CASH FLOW ANALYSIS OF EVEREST BANK LIMITED

A Project Work Report

By:

KAMLESH KUMAR SAH

4th Year Exam Roll No: 709270122
T.U. Registration No: 7-2-927-175-2018
Swoyambhu International College
Group: Finance

Submitted to:

Faculty of Management
Tribhuvan University
Kathmandu

In partial fulfilment of the requirement for the degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Kathmandu, Nepal
April 2023
 DECLARATION

I hereby declare that the project work entitled CASH FLOW ANALYSIS OF EVEREST BANK
LIMITED submitted to the Faculty of Management, Tribhuvan University, Kathmandu is an
original piece of work under the supervision of Mr. Raju Raut, faculty member, Swoyambhu
International College, Kathmandu and is submitted in partial fulfillment of the requirements for
the award of the degree of Bachelor of Business Studies (BBS). This project work report has not
been submitted to any other university or institution for the award of any degree or diploma.

…………………….

Kamlesh Kumar Sah

Date: 8th April, 2023

ii
 SUPERVISOR'S RECOMMENDATION

The project work report entitled CASH FLOW ANALYSIS OF EVEREST BANK LIMITED
submitted by Kamlesh Kumar Sah of Swoyambhu International College, Kathmandu is prepared
under my supervision as per the procedure and format requirements laid by the Faculty of
Management, Tribhuvan University, as partial fulfillment of the requirements for the award of
the degree of Bachelor of Business Studies (BBS). I, therefore recommend the project work
report for evaluation.

…………

Raju Raut

Date: 8th April, 2023

iii
 ENDORSEMENT

We hereby endorse the project work report entitled CASH FLOW ANALYSIS OF EVEREST
BANK LIMITED submitted by Kamlesh Kumar Sah of Swoyambhu International College,
Kathmandu, in partial fulfillment of the requirements for award of the Bachelor of Business
Studies (BBS) for external evaluation.

………………………… ……………………………

Hari Shankar Chakhun Suman Prasad Chaudhary

Chairman, Management Research Committee Campus Chief

Date: April 2023 Date: April 2023

iv
 ACKNOWLEDGEMENT

This report entitled CASH FLOW ANALYSIS OF EVEREST BANK LIMITED has been
prepared in partial fulfillment of the requirements for the Degree of Bachelor of Business Studies
(BBS) from Tribhuvan University. I am grateful to the Tribhuvan University for providing me an
opportunity to prepare this report.

I express my sincere gratitude to my academic advisor Mr. Raju Raut of Swoyambhu

International College, Kathmandu for his valuable support, guidance and encouragement,
without which it would be so difficult for me to complete this report. I am also indebted to my
respected teachers of Swoyambhu International College, who have assisted from their respected
sectors. Similarly, I would like to thank those who directly and indirectly provided their valuable
support to make this report.

I humbly acknowledge my family members and friends for their continuous support and
encouragement during the entire study period. I am also thankful to all the authors and
researchers whose findings have been used as references while preparing this report.

Thank You

Kamlesh Kumar Sah

v
 TABLE OF CONTENTS

Title Page……………………………………………………………………………………………….i
Declaration ............................................................................................................................................ ii
Supervisor's Recommendation .............................................................................................................. iii
Endorsement ..........................................................................................................................................iv
Acknowledgement ................................................................................................................................... v
Table Of Contents ..................................................................................................................................vi
List Of Tables ....................................................................................................................................... vii
List Of Figures .................................................................................................................................... viii
Abbreviation...........................................................................................................................................ix
CHAPTER I: INTRODUCTION ....................................................................................................... 1
1.1 Background .................................................................................................................................. 1
1.2 Brief Profile of Everest Bank Limited ......................................................................................... 3
1.3 Statement of Problem ................................................................................................................... 6
1.4 Objectives of the Study ................................................................................................................ 7
1.5 Rationale of the Study .................................................................................................................. 7
1.6 Literature Review......................................................................................................................... 8
1.7 Research Methodology .............................................................................................................. 11
CHAPTER II: RESULTS AND ANALYSIS................................................................................... 14
2.1 Data Presentation and Analysis.................................................................................................. 14
2.2 Major Findings ........................................................................................................................... 25
CHAPTER III: SUMMARY AND CONCLUSION ....................................................................... 27
3.1 Summary .................................................................................................................................... 27
3.2 Conclusion ................................................................................................................................. 27
BIBLIOGRAPHY .............................................................................................................................. 29

vi
 LIST OF TABLES

Table 1: Company at a Glance ............................................................................................................... 3

Table 2: Shareholding Pattern ................................................................................................................ 4
Table 3: Board of Directors (BODs) ...................................................................................................... 4
Table 4: Management Team .................................................................................................................. 4
Table 5: Cash flow from Operating Activities ..................................................................................... 14
Table 6: Cash Flow from Investing Activities ..................................................................................... 17
Table 7: Cash Flow from Financing Activities .................................................................................... 19
Table 8: Cash Flow Statement ............................................................................................................. 20
Table 9: Closing Balance of Cash and Cash Equivalents .................................................................... 22
Table 10: Cash Realization Ratios ....................................................................................................... 24

vii
 LIST OF FIGURES

Figure 1: Comparison of Cash Flow from Operating Activities .......................................................... 16

Figure 2: Comparison of Cash Flow from Investing Activities ........................................................... 18
Figure 3: Comparison of Cash Flow from Financing Activities .......................................................... 19
Figure 4: Net Change in Cash and Cash Equivalents .......................................................................... 21
Figure 5: Closing Balance of Cash and Cash Equivalents ................................................................... 23
Figure 6: Cash Realization Ratios for different years .......................................................................... 24

viii
 ABBREVIATION

ATM : Automated Teller Machine

BFIs : Banks and Financial Institutions

BODs : Board of Directors

BS : Bikram Sambat

CEO : Chief Executive Officer

CFIA : Cash Flow from Investing Activities

CFFA : Cash Flow from Financing Activities

CFOA : Cash Flow from Operating Activities

EBL : Everest Bank Limited

FY : Fiscal Year

NEPSE : Nepal Stock Exchange

NRB : Nepal Rastra Bank

ix
 1

CHAPTER I
INTRODUCTION

1.1 Background

Banks are the major financial institutions of a country. Bank involves in a process of accepting
deposits from the individuals, entities from different places and mobilizing the collected deposits
in various sectors of the economy according to the need of customers. The money that would
have remained idle with the individuals, gets utilized to the productive sectors of the economy
such as production sector, industrial sector, commercial sector, etc.

Cash, the most liquid asset is very important for smooth running of any business enterprises, that
may create a serious crisis if it is not managed properly. To understand and analyse the
inward/outward flow of cash from various activities, a statement termed as Cash Flow Statement
is prepared by the management. Thus, Cash Flow Statement can be defined as the statement
which is prepared to show the movement of cash inflow and outflow of an entity from various
activities namely, operating activities, investing activities and financing activities. It forms an
integral part of the financial statements prepared by the management at the end of the fiscal year.

A cash flow statement shows the sources and usage of the cash for the period from different
activities diving the activities into three categories: cash flow from operating activities, cash flow
from investing activities and cash flow from financing activities. Cash flow should not be
confused with the net profit of an entity as net profit is calculated after deducting the expenses
that do not involve the actual flow of cash such as depreciation.

The Cash Flow Statement can be divided into three sections: cash flow from operating activities,
cash flow from investing activities, and cash flow from financing activities.
 2

1.1.1 Cash Flow from Operating Activities

Cash flow from operating activities represent the net flow of cash and cash equivalents from the
major business activity of the company. The amount of cash flow arising from operating
activities is a key indicator of analysing the company's performance and its ability to repay loans,
and whether external finance will be required for any investment or not. Cash flow from
operating activities can be ascertained by two methods namely, direct method and indirect
method.
Under direct method, it can be simply calculated by deducting the operating payments from the
operating receipts. Under indirect method, net profit earned by the entity is considered, and
various adjustments are made that are necessary to reconcile the net profit with the net cash flow
from operating activities. The adjustments made to the net profit include, but are not limited to
the non-cash items shown in the income statement, the changes during the period in inventory,
operating receivables and payables, and other items in the income statement whose nature are
either investing or financing.

1.1.2 Cash Flow from Investing Activities

Cash flow from investing activities represent the net cash flow arising due to the change in fixed
assets and investments. It can be ascertained by deducting the amounts paid for the purchase of
fixed assets and the investments from the sale proceeds of the fixed assets and investments.
Some investing activities are:
❖ Purchase of fixed assets and investments
❖ Proceeds from the disposal of fixed assets and investments
❖ Income from the investments

1.2.3 Cash Flow from Financing Activities

Cash flow from financing activities represent the net cash flow arising as a result of raising funds
from the shareholders or debtholders and distributing return to them. Major financing activities
include, but are not limited to:
❖ Issue of shares
❖ Long term borrowings
❖ Redemption of debentures
 3

❖ Dividend paid
❖ Interest paid

Cash flow statement can be used for different purposes like:

❖ To evaluate the cash position of entity

❖ To identify and evaluate the liquidity in the organization so that there will be less chances
of shortage of money
❖ To identify the operational results, returns of the entity
❖ To analyse the investment decisions of the entity
❖ To evaluate the proper utilization of the funds financed
❖ To evaluate the risks within the organization
❖ To analyse the investor-relation of the firm through dividend decisions

1.2 Brief Profile of Everest Bank Limited

Established in 1994, Everest Bank Limited (EBL) is currently one of the leading commercial
banks of Nepal. The objective of the bank is to extend the professionalized & efficient banking
services. Everest bank Limited is a joint venture with Punjab National Bank, India and is a
consistently growing commercial bank of Nepal. At the end of the Fiscal Year 2078/79 i.e., at 16
July 2022, the Bank had 117 branches and 1057 employees as compared to 103 branches and
945 employees on 15 July 2021.

In addition to the 117 branches of the bank, the bank is providing banking services to its
customers through 3 extension counters, 160 ATMs and 32 revenue counters all over Nepal.

Table 1: Company at a Glance

Company Name Everest Bank Limited

Corporate Office Lazimpat, Kathmandu
Business Nature Class-A Commercial Bank
Phone No. +977-01-5970118
Establishment Year 1994
Chairman Mr. B. K. Shrestha
CEO Mr. Sudesh Khaling
Statutory Auditor for FY Sundar & Co.,
 4

2078/79 Chartered Accountants

Stock Symbol in NEPSE EBL
Opinion in Audit Report Unmodified
Authorized Share Capital Rs. 10,000,000,000
Subscribed and Paid-Up Rs. 9,427,340,209
Capital

Table 2: Shareholding Pattern

Percentage holding Shareholders

39.20% Local Promoters
40.77% Public Shareholders
20.03% Punjab National Bank, India

Table 3: Board of Directors (BODs)

S. No. Name of Director Representation on Board Appointment Date

1 Mr. B. K. Shrestha Chairman 2052/10/09
2 Mr. Arun Man Sherchan Promoter Director 2054/03/27
3 Dr. Bal Gopal Baidya Promoter Director 2060/03/06
4 Mr. Rakesh Grover PNB Nominee Director 2079/02/25
5 Mr. Nabin Bhakta Shrestha Public Director 2077/09/27
6 Ms. Urmila Shrestha Public Director 2077/09/27
7 Dr. Tarak Bahadur K.C. Independent Director 2078/10/26

Table 4: Management Team

Name Designation
Mr. Sudesh Khaling Chief Executive Officer
Mr. Vijay Kumar Sharma Deputy Chief Executive Officer
Mr. Gaurav Kumar Deputy General Manager
Mr. Keshab Raj Paudel Deputy General Manager
Mr. Ashutosh Sharma Deputy General Manager
 5

Awards and Recognitions

The bank has been bestowed with numerous awards such as,
❖ “Best Managed Commercial Bank” by NEWBIZ BUSINESS Award 2019
❖ “2nd Best Managed Commercial Bank” by Abhiyan National daily in 2018
❖ “Number 2 Bank under CAMELS rating in 2018 as adjudged by KAROBAR national
daily
❖ “Best Managed Commercial Bank” by ASIAN PAINT NEWBIZ Award 2013.
❖ “Highest Tax Payer among Commercial Banks” by Nepal Government for FY 2068/69.
❖ “Number 1 Bank” under CAMELS rating in 2012 as adjudged by KAROBAR national
daily
❖ “Bank of the Year 2006, Nepal” by the Banker, a publication of Financial Times, London
❖ “NICCI Excellence Award” by Nepal India Chamber of Commerce for its spectacular
performance under finance sector

Pioneering Achievements

❖ EBL is one of the first banks to introduce Any Branch Banking System (ABBS).
❖ EBL has introduced Mobile Vehicle Banking Service (Bank on Wheel) to serve the
segment deprived of proper banking facilities through its Birtamod Branch, which is the
first of its kind.
❖ EBL has introduced branchless banking system first time in Nepal to cover unbanked
sector of Nepalese society through biometric machine.
❖ EBL is the first bank that launched e-ticketing system in Nepal using which customers
can buy tickets (Airline, Movie etc.) through internet.
❖ EBL is the first bank to introduce agro-specialized branch “KRISHI UDHYAM BIKASH
SAKHA” at Rajbiraj.
❖ EBL has introduced “FREEDOM Savings Account” which allows a minor to operate
their account independently which is the first of its kind in Nepal.
 6

❖ EBL has introduced Cash Deposit Kiosk for the first time in Nepal through which the
customers can deposit cash conveniently.

Moreover, the bank has established E-lobby at its Head Office premises by reckoning the
importance of digitization in banking system.

1.3 Statement of Problem

Since the major objective of the banks and financial institutions (BFIs) is to advance credit to
various sectors, they compete among themselves for the same. Since cash is a blood for every
organization, it needs to be managed in a very effective way. This study is made to analyse the
decisions of EBL regarding cash management through the study of cash flow statements.

Statement of Problem is the description of issues faced by the company in their business. It
focuses to generate the queries that can highlight the problems faced by the institution. Like any
BFIs, EBL also faces many problems that affect its cash flow. Some of the problems addressed
by this study are:

❖ What do the cash flow statements of the EBL indicate?

❖ What are the factors influencing cash flow of the entity?
❖ Whether the cash flows have increased or decreased under different headings as
compared with the previous period?
❖ Whether the EBL has been able to manage the cash properly or not?
❖ What are the different types of ratios that can be analysed to assess the cash flow position
of the company?
❖ What is the situation of EBL in its operation?
❖ Whether EBL has a good investment policy and incurred the needed cash outflow for
such or not?
❖ Whether there are any irregularities in cash flow of the EBL or not?
 7

1.4 Objectives of the Study

The preparation of the cash flow statement helps to analyse the inflow and outflow of cash in a
business from various activities during a specific period of time. Thus, the major objective of this
research is to analyse the cash inflows received by the bank from various activities during the
given period of time and assess its policies and decisions to utilize those cash inflows.

The major objectives of the study are as follows:

❖ To obtain information about cash inflow and outflow under different headings namely,
operating activities, investing activities and financing activities and their impact on
financial position of the bank
❖ To analyse the position of cash of EBL and the efficiency in terms of management of
cash and cash equivalents
❖ To analyse the trend of cash flows of EBL in different periods

1.5 Rationale of the Study

The study evaluates the cash inflow and outflow, the cash position of EBL as at the end of the
given period of time. Unlike the Statement of Profit and Loss, it helps in understanding the
liquidity of the bank. This study helps the concerned bank to formulate strategies and economic
policies from the use of cash flow statements of the previous period to project its future cash
flows.

The primary purpose of the statement of cash flows is to provide information about the cash
flows or net change in cash resulting from the operating, investing, and financing activities of the
company during the period. Cash flow statement also helps the management in planning and
taking appropriate decisions. Similarly, the research will provide required information to the
various stakeholders such as general readers, investors, stockholders, businessman and general
public having interest in studying cash flow analysis.
 8

1.6 Literature Review

1.6.1 Theoretical Review

The purpose of the cash flow statement is to report the cash inflows and outflows of an entity for
a given period of time. Cash flow statement is divided into three parts: cash flow from operating
activities, cash flow from investing activities, and cash flow from financing activities. This
detailed disclosure of individual cash flows is important to the users. Cash flows can show a
company's ability to finance its expenditures from operations, pay its existing debts as and they
mature, and demonstrate a company's ability to meet unexpected obligations and to pursue
business opportunities (Larson, Wild, & Chappetta, 2006).

As per Para 1 of Nepal Accounting Standard (NAS) - 7 “An entity shall prepare a statement of
cash flows in accordance with the requirements of this standard and present it as an integral part
of its financial statements for each period for which financial statements are presented”.

Thus, cash flow statement is required to be prepared compulsorily by any entity in Nepal.

Operating activities, one section of the statement of cash flows, relates to the company's basic
business activities. Positive cash flow from its operating activities is a good indicator of a
company's performance. "Happiness is a positive cash flow," according to Kieso, Weygandt, and
Warfield (2004), and if the cash flow is increasing through the years, it shows that the company
is able to remain solvent and is able to meet its cash needs. On the other hand, a negative cash
flow from operating activities would indicate that the company is not performing well enough to
sustain even its core functions.

The remaining sections of the statement of cash flows, those concerning investing (purchase and
sale of assets other than the company's products) and financing (borrowings, repayments of
borrowings, investments by owners, and distribution of dividends or profits to owners) reflect
what the business does with its cash coming from operations, and the sufficiency of cash to meet
other functions of the company. Users of financial statements look at where the company is
getting its cash aside from operating activities. If most of the cash is acquired through financing
activities, then the company might be in danger in the future if it could not pay off its debts. If
 9

money is used for investing activities, you can expect the money to return after some time
depending on the payback period or the rate of return of the investment (White, 2004).

1.6.2 Empirical Review

Analyzing cash receipts and payment are the secondary basis for making managerial decisions
and for predicting the outcome of future business activities. This stems from the belief that
information from accrual accounting provided a better indication of a business's current and
future ability to create favorable cash flows compared to analyzing cash receipts and payments
(Bowen & Daley, 1986). However, the statement of cash flows has properties unique from
income statements and balance sheets. As one of the four required financial statements, the
statement of cash flows is believed to carry invaluable information essential for a complete
analysis of the financial situation of a company. This information can be converted into ratios as
well and can be useful tools in evaluating a company.

By examining the cash and non-cash investing and financing activities of a company, the users of
financial statements can understand why assets and liabilities increased or decreased during a
given period. It is easier to explain why there was an increase in the cash when the company was
showing a net loss, the sources of funds for acquiring fixed assets, the reasons why dividends did
not increase, how debts were retired, and how much money was borrowed (Kieso, et al., 2004).

Similarly, cash flows have been increasingly studied by researchers in the field of accounting
and finance. Bowen, Burgstahler, and Daley (1986) studied the relationship between accrual
earnings and various measures of cash flow. The primary focus of the study was to test if
earnings and cash flow data were equally effective in determining future cash flows. In addition
to this, the correlation between traditional cash flow measures and alternative cash flow
measures and the relationship between accrual accounting earnings and cash flow measures were
also determined. Results show that there is a relationship between accrual earnings and various
measures of cash flow. The results also showed that traditional measures of cash flow are highly
correlated with earnings. There is, however, low correlation between alternative measures of
cash flow and earnings. The results disproved the assertions that accrual earnings provided more
accurate forecasts of future cash flows than cash flow measures. Thus, there is evidence that cash
 10

flows can be an effective and efficient instrument in forecasting the results of business
operations.

Almeida and Weisbach (2004) focused on the relationship between financial constraint and a
firm's liquidity demand rather than on the effects of financial constraints on corporate policies.
The relationship between the two factors was used to identify whether or not financial constraints
were an important determinant of firms' behavior. The study was able to propose an empirical
method to test the effect of financial constraints on firms' policies through the application of the
cash flow sensitivity to cash. It was able to focus on the importance of cash holdings and its
management, which is necessary to pursue investment opportunities without experiencing heavy
financial constraint. The study was able to show the role of cash flow management in ensuring
firms' growth and survival.

Mills and Yamamura (1998) argued that when it comes to liquidity analysis, cash flows
information is more reliable than balance sheet or income statement information. Balance sheet
data are static--measuring a single point in time--while the income statement contains many
arbitrary non-cash allocations. Cash flows record the changes in the other statements and focuses
on cash available for operations and investments. The study presented an interesting case study
between two competing game houses or casinos. Although the two casinos' balance sheet items
and ratios seemed promising, there was in fact an actual dearth in cash on hand with one of them.
This problem was mostly left ignored until the company could no longer sustain itself through its
operations and cover its immediate debt. There is thus clearly a need for cash flow analysis to be
integrated into analyses of companies' financial positions. The study focused on understanding
the statement of cash flows from the point of view of auditor.

In order to make cash flows statements useful, ratios need to be derived from them in the same
way that ratios are derived from income statements and balance sheets. In "Developing Ratios
for Effective Cash Flow Statement Analysis," Carslaw and Mills (1991) show the emergence of a
consciousness towards using cash flows ratios to help internal and external users of financial
statements. It is a clear approach to the explanation of usefulness of the statement of cash flows
through the use of ratios. The study suggests different ratios from the statement of cash flows
that can be used to analyze the significance of the statement. They proposed four categories, each
covering a different angle in business: solvency and liquidity, quality of income, capital
 11

expenditures, and cash flow returns. Except for solvency and liquidity, most of the ratios are not
similar to the ratios derived from income statements and balance sheets. The study did not test
the effectiveness of the ratios by analyzing a company. They also recognized the need for
standardization of ratios, which would allow for better comparison of data.

Figlewicz and Zeller (1991) also identified and discussed meaningful ratios based on the
statement of cash flows. Cash flow data are merged with existing financial information to
complement standard ratios to measure performance, liquidity, coverage, and the capital
structure of businesses. The financial reports of W. T. Company for the period 1967 through
1975 were used to analyze if the ratios provide complementary information to the analyst. It was
found that the ratios complement traditional financial ratio analyses. Schmidgall, Geller, and
Ilvento (1993) further proposed nine financial ratios based on the statement of cash flows. The
authors discussed the usefulness of the ratios and concluded that the ratios "appear to provide
reasonable supplementary information beyond what traditional ratios provide" (p.53), after
analyzing a hypothetical income statement, balance sheet and statement of cash flows.

The objective of the study is to present the cash position of EBL. This study will focus on the
application of the cash flow ratios in evaluating EBL’s cash flows by using historical data for the
past 5 years. These ratios are derived from the operating, investing and financing activities of the
statement of cash flows.

1.7 Research Methodology

1.7.1 Research Design

In order to meet the objectives of the study high priority will be given in the process of research.
Secondary data will mostly be used for the research. All the essential data which will be required
to carry out research will be collected from the bank's official website. In this study researcher
will follow the descriptive research design to analyse the cash flow statement in different
financial year and various effective research techniques will be used to identify the weakness of
the bank.
 12

1.7.2 Population and Sample

The study will cover only one sampled bank i.e., EBL and use five year’s data namely Annual
Reports of EBL for the FY 2074/75, 2075/76, 2076/77, 2077/78 and 2078/79.

1.7.3 Method of Data Collection

Secondary data, that will be used for the purpose of the study, will be collected from official
website of the bank. Additionally, some data also will be gathered from website, articles, and
journals related to the cash flow study, previous research reports, etc.

1.7.4 Method of Data Analysis

A variety of financial analysis tools are available for the purpose of conducting of research.
According to the pattern of available data, data obtained from various sources will be arranged.
The various calculated results are then tabulated under different headings, which are later on
compared with each other and interpreted. More over various tables and charts are presented for
the clarity of subject matter.

The methods of data analysis are:

a) Financial method

b) Statistical method

a) Financial method

Cash flow itself is a financial tool for analysis of financial data. The cash flow statement of five
different fiscal years will be taken and the inflow and outflow under each of the operating,
financing and investing activity will be compared to analyse the generation of funds and
utilization of funds.

b) Statistical method

Out of the available statistical tools, the tools that will be used in this research are:

❖ Percentage
 13

❖ Bar diagram
❖ Arithmetic mean
❖ Ratio Analysis

1.8 Limitation of the Study

Different books, journals, articles, annual reports etc. will be used for this study. Thus, reliability
of the study is mostly based of those things. The following are the limitations of the study:

❖ This study covers the analysis of five years’ data only (2074/75, 2075/76, 2076/77,
2077/78 and 2078/79) and hence conclusion drawn represents only this period.
❖ This study is limited to the study of one commercial bank i.e., EBL and hence the
findings from this study may not be generalized for all financial institution.
❖ This study is mostly based on the secondary data of EBL obtained through its published
annual report so the validity of the findings depends on the genuineness and truthfulness
of the presented data.
❖ This study focuses on quantitative analysis only thus it ignores the qualitative analysis of
data.
❖ Most of the findings in this study are not consistent with many of the studies. Therefore,
it is worthwhile to note that nature of data and specification of the models may
themselves be responsible for the difference in results.
 14

CHAPTER II
RESULTS AND ANALYSIS

2.1 Data Presentation and Analysis

This research is focused on the presentation and analysis of the selected data of EBL to fulfil the
set objectives of the study. Various financial ratios are used to analyse the relationship between
cash flows and other measures of the bank performance.

Mainly secondary data was collected from the bank's official website, annual reports of the bank,
brochures, prospectus of the bank. The cash flow analysis of EBL has been done with the help of
following tools:

❖ Comparative Cash Flow Statement (relating to each activity, and overall cash flow
statement as well)
❖ Cash Realization Ratio

2.1.1 Cash Flow from Operating Activities

Cash flow from operating activities represent the net change in cash position of the company as a
result of the normal business activities of the firm. The positive cash flow from operating
activities indicates that the company has been able to meet its operating cash outflows from the
operating cash receipts and the surplus amount can be used in the investing activity or to pay the
dividends to the shareholders.

Table 5: Cash flow from Operating Activities

Particulars 2074/75 2075/76 2076/77 2077/78 2078/79
Interest 9,347,671,310 11,986,107,021 12,092,707,402 10,338,357,566 13,445,544,186
Received
Fees and other 945,375,352 1,025,000,325 1,144,656,716 978,902,083 1,294,957,645
income
received
Dividend - - - - -
received
Receipts from 203,820,503 288,110,721 293,994,921 409,701,540 255,798,512
other operating
 15

activities
Interest paid (4,965,003,511) (7,363,600,279) (8,554,128,240) (7,551,440,479) (9,944,625,501)
Commission (123,289,086) (133,605,344) (128,502,771) (210,737,406) (263,073,470)
and fees paid
Cash payment (1,068,563,003) (1,497,908,573) (1,796,941,258) (1,634,008,926) (1,836,644,231)
to employees
Other expenses (870,973,911) (702,680,878) (766,875,855) 155,768,799 (437,453,847)
paid
Operating cash 3,469,037,654 3,601,422,993 2,284,910,914 2,486,543,177 2,514,503,294
flows before
changes in
operating
assets and
liabilities
(Increase)/Dec
rease in
operating
assets
Due from NRB (4,361,663,880) (4,365,820,691) 3,331,893,637 (8,865,897,289) 17,733,539,936
Placement with 59,750,000 2,742,500,000 (1,855,500,000) 259,300,000 (730,800,000)
BFIs
Other Trading - - - - -
Assets
Loans and (973,309,203) (3,139,700,206) 510,587,252 (657,856,187) (2,114,779,201)
advances to
BFIs
Loans and (14,324,914,468) (14,821,935,275) (7,734,806,083) (15,791,493,866) (18,111,389,276)
advances to
customers
Other assets 1,056,127,895 (31,838,144) (280,899,224) 134,572,349 (135,640,698)
Increase/(Decr
ease) in
operating
liabilities
Due to BFIs (158,532,483) (306,863,060) 573,619,094 (503,859,119) 54,097,994
Due to NRB 11,951,075 1,179,356,369 (1,173,182,762) 2,079,298,409 807,074,636
Deposit from 21,419,813,916 14,056,446,974 13,977,322,289 16,674,781,756 12,518,927,965
Customers
Borrowings - - - - 2,556,000,000
Other 3,406,104,660 7,358,601,036 2,127,047,306 6,653,364,559 (5,945,415,350)
Liabilities
Net cash flow 9,604,365,166 6,272,169,996 11,760,992,423 2,468,753,789 9,146,119,300
from operating
activities
before tax
Income taxes (1,130,879,135) (1,362,534,749) (1,231,063,531) (1,004,610,750) (1,418,822,084)
paid
Net Cash flow 8,473,486,031 4,909,635,247 10,529,928,892 1,464,143,040 7,727,297,216
from operating
activities
 16

Net CFOA
12000

10000
Amount (in millions)

8000

6000

4000

2000

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

Net CFOA

Figure 1: Comparison of Cash Flow from Operating Activities

The Table 5 and Figure 1 show the net cash flows from operating activities (CFOA) for the last
five years. The cash flow from operating activities amount to Rs. 8,473.49 million in FY
2074/75, Rs. 4,909.64 million in FY 2075/76, Rs. 10,529.92 million in FY 2076/77, Rs. 1,464.14
million in FY 2077/78 and Rs. 7,727.30 million in FY 2078/79.

The cash flow from operating activities have remained positive in the last five years however,
there is no fixed trend in the cash flows. The cash flow has decreased and FY 2075/76 as
compared to FY 2074/75 and increased again in FY 2076/77. The cash flow from operating
activities, among last five years, has remained the minimum in FY 2077/78 and has increased
again in FY 2078/79.
 17

2.1.2 Cash Flow from Investing Activities

Cash flow from investing activities represent the net change in cash position of the company as a
result of the change in the investment strategy of the entity through purchase or sale of fixed
assets and investment. The negative cash flow from investing activities indicates that the
company is increasing the investments, thus helping in achieving long-term growth goal of the
company, and ensuring the perpetual succession of the company.

Table 6: Cash Flow from Investing Activities

Particulars 2074/75 2075/76 2076/77 2077/78 2078/79
Purchase of (7,804,556,448) (6,092,256,369) (7,238,471,657) (1,583,000,466) (5,280,023,339)
investment securities
Receipts from sale of - - - 124,372,516 870,336,607
investment securities
Purchase of property (283,971,942) (376,548,064) (174,453,607) (1,491,998,269) (257,358,308)
and equipment
Receipts from the sale 3,131,730 18,764,127 1,695,393 1,060,000 1,115,055
of property and
equipment
Purchase of intangible (9,994,211) (34,133,788) (19,791,838) (36,000) (3,265,388)
assets
Receipts from the sale - - - - -
of intangible assets
Purchase of - - - - -
investment properties
Receipt from the sale 5,140,696 - - 582,029 -
of investment
properties
Interest received 545,227,873 901,114,148 1,142,277,107 1,444,168,610 1,715,480,298
Dividend received 14,892,552 25,582,952 31,536,685 10,160,549 10,452,098
Net cash flow from (7,530,129,749) (5,557,476,994) (6,257,207,918) (1,494,691,031) (2,943,232,978)
investing activities
 18

Net CFIA
0
2074/75 2075/76 2076/77 2077/78 2078/79
-1000

-2000
Amount (in millions)

-3000

-4000

-5000

-6000

-7000

-8000
Fiscal Years

Net CFIA

Figure 2: Comparison of Cash Flow from Investing Activities

The Table 6 and Figure 2 show the net cash flows from investing activities (CFIA) for the last
five years. The cash flow from investing activities amount to Rs. -7,530.13 million in FY
2074/75, Rs. -5,557.48 million in FY 2075/76, Rs. -6,257.21 million in FY 2076/77, Rs.
-1,494.69 million in FY 2077/78 and Rs. -2,943.23 million in FY 2078/79.

The cash flow from investing activities has remained negative in each of the last five years.
However, there is a huge decline in the amount of purchase in the fixed assets and investments in
the latest years as compared with the FY 2074/75.
 19

2.1.3 Cash Flow from Financing Activities

Cash flow from financing activities represent the net change in cash position of the company as a
result of the financing decisions of the company. It consists of raising of funds through issue of
shares, bonds or borrowings, payment of dividend, interest, redemption of debentures etc. It
basically covers the transactions between the company and the investors.
Table 7: Cash Flow from Financing Activities
Particulars 2074/75 2075/76 2076/77 2077/78 2078/79
Receipt from issue of debt - - - - 856,783,000
securities
Repayment of debt - - - (600,000,000) -
securities
Receipt from issue of - - - - -
subordinated liabilities
Repayment of - - - - -
subordinated liabilities
Receipt from the issue of 612,610,084 - - - -
shares
Dividends paid (111,893,031) (1,531,574,194) (1,573,275,162) (485,143,622) (415,997,815)
Interest paid (54,192,968) (110,027,489) (110,042,421) (101,020,479) (418,603,837)
Other receipt/payment - - - - -
Net cash flow from 446,524,085 (1,641,601,682) (1,683,317,583) (1,186,164,102) 22,181,348
financing activities

Figu
Net CFFA re 3:
1000 Com
paris
500 on of
Amount (in millions)

Cash
0
Flow
2074/75 2075/76 2076/77 2077/78 2078/79
-500
from
Fina
-1000 ncin
g
-1500 Activ
ities
-2000
Fiscal Years

Net CFFA The

Table 7 and Figure 3 show the net cash flows from financing activities (CFFA) for the last five
years. The cash flow from financing activities amount to Rs. 446.52 million in FY 2074/75, Rs. -
 20

1,641.60.48 million in FY 2075/76, Rs. -1,683.32 million in FY 2076/77, Rs. -1,186.16 million
in FY 2077/78 and Rs. 22.18 million in FY 2078/79.
The cash flow from financing activities was positive in FY 2074/75 and has been negative for
three consecutive years i.e., for the FY 2075/76, 2076/77, and 2077/78. The cash flow from
financing activities has attained its positive position again in FY 2078/79.

2.1.4 Cash Flow Statement from All Activities

The net change in cash and cash equivalents during the year can be ascertained by adding the
cash flows from operating, investing and financing activities. This represents the net change in
an entity's position of cash and cash balance after deducting the total cash outflows made by the
entity from the total cash inflows from each heading. In short, it is net movement of cash and
cash equivalents made by the entity during the year.

Table 8: Cash Flow Statement

Particulars 2074/75 2075/76 2076/77 2077/78 2078/79
Cash Flow from 8,473,486,031 4,909,635,247 10,529,928,892 1,464,143,040 7,727,297,216
Operating
Activities
Cash Flow from (7,530,129,749) (5,557,476,994) (6,257,207,918) (1,494,691,031) (2,943,232,978)
Investing Activities
Cash Flow from 446,524,085 (1,641,601,682) (1,683,317,583) (1,186,164,102) 22,181,348
Financing
Activities
Net 1,389,880,370 (2,289,443,430) 2,589,403,392 (1,216,712,093) 4,806,245,587
increase/(decrease)
in cash and cash
equivalents
 21

Net Cash Flow

6000

5000

4000
Amount (in millions)

3000

2000

1000

-1000 2074/75 2075/76 2076/77 2077/78 2078/79

-2000

-3000
Fiscal Years

Net Change in Cash and Cash Equivalents

Figure 4: Net Change in Cash and Cash Equivalents

The Table 8 and Figure 4 show the net change in cash and cash equivalents for the last five
years. The net change in cash position amounts to Rs. 1,389.88 million in FY 2074/75, Rs.
-2,289.44 million in FY 2075/76, Rs. 2,589.40 million in FY 2076/77, Rs. -1,216.71 million in
FY 2077/78 and Rs. 4,806.25 million in FY 2078/79.

The overall cash flows have been fluctuating in the last five years. In FY 2078/79, the net change
in cash and cash equivalents during the year has reached its maximum amount in the last five
years.
 22

2.1.5 Closing Balance of Cash and Cash Equivalents

The closing balance of cash and cash equivalents are ascertained by making the following
adjustments in the net change in the cash and cash equivalents during the year:

❖ Adding the opening balance of cash and cash equivalents

❖ Adjusting the effect of exchange rate fluctuations on the cash and cash equivalents held
by the entity

The closing balance of cash and cash equivalents ascertained in the cash flow statement must be
tallied with that presented in the Statement of Financial Position (Balance Sheet) of the
company. Cash and cash equivalents are the most liquid assets held by an entity. Hence, the
position of cash and cash equivalents held by an entity is very important in understanding the
liquidity position of the entity.

Table 9: Closing Balance of Cash and Cash Equivalents

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

Net 1,389,880,370 (2,289,443,430) 2,589,403,392 (1,216,712,093) 4,806,245,587
increase/(decrease)
in cash and cash
equivalents
Cash and cash 8,667,840,097 10,065,422,666 7,759,121,374 10,368,147,712 9,163,408,289
equivalents at the
beginning of the
year
Effect of exchange 7,702,199 (16,857,863) 19,622,947 11,972,671 54,709,832
rate fluctuations on
cash and cash
equivalents held
Cash and cash 10,065,422,666 7,759,121,374 10,368,147,712 9,163,408,289 14,024,363,708
equivalents at the
end of the year
 23

Closing Balance of Cash and Cash Equivalents The

16000 Tabl
14000 e 9
Amount (in millions)

12000
and
10000
Figur
8000
e 5
6000
4000 show
2000 the
0 closi
2074/75 2075/76 2076/77 2077/78 2078/79
ng
Fiscal Years
balan
Closing Balance of Cash and Cash Equivalents
ce of
cash
Figure 5: Closing Balance of Cash and Cash Equivalents
and
cash equivalents of Everest Bank Limited for the last five years. The cash and cash equivalents at
the end of the year amount to Rs. 10,065.42 million in FY 2074/75, Rs. 7,759.12 million in FY
2075/76, Rs. 10,368.15 million in FY 2076/77, Rs. 9,163.41 million in FY 2077/78 and Rs.
14,024.36 million in FY 2078/79.

The closing balance of cash and cash equivalents have been fluctuating in the last five years. The
balance decreased in 2075/76, as compared to 2074/75, and again increased in 2075/76. The
closing balance decreased to Rs. 9,163.41 million in 2077/78 and showed a huge jump in FY
2078/79 and reached to Rs. 14,024.36 million. In FY 2078/79, the cash and cash equivalents at
the end of the year has reached its maximum amount in the last five years.
 24

2.1.6 Cash Realization Ratio

Cash realization ratio indicates the closeness of cash generated from operations with the net
income of the company. It indicates how well a company is able to realize its net income in
terms of cash and cash equivalents. This ratio can be calculated as follows:

Cash realization ratio = Cash generated from Operations (i.e., CFOA)/Net Income

The cash realization ratio of greater than one is considered to be good, as it indicates that the
company is doing well in converting its net income into cash realizations.

Table 10: Cash Realization Ratios

Fiscal Year CFOA Net Income Cash Realization Ratio
2074/75 8,473,486,031 2,581,681,778 3.3282
2075/76 4,909,635,247 3,054,122,062 1.6075
2076/77 10,529,928,892 2,516,243,710 4.1848
2077/78 1,464,143,040 1,958,008,050 0.7478
2078/79 7,727,297,216 2,479,400,875 3.1166

Cash Realization Ratio

4.5
4
3.5
3
2.5
Ratio

2
1.5
1
0.5
0
2074/75 2075/76 2076/77 2077/78 2078/79
Fiscal Years

Cash Realization Ratios

Figure 6: Cash Realization Ratios for different years

 25

The Table 10 and Figure 6 show the cash realization ratios of EBL for the last five years. The
cash realization ratios are 3.3282, 1.6075, 4.1848, 0.7478, and 3.1166 for the FY 2074/75,
2075/76, 2076/77, 2077/78, and 2078/79 respectively. The cash realization ratio of the company
is quite impressive and is a good indication about the cash management techniques of the bank.
Except in FY 2077/78, the company has been quite well in terms of realizing the net income of
the company in cash.

2.2 Major Findings

In this research report, we have studied bout the cash flow of EBL for the last five years, and
have reported the following findings after the analysis of the collected data:
❖ The cash flows from operating activities have been positive in each of the last five years,
which indicates that the company has been able to generate a surplus from the operating
cash receipts after making payments for operating expenses.
❖ TH CFOA has been the highest in FY 2076/77 and then reached to the lowest in FY
2077/78, and has increased again in FY 2078/79 which is a very good indication.
❖ The cash flows from investing activities have been negative in last five years however,
the amount paid for the purchase of fixed assets and investments have declined by a huge
margin as compared with the FY 2074/75.
❖ The cash flow from financing activities was positive in FY 2074/75 due to issue of
shares, and has remained negative for three consecutive years
❖ The CFFA has become positive again in FY 2078/79 due to the issue of the debt
securities in FY 2078/79.
❖ The CFFA has remained negative due to the payment of the dividends and interest to the
investors, to keep a healthier relation between the investors which is a very good sign.
❖ EBL has a positive net change in cash and cash equivalents in the FY 2078/79. The
amount can be used in the current fiscal year for the business operation or for the
expansion of the investments.
❖ The cash realization ratio is pretty good in each of the last five years. Except in FY
2077/78, it is greater than 1 in all four fiscal years. The cash realization ratio in FY
2077/78 is 0.7478 only.
 26

❖ The cash realization ratio was the highest in FY 2076/77, which was 4.1848. It is 3.1166
in the FY 2078/79, which is quite good.

The closing balance of cash and cash equivalents have remained positive in all the five years,
and has reached the maximum amount in the last fiscal year. It reflects a good financial health
and an appreciable cash management of EBL.
 27

CHAPTER III
SUMMARY AND CONCLUSION

3.1 Summary

The research has been undertaken to analyse the cash flows of EBL for the last five years. The
Cash Flow Statements of the company for the FY 2074/75, 2075/76, 2076/77, 2077/78, and FY
2078/79 have been considered for the cash flow analysis of the bank. The report has been
divided into three main chapters viz. Introduction, Results and Analysis, and Summary and
Conclusions. This study is mainly based on secondary data obtained from the annual reports and
other publication of the bank. The data have been analysed by using various financial and
statistical tools.

In the first chapter, a brief introduction of cash flow analysis, profile of the bank, statement of
problem, objectives of the study, rationale of the study, literature review, research methodology,
and the limitations of the study have been included. The second chapter consists of the
presentation, analysis of results and findings. This research contributes to the existing literature
by providing an overview of the current situation in EBL regarding the preparation and analysis
of cash flow statement.

In the third chapter, the summary, conclusions and recommendations have been presented, and
necessary suggestions are given to the concerned authorities for the betterment of cash flow in
comparison to the existing condition.

3.2 Conclusion
The research has been centred to meet the objectives of the study and solve the problem. The
analysis has been done by preparing comparing cash flow statements and by computing the cash
realization ratios for the last five years. Following conclusions have been made from the study:

❖ EBL has a very effective cash management policy.

❖ EBL has been able to generate a surplus from the operating cash receipts after making
payments for operating expenses in each of the last five years. This indicates that the
bank has been fabulous in its business operations from the point of view of cash flow.
 28

❖ The negative cash flow from investing activities represents that the bank is expanding its
fixed assets and investment each year, which indicated a good investment policy of the
bank at the prima facie. As the company is expanding its investment, it seems that the
company is executing its plans for maintaining its going concern and ensuring its long-
term growth.
❖ During the FY 2078/79, the Cash flow from operating activities amounts to Rs.
7,727,297,216, and the Cash flow from investing activities amounts to Rs.
-2,943,232,978 only. This shows that the surplus of cash from the operating activities is
enough to cover all the cash outflows made for the purchase of fixed assets and
investments.
❖ EBL has been able to provide the returns to the investors from the operating cash surplus.
❖ The bank's cash flow from financing activities is positive in the FY 2078/79 due to the
issue of debt securities amounting Rs. 856,783,000. It gives an indication that the
company has a good investment opportunity due to which the fund has been raised.
❖ The issue of the debt securities had a good impression in the market due to which the
public subscribed the securities. This shows that the bank has established a good
credibility among the public.
❖ Except in FY 2077/78, the cash realization ratio of the bank is greater than one in all four
fiscal years. This indicates a good relation between the cash flow from operation and the
net income i.e., the company is doing well in realizing its net income earned during the
year in terms of cash and cash equivalents.
❖ The company has a good balance of cash and cash equivalents at the end of FY 2078/79,
which can be utilized in business operations or expanding the investments in the current
year

Last but not the least, this study carries a lot of limitations as described in the first chapter of this
report. Thus, the study may not be generalized for all other cases. Moreover, a more
comprehensive study needs to be carried from the concerned authorities and further researchers
to reach a more authentic conclusion depicting the cash flow analysis of the bank.
 29

BIBLIOGRAPHY

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Bowen R. M., Burgstahler D., & Daley, L. A. (1986). Evidence on the relationships between
earnings and various measures of cash flows. The Accounting Review, 61, 713-725.

Carslaw, C.A., & Mills, J.R. (1991). Developing Ratios for Effective Cash Flow Statement
Analysis. Journal of Accountancy, 172(5), 63-0.

Dangol, R.M. (2062 B.S.). Accounting for Financial Analysis and Planning. Kathmandu: Taleju
Prakashan.

Joshi, P.R. (2073 B.S.). Business Research Methods. Kathmandu: Samjhana Publication Pvt. Ltd.

Kieso, Weygandt, and Warfield (2004). Intermediate Accounting. New York: Wiley.

Larson, K.D., Wild, J.J., & Chiappetta, B. (2006). Fundamental Accounting Principles. New
York: McGraw-Hill.
Mills, J.R., & Yamamura, J.H. (1998). The Power of Cash Flow Ratios. Journal of Accountancy,
184(4), 53-60.

Schmidgall, R.S., Geller, A.N. & Ilvento, C. (1993). Financial Analysis Using the Statement of
Cash Flows. Cornell Hospitality Quarterly, 34(1).

Websites:

Everest Bank Limited. (2022, March 01). Retrieved from Everest Bank Limited:
https://everestbankltd.com

Bank and Financial Institutions Act, 2073. (n.d.). Retrieved from Nepal Rastra Bank:
http://www.nrb.org.np