary data like annual report of KBL, newspaper and reports periodically published by various agencies.

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3.2 CONCLUSION :On the basis of analysis of financial statement of KBL, the following conclusions are adopted: The current ratios of the bank shows the highest ratio is 22.43:1 in F.Y. 2066/067 and in other year it is just more than its standards. It means, the company could maintain the standard of 2:1. It depicts the company may have not the problem of meeting immediate liabilities on time. The liquidity position is high which is not good because higher liquidity position shows the greater amount of ideal money, which cannot generate the revenue. The assets utilization ratios is going in decreasing trend by more than 1% from 2064/065 to 2067/068 which is not good for the KBL but it increases last year i.e. 2068/069 by 0.55% which is good for the KBL. The Bank is not used more debt so the total debt is low in all year which is good for the KBL. It indicates the bank has low risk. The banks LTD to total capitalization ratio is very high in some year and the high ratio represent is greater risk to creditors as well as to share holders.

 Ratio of return on total assets is in trend of decreasing by more than 0.30 per year which implies that available sources and tools are not going to be employed efficiently. Return on equity capital ratio is in also decreasing trend per year which depicts company employed their capital less effectively to earn more but in F.Y. 2068/069 it increased. The ROE is an increased in last year by 2.42% than F.Y. 2068/069 which is good for the company. Basic Earning Power Ratios depicts the relationship between EBIT and total assets. The ratio of basic earning power of KBL for respectively five years is decreasing trend by more than 1%. While going through the study, all the liquidity ratios, assets Management ratios, debt management ratios, profitability ratios EPS of KBL are quit better than the previous year. AUR, ROE and EPS are increasing slightly. At last from the study of the financial position under financial analysis of the bank based on the past years, we conclude that the KBL ltd. According to financial position of KBL, it is going to be popular in the coming year soon.

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3.3 SUGGESTION AND RECOMMENDATION:-

29

On the basis of financial analysis calculated in second chapter, the following recommendations are made:-

In other to meet the else current obligation in the time the company should have to increase in their current assets as well as liquid assets because current ratio is just double than its standard 2:1. Its AUR is in decreasing trend per year it means TOR of KBL does not increase proportion to total assets. So it must be increase in order to better utilize of its total assets. The bank should increase its efficiency in utilizing its current assets, total assets and shareholders fund.

 The ratio of basic earning power of KBL is getting low per year it means ability of banks assets is to generate low operating income. So it must be high. The ROA is also decreasing trend which implies that the available resources and tools are not employs efficiently so, the manager of KBL should manage their assets in time in order to get good performance. Total debt of KBL is less; it is good for the bank. It indicates the bank has low risk. Do not try to taking risk to use of more debt because more debt, more risk and less debt less risk but it depends on bank what its require.

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Bibliography

Pant Prem Raj, Field Work Assignment and Report writing, Veena Academic enterprises Pvt. Ltd. Kathmandu, 1997 Howard K. Wolf, Prem R. Pant, A Hand Book for Social Science Research and Thesis writing, Budha Academic enterprises Pvt. Ltd., 1999 Singh Hriday Bir, Banking and Insurance, Asian Publication Pvt. Ltd, September 2005

Sing Hriday BIr, Organizational Behaviour and Human Resource Managemet, Asmita Publication Kath.,2066 Bhandari Dilli Raj, Banking and Insurance, Ayush publication, January 2003 Kadka S.J & Singh H.B., Banking and Insurance (in Nepali), Asian Publication, 2062 Bhandari, D.R. (2003). Banking & Insurance. Kathmandu: Aayush Publication. Previous 5 Years FIELD Work Report of Kist Bank. Consulting from the manager of KBL, branch office, Janakpur dham for the detail information of KBL. Annual Report of KBL. Various websites: www.kistbank.com www.nrb.gov.np www.google.com

A Field work Report

Appendix
Recommendation letter of KBL, branch office, Janakpurdham, Dhanusha. Voucher and forms are used by KBL, branch office, Janakpur Dham, Dhanusha.

A Field work Report