A STUDY ON THE ANALYSIS OF FINANCIAL PERFORMANCE OF

KUMARI BANK LIMITED

A Project Work Proposal

Submitted by:

Gopal Rimal

TU Registration No: 7-2-25-1023-2014

Nepal Commerce Campus

Symbol no:

Finance group

Submitted to:

Faculty of Management

Tribhuvan University

Kathmandu

In Partial Fulfillment of the Requirement for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

New Baneshwor, Kathmandu

December 2017
 Declaration

I hereby declare that the project work entitled ‘Analysis of Financial Performance of
Kumari Bank Ltd.’ submitted to the Faculty of Management, T.U., Kathmandu is an
original piece of work under the supervision of Mr. Shankar Dhodary, faculty member,
Nepal Commerce Campus, Minbhawan, Kathmandu and is submitted in partial
fulfillment of the requirements for the award of degree of Bachelor’s in Business Studies.
This project work report hasn’t been submitted to any other university for the award of
any Degree or Diploma.

Gopal rimal
Date April 15, 2018
 Supervisor’s Recommendation

The project work report entitled ‘Analysis of Financial Performance of Kumari Bank
Ltd.’ Of Nepal Commerce Campus, Minbhawan, Kathmandu, is prepared under my
supervision as per the procedure and format requirements laid by the Faculty of
Management, T.U., as partial fulfillment of the requirements for the award of the degree
of Bachelors of Business Studies. I, therefore, recommend the project work report for
evaluation.

.........................

Shankar Dhodary

NCC

Date: December 2017

 Endorsement
We hereby endorse the project work report entitled ‘Analysis of financial performance of
Kumari Bank Ltd.’ by Gopal Rimal of Nepal Commerce Campus, Minbhawan, submitted
in partial fulfillment of the requirements for award of the Bachelor of Business Studies
for external evaluation.

…………………………………
……………………………..

Prof. Dr. Sushil Bhakta Mathema Prof. Dr, Jeewan Kumar Bhattarai

Research committee Campus Chief

Nepal Commerce Campus Nepal Commerce Campus

December 2017 December 2017

 Acknowledgement

This study attempts to examine the financial performance of Kumari Bank Ltd. with
available data and information. It deals with the problem identification besides this field
study to acquire the reality of banking operation of Kumari Bank Ltd. For easier study the
data has been presented by tables, graphs and have been interpreted using various
statistical methods.

I express my heartiest gratitude to Mr. Shankar Dhodary for guiding and inspiring me to
do this fieldwork.

Similarly, I am equally thankful to all the lecturers of Nepal Commerce Campus,

Department of Management who helped me preparing this project. I would like to extend
my gratitude to our college Campus Chief Prof. Dr. Jeewan Kr. Bhattarai for his
continuous encouragement in our study.

I would like to extend my sincere thanks to the staffs of Kumari Bank Ltd. for providing
me related data, information and contribution.

Finally, I want to thank my family, friends and colleagues for their continued moral
support.

Gopal Rimal

Nepal Commerce Campus

December 2017
 Table of contents
Page

CHAPTER I

Introduction
1.1. Background of the study
1.2. profile of organization
1.3. Objectives of the study

1.4. Rational of the study

1.5. Review
1.5.1 Conceptual
1.5.2 Precious study

1.6. methodology
1.6.1 Research design
1.6.2 Population & sample
1.6.3 Types of data
1.6.5 Data collection procedure
1.6.5 Tools used
1.7. Limitations
Chapter II
Results & analysis
 2.1. Data presentation
2.2. Analysis of result
2.3 findings
Chapter III
Summary and conclusions
3.1. Summary
3.2. Conclusion

List of tables
Table 1 current ratio

Table 2 cash and bank to total deposit ratio

Table 3 cash and bank balance to current ratio

Table 4 liquid assets to total assets

Table 5 liquid assets to total deposits

Table 6 loan and advances to total deposit ratio

Table 7 total investment to total deposit ratio

Table 8 net profit to total assets

Table 9 net profit to total deposit ratio

Table10 earning per share (EPS)

Table 11 debt to assets ratio

Table 12 debt to equity ratio

 List of figure

Figure 1 current ratio

Figure 2 cash and bank to total deposit ratio

Figure 3 cash and bank balance to current ratio

Figure 4 liquid assets to total assets

Figure 5 liquid assets to total deposits

Figure 6 loan and advances to total deposit ratio

Figure 7 total investment to total deposit ratio

Figure 8 net profit to total assets

Figure 9 net profits to total deposit ratio

Figure 10 earnings per share (EPS)

Figure 11 debts to assets ratio

Figure 12 debts to equity ratio

 List of abbreviations
% percentage
& and
AGM annual general meeting
ALC asset liability management
BS Bikram Sambat
CD credit deposit
Eg/eg. Example
Etc. etcetera
Govt. Government
i.e. that is
NRB Nepal Rastra Bank
Rs. rupees
SEBON Security Exchange Board of Nepal
TU Tribhuvan University
Ltd. Limited
NPA Non-performing assets
KBL Kumari bank limited
 Chapter I
Introduction
1.1 Background of the Study

There are many commercial banks operating in Nepal. They are providing many financial
services to the various sectors of the society. They are keeping up with the change taking
place in the world. While comparing present banking of Nepal with that of two decade
ago, we find lots of change. For more than two decades ago, no more banks have been
established in the country. After declaring free economy and privatization policy, the
government of Nepal encouraged the foreign banks for joint venture in Nepal. Today, the
banking sector is more liberalized and modernized and systematic managed. There are
various types of bank working in modern banking system in Nepal. It includes central,
development, commercial, financial, co-operative and micro-credit banks. Technology is
advancing day by day, and advanced technology affects the traditional methods of service
of the bank.

1.2. Profile of organization

Kumari Bank Limited, came into existence as the fifteenth commercial bank of Nepal by
starting its banking operations from April 03, 2001 with an objective of providing
competitive and modern banking services in the Nepalese financial market.
Kumari Bank Ltd has been providing wide - range of modern banking services through
76 points of representations located in various urban and semi urban part of the country,
74 branches outside and inside the valley; and 2 extension counters. The bank is pioneer
in providing some of the latest / lucrative banking services like E-Banking and Mobile
Banking services in Nepal. The bank always focus on building sound technology driven
internal system to cater the changing needs of the customers that enhance high comfort
and value. Similarly the bank has been providing 365 days banking facilities, extended
banking hours till 7 PM in the evening, Utility Bill Payment Services, Inward and
Outward Remittance services, Online remit services and consumer banking, corporate
banking, finance and insurance, investment banking, mortgage banking private banking,
assets management, wealth management and other banking services. The bank has been
able to get recognition as an innovative and fast growing institution striving to enhance
customer value and satisfaction by backing transparent business practice, professional
management, corporate governance and total quality management as the organizational
mission.

Kumari bank limited has authorized capital of Rs. 8 arba and its paid-up capital is Rs. 6
arba with face value of Rs. 100 each. Bank is planning to raise its capital to Rs 8 arba as
per the directives and guidelines for minimum paid up capital requirement of commercial
banks issued by Nepal Rastra Bank. In the start of 2073/74 banks paid up capital was Rs
2arba 69 crores and 90 lakhs after issuing right shares and merging with other financial
institutions its paid up capital reached 6 arba at the end of financial year 2074/2075.

Mission:
Its mission is to deliver innovative products and services to our customers, use these
innovative products to achieve financial inclusion, and do so by exemplifying good
corporate governance, proactive risk management practices, and superior corporate social
responsibility.

1.3 objective of study

We can confident about that commercial banks are the heart of the nations who mobilize
and utilize scattered resources. It generally plays the role of intermediate to convert the
saving into an investment. The primary objectives of the study are to figuring out the
liquidity and profitability position of kumara bank limited. The other specific objective
Of the study are listed below:
To observe the profitability on kumari bank limited
To study of short term and long term solvency position of kumari bank limited
To evaluate leverage and liquidity position of kumari bank limited
1.4 rationale of the study
In this changing pace of time, most of the commercial banks are gaining a wide
popularity through their efficient management and professional services and playing a
great role in the economy. The main purpose of the commercial bank is to have effective
financial management so that stakeholders get satisfaction. This study adds new idea and
findings about the concerned bank. This study is helpful for all the concerned parties
which add new idea and findings about kumari bank limited. The studies that will have
importance to various groups but in particular is directed to a certain group of
people/organization are :
To investors
To the creditors to management of bank
To the creditors
To the customers
To other parties such as government, tax departments, and depositors
And this study will be equally useful to the other readers, students of related subjects and
other people who are concern with banking field.

1.5 Reviews
A literature review is generally conducted to review the present status of a particular
research topic. From the survey of literature, a researcher is able to know the quantum of
work already done on his/her new research topic so far not touched, or yet to be
undertaken. The overview of literature at the national or an international level is
researched with the help of research reports, articles, books and other materials. Review
of literature is basically a stock taking of available literature in the field of research.
Every possible effort has been made to grasp knowledge and information that is available
from libraries, documents collection center, other information managing bureaus and
concerned bank website. This chapter helps to take adequate feedback to broaden the
information to the study. The first part of the chapter includes the conceptual framework
and the second part includes the review of various related studies.

1.5.1 Conceptual/ theoretical framework

Financial analysis is the process of identifying strength and weakness of the firm by
properly establishing between the items of the balance sheet and profit and loss
statements. Management of the firm or the parties’ amide the firm can undertake the
financial analysis. The nature of analysis will differ depending on the purpose of the
analyst. Accordingly, trade creditor is more interested in the cash flow ability of the firm
to service debt over long period of time. The bond holders may evaluate this ability by
analyzing the capital structure of the firm and major sources are use of funds; its
profitability over time and projections of future profitability. Investors are concerned
principally with present and future expected earning about a trend as well as their
covariance with earning of the other companies management of the firm would be
interested in every aspect of financial analysis. Ratio analysis is an important techniques
of financial analysis. It is a way by which financial stability and health of concern is
judged. Ratio analysis are mainly useful for financial position analysis, simplifying
accounting figures, assessing the operating efficiency , forecasting the weak spot of
business and comparing the performance within same industry.
Two very important developments in this period because of which need of ratios has
surfaced were federal income tax code in 1913 and the establishment of the Federal
Reserve System 1914. These two developments also helped improve the content of
financial statement as well as increased demand of financial statements.

In 1920s interest in ratio analysis increased dramatically. Many publications on the topic
of ratio analysis published during this period. Different credit agencies, trade unions,
universities and individuals seeking analysis compiled industry data on ratio analysis.

Justin 1924 argued that the method of gathering industry data and calculates averages
were called”scientific ratio analysis”. The word “scientific” in this title was not entirely
correct because no evidence had been found that the hypothesis formulation and
hypothesis testing actually carried out.

Horrigan 1968 says ratios analysis has came into existence since early ages and the main
reason of the development of ratio analysis was its used in the analysis of the properties
of ratios in 300 B.C. in recent time it is used as a standard tools for the analysis of
financial statement. In nineteenth century main reasons of using ratio analysis are power
of financial institutions and shifting of management to professional managers. Ratio
analysis is used for two purposes that are credit and managerial. In managerial approach
profitability and in credit approach capacity of firm to pay debts is the main point of
focus. Generally, ratio analysis is used for credit analysis.

There was rapid expansion of financial knowledge in nineteenth century and to study this
rapidly expanding knowledge analyst first compared similar items then moved further
and compared to current assets and liabilities as well with other ratios. In that period
current ratio was the most significant ratio among all other available ratios. To analyze
the operating results du-pont analysis is used. The result divided into three parts and then
compared with other companies to point out the problem and strong areas of business.
Concept of commercial banks
Commercial banks are those banks that perform all kinds of banking business. Generally
commercial bank deals with finance trade and commerce. Since their deposits are for
short period, these banks normally advance short terms loan to the businessman and
traders.

They specially avoid long term lending. Commercial banks are also called joint stock
bank. These banks accept the public deposit and grant loans in the form of cash credit,
overdraft etc. apart from financing they also render service like collection cheque,
safekeeping of valuable remittance facility, bank guarantees agency function etc.

Functions of commercial bank

Accepting deposits
Advancing loans
Agency service
Credit creation
Making venture capital credit
Collection and payment
Bank guarantee
Remittance service

Concept of credit
Credit is the amount of money lent by the creditor to the borrower either on the basis of
security or not. Some of the money lent by a bank is known as credit (oxford advanced
learners dictionary 1992; 279)
Credit is financial assets resulting from the delivery of cash or other assets by a lender to
a borrower in return for an obligation of repay on specified date on demand. Banks
generally grants credit on four ways (chhabta and tenaja1999:4)
Overdraft
Cash credit
Direct credit
Discounting of bills

1.5.2. Previous study

Thagunna, K. S., & Poudel, S. (2013) stated that the traditional measure of profitability
through stockholder’s equity is quite different in banking industry from any other sector
of business, where loan-to-deposit ratio works as a very good indicator of banks'
profitability as it depicts the status of asset-liability management of banks. But banks' risk
is not only associated with this asset liability management but also related to growth
opportunity. Smooth growth ensures higher future returns to holders and there lies the
profitability which means not only current profits but future returns as well. So, market
size and market concentration index along with return to equity and loan-to-deposit ratio
grab the attention of analyzing the banks’ profitability.
Bhattarai, Rabin (2009), in his articles “something is rotten with the state of
commercial banking in Nepal” starts with words like NPA, conflict of interest, mercy
offshore ownership, well connected defaulter loan swapping and political obstruction to
describe the commercial banks in Nepal. Mr bhattarai quoted the words of the governor
to describe the state of banking sector as ‘terrible’. Also , he quotes one of the donor
representatives involved in financial reform as “Nepal has weakest central bank in
debelopong world”. He quotes Mr SJB Rana, the first governor of NRB, “only 3 out of
12 governors actually completed their five years terms in its entire history because they
were sacked for undefined exigencies”. He also quotes Mr shovan dev pant, the then
executive director of Nabil bank, “the financial sector is in appalling state”.

According to his findings the directives if not properly addressed gave potential to wreck
the financial system of the country. The directives in themselves are not that important
unless properly implemented. The implementation part depends upon the commercial
banks. In case commercial banks are making such huge profit with full compliance of
NRB directives, then the commercial banks would deserves votes of praise because they
would then be instrumental in the economic development of the country all the change in
NRB directives made impacts on the bank and the result are the followings:
1 Increase in operational procedures of the bank, which increase the operational cost of
the bank.
2 A short term decreases in profitability, which result to fewer dividends to shareholders
and less bonus to the employees
3 Reduction in the loan exposure of the bank, which decreases the interest income by
increase the protection of the depositor’s money.
4 Increase protection to the money of the depositors through increased capital adequacy
ratios and more stringent loan related documents.
5 Increase demand from shareholders contribution in the bank by foregoing dividends for
loan loss provisions and various reserves to increase core capital.

All the aforesaid result lead to one direction the bank will be financially healthy and
stronger in the future. Kumari bank will be able to withstand tougher economic situation
in the future with adequate capital and provision for losses. The quality of the asset of the
banks will become better as banks will be careful before creation credit. Ultimately, the
changes in the directives will bring prosperity not only to the shareholders but also to the
depositors and the employees and economy of the country as a whole.

Review of report “an investment analysis of rastriya bank (with comparisons to Kumari
bank limited.)” with the main objectives :
1) To evaluate liquidity activity and profitability ratio of RBB in comparisons with
Kumari bank limited.
2) To examine the loan loss provision of RBB and KBL.
3) To provide suggestions and recommendation on the basis of findings.

The findings of the researcher are as follows:

1) RBB has good deposit collection, enough loan and advances and small investment in
government securities.
2) The assets management ratio of RBB is not better than that of KBL.
the profitability position of RBB is worse in comparisons with KBL due to low return
on working fund, loans and advances outside assets
3) to fund collection and mobilization position of RBB is satisfactory in comparisons to
KBL while considering growing rate.
4) In relation to fund flow analysis, the RBB has poor loans and advances issues
2 RBB has better positive relationship between net profit, return on loans and advances
and return on investment but RBB has worse performance in income as commission
and discount and exchange income.
3 There is significant relationship between deposit and loans and advances but there is
no significant relation between deposit and investment of both banks RBB and KBL.
There is no relationship between outside assets and net profit.
The findings of the study are as follows:
1 the liquidity position of KBL is better than of other banks. Highly fluctuating liquidity
position shows that the bank has not formulated any stable policy/
2 it can be concluded that KBL have good profitability position.
Total loans and advances to total saving deposits ration of KBL is good than other bank.
 1.6 Methodologies
1.6.1. Research design
A detailed outline of how an investigation will take place. A research design will
typically include how data is to be collected, what instruments will be employed, how
the instruments will be used and the intended means for analyzing data collected.
Research design section describes the rational for the application of specific procedures
or techniques used to identify, select and analyze information applied to understand the
research problem. It allows the reader to critically evaluate a studys overall validity and
reliability, financial ratios are important tools of financial analysis. It’s based on
quantitative data and qualitative data tools .
There are two types of research methods:
quantitative research
Quantitative research is inquiry into an identified problem based on testing theory,
measured with numbers, and analyzed using statistical techniques. The goal of
quantitative method is to determine whether the predictable generalizations of a theory
hold true. We will explore some of the issues and challenges associated with quantitative
research in this section. Seek the advice of faculty members who have conducted
quantitative studies for advise, support and encouragement.
qualitative researches
A study based upon a qualitative process of inquiry has the goal of understanding a
social or human problem from multiple perspectives. Qualitative research is conducted
in a natural setting and involves a process of building a complex and holistic picture of
the phenomenon of interest. We will explore some of the issues and challenges
associated with qualitative research in this section. Look for colleagues who engage in
qualitative research to serve as a sounding board for procedures and processes you may
use as a new faculty member.
This research is based on quantitative research method.

1.6.2. Population & sample

Population is a complete enumeration of each and every unit of the universe as a whole.
It related to the total study of material in detail. There are 28 A class commercial banks in
Nepal but this study is considered with kumara bank limited as a sample.
Sample is a small separated part showing the quality of the whole. In sample, only a part
of universe is considered and conclusions about the entire universe are drawn on that
basis. Here, for the proposed study, data have been taken from kumari bank limited as a
sample.

1.6.3. Types of data

Data of the study shall be collected from the secondary sources and applied to the study
on the financial statements during the period (2011-2016) of the Kumari bank limited.
This research is conducted in secondary data basis, so the last 5 years data has been
collected from:
Website of kumari bank
Annual report of kumari bank

1.6.4. Data collection process

Data is collection of related raw materials on which decision is based. There are mainly
two sources of data i.e., primary data and secondary data. The study will be conducted
mainly based on secondary data. The major sources of secondary data for this study are
as follows:
2. annual report of the bank
3. previous studies and reports
4. unpublished official records
5. published records and bulletins and reports of bank
6. reports published by Nepal stock exchange
7. Reports of Nepal rastra bank and banking and financial statistics published by Nepal
rastra bank.
8. Other material published in daily, weekly, monthly newspaper and magazines.

8.1.1. Tools used

Data analysis tools means which tools the research used for present and analyses the
data. The main tools of analysis are mathematical and statistical tools. In this reports
statistical and financial ratio tools are used for data analysis. Mean and correlation is
calculated for analysis the data as statistical tools. The tools are categorized as :
Financial tools
Statistical tools
3.5.1financial tools:
For the sake of analysis, various financial tools are used. The basic tools used are ratio
analysis. Ratio analysis is used to compare firms financial performance and status to that
of other firms overtime. The financial tools used are listed below:
Ratio analysis
Ratio analysis is the calculation and interpretation of financial ratios to assess the firms
performance status. It is relationship between two accounting figures expressed
mathematically.
Ratio analysis is the main tool of financial statement analysis. Ratio means the numerical
or quantitative relationship between two items or variables. It can be expressed as
percentage, fraction or stated or comparisons between numbers.
Financial ratio is the mathematical relationship between two accounting figures. Ratio
analysis is used to compare a firm’s financial performance and status to that other firm of
to it of same industry.
From the help of ratio analysis, the quantitative judgments can be done regarding financial
performance of a firm. In this study, different ratio are calculated and analyzed, which are
given below:
A) liquidity ratios
Liquidity ratio measures the ability of the firm to meet its current obligation. The failure
of a company to meet its obligation , due to lack of sufficient liquidity, will result bad
credit image, loss of creditors confidence , or even in lawsuits resulting in the closure of
the company. A very high degree of liquidity is also bad, as idle assets earn nothing. The
firms fund will unnecessarily tie up in current assets. Thus it is the measurement of speed
with which banks assets can be converted into cash to meet withdrawals and other current
obligations. There are various ratios under liquidity ratios, which are calculated as under :
a)current ratio

the current ratio is a measure of the firms short term solvency. It indicates the extent to
which the claims of short term creditors are covered by assets that could expect to be
converted into cash in a period roughly corresponding to maturity of claims. Generally, it
shows relationship between current assets and current liabilities.
The ratio is calculated by dividing current assets by current liabilities.

Current ratio= current assets /current liabilities

As a conventional rule, a current ratio of 2:1 or more is considered satisfactory. The higher
the ratio, the greater the ability of the bank to pay its current obligation but too large ratio
is harmful as unused fund too bears cost.

b) cash and bank balance to total deposit ratio

it is ability to meet daily requirements. Hence cash and bank balance includes cash in
hand foreign cash on hand, cheques and other cash items balance held in foreign banks
etc. the deposit represents current deposits, saving deposits, fixed deposits money at call
and short notice and other deposits. Dividing cash and bank balance calculates the ratio by
total deposits. It is stated as under:

Cash and bank balance ratio = cash and bank balance/ total deposits

B) assets management ratios of activity ratios

Activity ratios are employed to evaluate the efficiency with which the firm manages and
utilizes its assets. The ratio is called because they indicate the speed with which assets are
being converted. Thus ratios are used to measure the bank’s ability to utilize. These are
following ratios, which falls in this category.
a)loan and advances to total deposit ratio
this ratio shows how successfully the bank is utilizing its deposits to loan and advances for
generating profit. The ratio can be obtained by dividing loan and advances by total
deposits. Higher the ratios better the utilization of total deposits.
This can be stated as:
Loan and advances to total deposit ratio = loan and advance / total deposits

b) loan advances and investment to total deposit ratio

this ratio shows the utilization of firms deposit to loan and advance for generating profit
and in government securities and bonds, share and debentures of other companys and
bank. Share in subsidiary companies and other investments.
Mathematically, it is expressed as;
 Loan advances and investment to total deposit ratio = loan advance and investment / total
deposit
C) profitability ratios
Any organization should earn profit to survive and grow over a long period of time. Profit
is ultimate output of any organization, and it will have no future if it fails to make
sufficient profits. Thus, the financial manager should continuously evaluate the efficiency
of its organization in terms of profit. The profitability ratios are the best indicators to
measure overall efficiency of operation of any organization. As management of
organization, creditors and owners are also interested in the profitability of firm. Creditors
want to get interest and repayment of principal regularly. Owners want to get a reasonable
return on their investment. This is possible only when the organization earns enough
profit. Profitability ratio implies that higher the profitability ratio, better the financial
performance of the bank. Profitability position of the bank can be evaluated in terms of the
relationship between net profit and assets.
The following ratios are taken into account under this heading;
a) return on total assets ratio
This ratio is useful to measure how well management uses all the assets in the business to
generate and operate surplus fund. Higher the ratio higher would be the efficiency in the
utilization of total assets and vice versa. In this study, net profit/loss ratio is examined to
measure the profitability of all the financial resources in bank assets and is calculated by
applying the following formula;
Return on total assets= NPAT/ total assets
b) return on equity ratio
it indicates the generation of net profit after tax for the contribution towards net worth.
Higher ratios may indicate better control of production and other costs. It may also be the
result of higher prices due to inflation. A lower ratio may indicate problems with cost
control or production efficiency. It is calculated by using following formula;
return on equity= NPAT/total equity

c) Earnings per share

Earnings per share are one of the most widely quoted statics when there is discussion of a
company’s performance or share value. It is the profit after tax figure that is divided by the
number of common share to calculate the value of earning per share. This figure tells us
what profit the common shareholders earn for every share held. The symbolic
representation of is expressed as EPS and calculated as under;

Earnings per share= npat/no of outstanding share

3.5.1 Statistical tools

Some of the statistical tools which show the highlight of kumara bank limited are used to
achieve the objective of the study. The main statistical tools used in this research is :
1) arithmetic mean
Arithmetic means of given set of observation is their sum divided by the number of
observation. It represents the entire data by a single value. Out of the various central
tendencies a mean is one of the useful tools to find out the average of the given data. It is
calculated in the following ways;
x̅= ∑X/N
where,
x̅= arithmetic mean
∑X= sum of observation
N= no. of observations

1.7 Limitations
The study is mainly based on secondary data.
The study covers only three years data from 2011-2017.
The data used on calculation has been rounded up wherever necessary.
The data has been analyzed by comparing with the five years average data.
This study has been carried out based on the published financial statements namely
balance sheets profit and loss accounts profit and loss appropriation account related
schedules and published annual report.
The study has been based on the secondary data only the evaluation of exact situation was
not possible.
 Chapter II
Results and analysis
4.1 presentations of data
This chapter deals with the presentation, analysis and implementation of relevant data of
kumari bank limited. In order to fulfill the objectives of study, purpose lf this chapter is to
introduce the mechanics of data analysis and interpretation. Calculated financial ratios are
analyzed and evaluated after their interpretation is made. The calculated secondary data have
analyzed and presented in the table form. For this purpose, analysis and interpretation are
categories into two headings. They are analysis of financial and statistical tools.

4.2 analysis of financial tools

Under this topic various financial ratios are calculated to evaluate and analyze the
performance of kumara bank limited. Study of all type of ratio is not possible due to some
limitations. Only those ratios that are important from the point of view of the fund
mobilization and investment are calculated the important ratios that are studied for the
purpose are given below

Liquidity ratio
As name denotes the liquidity refers to the ratio between liquid assets and liability. The ability
of firm to meet its obligation in the short term is known as liquidity. It reflects the short term
financial strength of the business. In order to ensure short term solvency, the company must
maintain unnecessary high liquidity ratio then it may adversely effect in the profitability of the
company will invest all its assets in safe liquid assets, which can lose the opportunity to earn
high profit. It means everybody knows that investing all assets in sage liquid assets doesn’t
have a good. As well as high liquidity may unnecessary tied up In the current assets. In the
other hand if a company doesn’t maintain adequate liquidity then it will result in bad credit
ratings, less creditors, confidence, eventually may lead to bankruptcy. Thus the company
should Endeavour to maintain proper balance between inadequate liquidity and unnecessary
liquidity for the survival and for avoiding risk.

1) CURRENT RATIO
Table1 showing position of current assets and liabilities (inmillions)
Year 2069/70 2070/71 2071/72 2072/73 2073/74

Ratio 27.9 11.47 9 6.09 3.33

Current assets 4690 5401 5426 6111 8287

Current 387 473 604 1003 2485

liabilities
 4.6

4.4

4.2

3.8

3.6

3.4
69/70 70/71 71/72 72/73 73/74
Fig1: showing current ratio over the period of 5 years.

Above figure represents the ratio of current assets to current liabilities of kumari bank
limited for the year2069/70 to 2073/74 respectively. In the figure we can observe the
ratios of various time periods. Current ratio at 2069/70 was 4.05 and fell to 3.99 the
year after later on on 2071/72 it has increased to 4.39 times and in 2072/73 it fell again
to 4.15 and it reached to lowest point of 3.79 on 2073/74.current ratio of 2 is considered
as good for business and in our study the ratio is higher than 2 times standard ratio
which means our company would be able to meet short term liabilities.
2) CASH AND BANK BALANCE TO TOTAL DEPOSIT RATIO

Table 2 showing Cash and bank balance to total deposit ratio (in millions)
Year 2073/74 2073/72 2072/71 2071/70 2069/70

Ratio(%) 11.74 11.88 14.85 17.7 18.38

Cash and 6111 4511 4965 4894 4275

bank balance
Total deposit 52071 37950 33421 27578 23256

60000

50000

40000

30000 cash and bank

deposits

20000

10000

0
2069/70 2070/71 2071/72 2072/73 2073/74

Fig2: sh0wing cash and bank balance to total deposits

Above figure shows the total amount of cash and bank balance to total deposit kept by
kumari bank limited for the year 2069/70 to 2073/74 respectively. It shows the
comparative figure of different periods under the study. Analyzing the chart we can see
deposits constantly increasing but along with it cash and bank balance were not increased
earlier and we can see that highest balance of deposit was at 2073/74 of re 52071 million
and cash and bank balance of Rs. 7772 millions. Similarly the lowest deposit and cash
balance was at 2069/70.

3) Cash and bank balance to current assets

Table3: showing cash and bank balance to current assets (IN millions)

Year 2069/70 2070/71 2071/72 2072/73 2073/74

Ratio 91.15 90.6 91.5 73.82 73.75

Cash and 4275 4894 4965 4511 6111

bank balance
Current 4690 5401 5426 6111 8287
assets
9000

8000

7000

6000

5000
cash and bank balance
4000 current assets

3000

2000

1000

0
2069/70 2070/71 2071/72 2072/73 2073/74

Figure3: showing cash and bank balance to current assets ratio

Above figure shows the cash and bank balance to total current assets ratio of kumari
bank limited from the year 2069/70 to 2073/74. During the period we noticed that banks
cash and bank balance has been tremendously increasing even though the ratio of cash to
current assets has been decreasing. We have observed banks lowest cash balance in the
year 2069/70 and highest in 2073/74. Similarly banks current assets had reached to 8287
millions in 2073/74 from 4690 millions in 2069/70. Increasing cash and bank balance
along with current assets shows liquidity in the company.

4) LIQUID ASSETS TO TOTAL ASSETS

Table 4 showing liquid assets to total assets of bank (IN MILLIONS)

Year 2069/70 2070/71 2071/72 2072/73 2073/74

Ratio(%) 25.6 27.6 27.5 28.46

24.82

Liquid 6804 8565 10283 12253 15544

assets
Total assets 26540 31020 37374 43041 62639

60000

50000

40000

30000 liquid assets

total deposit

20000

10000

0
2069/70 2070/71 2071/72 2072/73 2073/74

Figure4 showing liquid assets to total assets

In the above figure we can clearly see the position of liquid assets to total assets. Total
assets of bank is tremendously increasing from the year of research to the end up to
2073/74 along with increase in liquid assets of the bank. Higher the ratio better would be
the efficiency of bank to settle the due balance to depositors of bank. It means that bank
is making short term and liquid investment which could be available as and when
required by the bank.
5) LIQUID ASSETS TO TOTAL DEPOSIT

Table 5 showing liquid assets of bank to total deposit ( in millions)

year 2069/70 2070/71 2071/72 2072/73 2073/74

Ratio(%) 29.26 31.05 30.76 32.28 29.85

Liquid assets 6804 8565 10283 12253 15544

Total deposit 23256 27578 33422 37950 52071

60000

50000

40000

30000 liquid assets

total deposit

20000

10000

0
2069/70 2070/71 2071/72 2072/73 2073/74

Figure 5 showing liquid assets to total deposit of kumara bank limited

Analyzing the chart we can see the upward trend for both liquid assets and total deposit in
the financial statement of kumari bank limited. Upward trend denotes growth in the
organization and capturing market share. In 2069/70 total deposit of bank was 23256
million which reached to 52071 million in 2073/74 that means deposits has been rising in
around 20% every year.
Assets management ratios (activity ratios)

6) Loan and advance to total deposits ratio

Table6 showing loan and advance to total deposit ratio (in millions)

year 2069/70 2070/71 2071/72 2072/73 2073/74

Ratio(%) 79.22 79.4 78.5 79.34 86.79

Loan and 18425 21898 26246 30111 45195

advance

Total deposit 23256 27578 33422 37950 52071

60000

50000

40000

loan and advance

30000
total deposit
Column1
20000

10000

0
2069/70 2070/71 2071/72 2072/73 2073/74

Figure6 showing loan and advance to total deposits

The above figure shows the ratio of loan and advance to total deposits for the f/y 2069/70
to 2073/74. As per the figure , we can see the ratio of loan and advance to borrowers with
respect to deposits made in bank. From the chart we can conclude that bank had highest
ratio of loan and advance to total deposit in the year2073/74. And the amount lended by
bank was 45195 millions.
7) Total investment to total deposit ratio
Figure 7 showing total investment to total deposit ratio of the bank (in millions)

year 2069/70 2070/71 2071/72 2072/73 2073/74

Ratio(%) 11.40 11.47 14.54 16.18

14.45

Total 2651 3164 4862 6142 7526

investment

Total deposit 23256 27578 33422 37950 52071

60000

50000

40000

total investment
30000
total deposit
Series 3
20000

10000

0
2069/70 2070/71 2071/72 2072/73 2073/74

Figure 7 showing total investments to total deposits made by bank

From the given chart we can analyse the banks investment with respect to total deposits
made by depositors. In chart we can say that increasing deposit is increasing the
investments of bank too. In the year 2069/70 total investment of bank was 2651 millions
where it reached to 7526 milllion in the year 2073/74. Along with it deposit stood at
52071 millions in the year 2073/74.
 Profitability ratios

8) Net profit to total assets

Table 8 showing net profits to total assets ratio (in millions)

year 2069/70 2070/71 2071/72 2072/73 2073/74

Ratio(%) 1.83 1.765 1.67 1.72 1.12

Net profit 487 546 622 740 700

Total assets 26540 31020 37374 43041 62639

70000

60000

50000

40000
net profit
30000 total assets

20000

10000

0
2069/70 2070/71 2071/72 2072/73 2073/74

Figure8 showing net profit to total assets ratio

In the above table, we can demonstrate that net profit of company is growing rapidly
along with total assets of company. The ratio of net profit of company to total asset was
1.83% in the year and amounting to RS. 487 millions in 2069/70 which reached to 700
million in the year 2073/74? The total deposits of bank are constantly rising to 62639
million s.
9) Net profit to total deposit ratio

Table 9 showing net profit to total deposit (in millions)

year 2069/70 2070/71 2071/72 2072/73 2073/74

Ratio(%) 2.09 1.97 1.86 1.95

1.34

Net profit 487 546 622 740 700

Total deposits 23256 27578 33422 37950 52071

ratio %
2.5

1.5
ratio %

0.5

0
2069/70 2070/71 2071/72 2072/73 2073/74

Figure 9 showing the ratio of netprofit to total deposit from the year 2069/70 to 2073/74.
We can see that net profit ratio to total deposits has been constantly declining over the
period even though net profit is increasing. The highest ratio was 2.09 in the year
2069/70 and lowest in the year 2073/74.
EARNING PER SHARE(EPS)

Table 10 showing earning per share of company (in millions)

year 2069/70 2070/71 2071/72 2072/73 2073/74

EPS 20.666 22.45 24.89 27.42

11.72

Net profit 487 546 622 740 700

No. of shares 23568957 24316815 24991670 26991700 59694600

30

25

20

15
Column2

10

0
2069/70 2070/71 2071/72 2072/73 2073/74

Figure10 showing earning per share of company

In the given figure we can analyze the earning of company from the year 2069/70 to
2073/74. From the figure what we can say is that the EPS of company is constantly rising
from 2069/70 to 2072/73. But in the year 2073/74 EPS fell to 11.72 per share. In the year
2072/73 the earning of company was highest and that was rs 27.42 per share.
Leverage ratio

This ratio is also called solvency ratio or capital structure ratio or debt management ratio.
A firm should have strong short term as well as long term financial position. To judge the
long term financial position of the firm, these ratios help to measure the financial
contribution of owners and creditors comparatively. These ratios indicate the situations of
the capital structure, which is calculated to measure the company’s ability of using debt
for the benefit of shareholders. Long-term creditors like debenture holders, financial
institutions etc. are more interested to the firms long term financial health, debt servicing
capacity and strength and weakness of the concerns. This ratio may be calculated from
the balance sheet items to determine the proportion of debt in total financing. In summary
debt ratio tell us the relative proportions of capital contribution by creditors and by
owners.

11 Debt assets ratio

Table 11 showing debt to assets ratio (in millions)

Year 2069/70 2070/71 2071/72 2072/73 2073/74

Ratio(%) 89.58 90.43 91.04 90.5

87.1

Total debt 23775 28051 34025 38954 54556

Total assets 26540 31020 37374 43041 62639

70000

60000

50000

40000
total debt
30000 total assets
20000

10000

0
2069/70 2070/71 2071/72 2072/73 2073/74

Figure11 showing Debt to total assets ratio of the company.

TOTAL DEBT TO TOTAL EQUITY

Figure12 total debt to total equity (in millions)

Year 2069/70 2070/71 2071/72 2072/73 2073/74

Ratio(%) 11.63 10.57 9.8 10.49

14.81

Total debt 23775 28051 34025 38954 54556

Total equity 2765 2965 3347 4087 8081

60000

50000

40000

30000 total debt

Column1

20000

10000

0
2069/70 2070/71 2071/72 2072/73 2073/74

Figure 12 showing total debt to total equity

In the above figure, we can see the portion of equity and debt fund to total assets. From
the table we can say that the ratio of debt is constantly increasing with increasing equity.
In the figure, we total debt has been constantly rising from 2069/70 to 2073/74. And the
equity has also been rising to 8081 millions from 2765 millions from 2069/70 onwards.
The company has highest debt of rs. 54556 millions in the year 2073/74.