A STUDY ON PROFITABILITY ANALYSIS OF

NEPAL TELECOM CORPORATION

A Research Proposal

By

Aman Gupta
T.U Registration number - 7-2-751-177-2019
Exam Roll no- 707510009
Divya Gyan College
Group: Account

Submitted to

The Faculty of Management

Tribhuvan University
Kathmandu

In Partial Fulfillment of the Requirement for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Kamaladi Mode, Kathmandu

July 2024
 TABLE OF CONTENTS

Table of Contents……………………………………………………………………………………… ii

Abbreviations………………………………………………………………………………………….iii

CHAPTER I: INTRODUCTION....................................................................................................1
1.1: Background of Study............................................................................................................1
1.2: Statement of Problem...........................................................................................................2
1.2: Objective of the Study..........................................................................................................2
1.3: Rationale of the Study..........................................................................................................2
1.4: Review of Literature.............................................................................................................3
1.5: Research Methodology.........................................................................................................4
1.6: Limitations of Study.............................................................................................................5
BIBLIOGRAPHY............................................................................................................................6

ii
 ABBREVIATIONS

% : Percentage

B.S. : Bikram Sambat

BBS : Bachelor of Business Studies

Ltd. : Limited

No. : Number

NTC : Nepal Telecom Corporation

Pvt. : Private

Regd. : Registration

S.D. : Standard Deviation

TU : Tribhuvan University

iii
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CHAPTER I: INTRODUCTION

1.1: Background of Study

Profitability analysis is a critical component of financial evaluation, providing insights into the
financial health and efficiency of a business. By examining various financial metrics and ratios,
this analysis aims to assess how effectively a company generates profit from its operations and
investments. Understanding profitability not only helps stakeholders gauge the sustainability of a
business but also informs strategic decision-making processes. The significance of profitability
analysis extends beyond mere financial metrics; it serves as a critical tool for strategic decision-
making. By identifying factors influencing profitability, such as cost structures, pricing
strategies, operational efficiencies, and market dynamics, this report seeks to provide actionable
insights that can guide management in optimizing performance and enhancing sustainable
growth.

Profitability is ability of a company to use its resources to generate revenues in excess of its
expenses. In other words this is a company’s capability of generating profit from its operations.
Profitability is one of four buildings block for analyzing financial statements and company
performance as a whole .The other three are efficiency , solvency ,and market
prospects .Investors ,creditors ,and managers use these key concepts to analyze how well a
company is doing and the future potential it could have if operation were manage properly . The
two key aspects of profitability are revenue and expenses. Revenues are the business income.
This is the amount of money earned from customers by selling products services. Generating
income isn’t free, however business must use their resources in order to produce these products
and provide these services. Resources, like cash are used to pay for expenses like employee
payroll, rent utilities and other necessities in the production process.

Profitability looks at the relationship between the revenues and expenses to see how well a
company is performing and the future potential growth a company have. Investors review
important factors in a company’s economic status by analyzing profitability .A profitability is an
accounting document summarizing an organization’s economic events and their impacts on the
firm’s competitive position. The study focused on profitability of Nepal Telecom Corporation
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(NTC). The working capital of NTC has deterioted in recent years. This report measures
profitability of NTC. And examine the financial position of NTC using profitability ratios.

1.2: Statement of Problem

The profitability analysis aims to assess Nepal Telecom Corporation's financial performance by
evaluating key metrics such as profit margins and return on investment. It seeks to identify
factors influencing profitability trends and operational efficiencies within the
telecommunications sector, providing insights for strategic decision-making and sustainable
growth.

1.2: Objective of the Study

The main objective of this report is to examine discuss and evaluate the financial
operation and analysis the impact on profitability when rate sensitive assets of
NTC. The specific objectives were as following:
 To examine the financial position with the help of different ratios calculation and their
interpretation of the NTC (examine ROE, ROA, Gross Profit Margin, Net Profit
margin Debt ratio, Basic earning power ratio, Equity multiplier).
 To know the Profitability performance of NTC.

 To Know the Income and expenses of NTC

1.3: Rationale of the Study

The rationale for studying the profitability of Nepal Telecom Corporation lies in its importance
for both internal management and external stakeholders. Understanding the factors influencing
profitability metrics such as profit margins and returns on investment is crucial for evaluating the
company's financial health and operational efficiency. This analysis provides insights into how
effectively the company manages costs, generates revenue, and navigates competitive pressures
within the telecommunications industry. By identifying strengths and areas for improvement, the
study aims to inform strategic decisions that can enhance profitability, optimize resource
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allocation, and sustain long-term growth, thereby benefiting shareholders, management, and
customers alike.

1.4: Review of Literature

1.4.1: Conceptual Review

Profitability analysis is a critical tool for assessing the financial health and efficiency of
organizations like Nepal Telecom Corporation. It involves evaluating metrics such as profit
margins and return on investment to gauge how effectively the company converts revenues into
profits. By identifying factors influencing profitability, such as operational efficiencies and cost
management strategies, this analysis provides insights that inform strategic decision-making.
Understanding these metrics not only helps in optimizing resource allocation but also in
identifying areas for improvement to enhance overall financial performance and sustainability in
a competitive market environment.

Profitability analysis involves evaluating a company's ability to generate profit relative to its
resources and operations. It encompasses various financial metrics such as gross profit margin,
net profit margin, and return on investment (ROI), which provide insights into the efficiency and
effectiveness of management in utilizing assets and controlling costs (Smith & Smith, 2020).
Understanding profitability is essential not only for financial health assessment but also for
strategic decision-making, as it helps identify competitive advantages and areas needing
improvement (Jones, 2018). By conducting a rigorous analysis of these metrics, stakeholders can
gain a comprehensive view of a company's financial performance and its potential for sustainable
growth and profitability.

1.4.2: Review of Previous Work

Pradhan (2009), has conducted thesis on the topics of “A study on investment policy of
JanataBank Ltd” this study with the objectives as: to access the lending policies of the bank, to
find out the causes of fluctuation of loan during the year 2060 to 2065, to find out to what extent
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Janata bank Ltd had been able to utilize deposit, to suggest measures to improve the leading
policy.
Thapa, B. B. (2011) has conducted thesis on the topics of “A study of financial performance of
SBI Bank Ltd” drown major findings as follows; This study conducted that the loan and
advances to total deposit shows a fluctuating trend in the over the period. The bank becomes
most Successful in utilizing the depositors fund to earn profit by providing loans and advances.
The price-earnings ratio is high; bank has properly utilized the high interest bearing profit

1.5: Research Methodology

Research simply means to search again and again. Methodology is the

research method used to test the hypothesis. So the research methodology
refers to the overall research process, which a researcher conducts during
his/her study. "The purpose of research is to discover answers to questions
through the application of scientific procedures.

1.5.1: Research Design

This report basically was prepared through the descriptive and Analytical method of research
design. The task began with the collection of necessary data and information concerning the
study. The data and information collected were studied carefully and presented them
systematically and get them analysed so as to meet the objective of the report.
1.5.2: Population and Sample

The population refers to the industries of the same nature and its services and product in general.
But we cannot applied this samplings and population in the exactly behavior because we
collected secondary data, this data is not able to give perfectly conclusion.

1.5.3: Sources of Data Collection and Analysis Techniques

There are two types of data. First, primary sources of data, this data are first hand data which are
collected from the observation .This was not able use for our report because we are student.
Next, secondary sources of data, which are obtained from different sources. The annual reports
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of the NTC and other published documents and audit reports are the main source of the
secondary data for the report preparation and analysis.

1.5.3.1: Analysis Technique

Following tools are used to analyze the data obtained from the company in order to obtain the
result for the data gathered.
1) Financial Tools
I. Liquidity Ratio
II. Profitability Ratio
2) Statistical Tools
I. Arithmetic Mean
II. Standard deviation
III. Coefficient of Variance
3) Graphical Tools

1.6: Limitations of Study

In the research time, we are not able to use primary data of this
organization. We used secondary data like annual general meeting report,
other published and unpublished data. The following factors are the basic
limitations:

 The main constraints of the study are insufficient of information which is highly
required for the study.
 This study is limited to the information that was available from the secondary data.
 This study is mainly carried out to attain the partial fulfillment of BBS
4th year study.
 Only few financial tools are used in this study
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BIBLIOGRAPHY

 Smith, J., & Smith, K. (2020). Financial Performance Metrics: A Comprehensive Guide.
Publisher.

 Jones, M. (2018). Strategic Financial Management: Concepts and Applications. Publisher.

 Brigham, E. F., & Houston, J. F. (2016). Fundamentals of Financial Management (14th ed.).
Cengage Learning.

 Kaplan, R. S., & Atkinson, A. A. (1998). Advanced Management Accounting (3rd ed.).
Prentice Hall.

 Palepu, K. G., Healy, P. M., & Bernard, V. L. (2007). Business Analysis and Valuation:
Using Financial Statements (4th ed.). Thomson South-Western