Você está na página 1de 15

Date:-29 June, 2018

The Head
Manjushree Finance Limited
New Baneshwor, Kathmandu

Subject:-for the post of Assistant

Dear sir/madam
With reference to your advertisement published in Himalayan Times on 27 June, 2018. I
would like to apply for the post of Assistant in Birgunj Branch. I am eligible for all requirements
that you have mentioned in vacancy.
I am young and energetic boy of 25 year old. I am confident that my experience,
qualifications and knowledge combined will make an asset to the continued success of your
I am passionate, energetic and self motivated about banking and I have done Internship at
Citizens Bank Int’l Ltd, Birgunj Branch for 3 months and throughout this period I have worked
in CSD & Credit department.
Talking about my academic qualification, I have completed SLC from Rautahat, 10+2
and BBS from Birgunj Public College, Birgunj (waiting for BBS result) and other details are
mentioned in Resume which is attached with this application.
I would be pleased to meet for an in-depth interview so that we can discuss my past
achievements and future career prospectus in detail.
Thanks for considering my application.

Yours sincerely
Mukesh Kumar sah
Panitanki, Birgunj
9845499723Tuesday, May 16, 2017
1.1 General Background
Nepal is one of the least developed countries in the world with a per capita income of less than
$220 per annum. Rapid economic development is important for all countries of the world and it
is more important for the country like Nepal
The Nepalese financial system is dominated by the banking system, where commercial banks are
the largest and important constitution of nation. Keeping in mind the objectives of economic
liberalization policy, which paved the way for the establishment of qualitative banking services
by allowing even the foreign banks to operate in Nepalese money market. As a result fifteen
commercial banks including nine joint venture banks came into operation up to now. Such banks
are providing different services and facilities i.e. collect deposits from public, grant loan to the
investor who want to invest in business, industry and other sector, overdraft, letter of credit,
discounting bills, promissory notes, selling of other shares, agency function and storage of
valuable commodity, etc. apart from this, joint venture banks are providing modern banking
facilities by introducing higher technologies and efficient methods in banking business that has
invited a new era of banking in Nepal.
1.2 Focus of the study
Financial management is essential to utilize and manage scarce financial resource efficiently.
Nowadays different tools and techniques are applied to evaluate the performance of business
organization and ratio analysis is one of them. Evaluation of performance is an important
activity, which helps to sustain the organization and its improvement .The financial performance
of Nepal SBI Bank Ltd. is evaluated in this study. For such evaluation information are basically
derived from the published financial statement. The user of information from financial statement
analysis is decision makers who are concerned with evaluating the economic situation of the firm
and predicting its future course of action. So, performance analysis has a crucial in making the
best uses of financial resources and suggests remedial measures to improve the performance.
1.3 Need and Importance of the Study
Every business firm performs economic activities. These activities affect on the economic
condition of state and financial condition of the firm and this is to be kept under consideration to
form economic policy of the state. A sound financial performance is important for the growth of
business enterprises and financial institution. It is necessary that financial management of an
institution must be appropriate to yield a fair rate of return on capital employed in them. Any
mistake made in financial management adversely affects the financial condition of an institution
in this regard; it is required to measure the financial performance of the commercial banks from
time to time.
Apart from this, the institution and firms can allow the suggestion of this study to make their
policy and strategy more practical and scientific. This study also helps the shareholders or
investors management of the bank, financial agencies, etc. By providing information about the
financial condition of the bank.
1.4 Objective of the study
The main objective of this study is to show the financial position of SBI bank ltd. This study
helps to know exactly the financial strength and weaknesses of the bank. Some of objective of
the study are the following:
To examine the overall performance of the bank in terms of ratio analysis.
To examine the success /failure of the bank in terms of investments and deposits.
To analysis the liquidity position of the bank.
To provide suggestions for the improvement of future performance of bank.
1.5 Limitation of the study
The fieldwork study has some limitations which are mentioned below.
This study is mainly based on the financial report i.e. secondary data.
This study covers only the period of three years.
This study is not free from monetary inflation.
This study does not consider the factors that affect the company's financial positions such as
technical condition, social condition, political condition personal, advisement etc.
Only limited financial tools and technique are used for analysis, so this study may not be
sufficient for dept analysis.
Chapter II
Review of the Literature
This chapter highlights about the relevant literature to make the base of knowledge for the study.
The scholars in respect of financial performance have expressed different visions.
2.1 Concept of Bank
Banks are among most important financial institution in the economy as essential in thousand of
local towns and cities. In this context, there is much confusion about exactly what bank is.
Certainly bank must be identified by the functions they perform in the economy. Different views
were shared against bank concepts. In general, bank means financial institution that accepts
deposits in different accounts and loan of different types.
The term bank was originated from Italian word "Banko" which means bench. The term bank
was first used in Italy. In reality, the history of modern banking had started from "Bank of
England" established in 1694. Different economists have given different definition of the bank.
According to Sayers," A bank is an institution whose debts (bank deposits) are widely accepted
the in settlement of their peoples, debts to each other.
According to Chandler," A bank is an establishment which makes individuals such advances of
money as may be required and safely made to which individual money when not required by
them for use." [2]
In the opinion of Horace," A bank is manufacture of credit and machine for facilitating
exchange." [3]
In the view of crowther," the bankers business is to take the debts of other people to offer his
own in exchange and thereby create money." [4]
Therefore summarizing the above, banks are those financial institutions that offer the widest
range of financial services, especially credit, savings and payments services and perform widest
range of financial functions of any business firm in the economy.
2.2 Types of Banks
Today is the age of specialization. The modern economy demands different types of financial
services. A single institution cannot fulfill all the services demanded by the customers.
Therefore, different types of banks also emerged in the banking industry specializing in different
functional areas. These different types of banks are:
Commercial bank
Central bank
Development bank
Agricultural bank
Saving banks
Rural development banks, etc.
2.3 Concept of Commercial Ban
Commercial Bank is an institution, which deals with money and credit .IT accepts deposits from
public, makes the funds available those who need them and helps in remittance of money from
one place to another. In fact, a modern commercial bank performs such a variety of functions
that it is difficult to give a precise and general definition of it. According to American Institute of
Banking," Commercial Bank is the corporation which accepts demand deposits subject to check
ad makes short-term loans to business enterprises regardless of the scope of its other sources."
Commercial Bank Act,2031 B.S. of Nepal has defined commercial bank as," An organization
which exchanges money, accepts deposits, grant loans and performs commercial banking
functions and which is not a bank meant for co-operative, agriculture, industries or for such
specific purpose." [6]
Banks are dealer in credit; they specialize in the exchange of money for credit and credit for
money. They receive deposits; current, fixed, savings, call and short, that can be withdrawn by
cheque. They borrow in order to lend. They trade in loan able capital; they borrow it from the
depositors and lend it to borrowers. They thus, coordinate the demand for and the supply of
floating funds; they form an integral of part of credit mechanism.
2.3.1 Functions of commercial bank
The American institute of banking has laid down four functions of commercial banks as
receiving and handling deposit (deposit function)' handling of payments of money (payment
function), making loans and investment (loan function) and creation of money by extending
credit (money function).
According to R.S. Sayers, "ordinary banking business consists of changing cash from bank
deposits and bank deposits for cash; transferring bank deposits from one person or corporation to
another, giving bank deposits in exchange for bills of exchange , government bonds, the secured
promises of business to repay and so forth."
Following are the basic functions performed by a modern commercial bank:
1.Acceptance of deposits:
The bank has deposits from the public in the form of demand deposits, saving deposits and fixed
or term deposits. Demand deposits are on current account and are
withdraw-able on the demand by cheque. Usually no interest is allowed on such accounts; some
banks even charge commission for rendering such service of safekeeping of the depositor's funds
and keeping his accounts. Saving deposits are designed to mobilize the scattered small saving of
the community. They are subject to certain restrictions regarding the number of withdrawals or
the total amount withdrawn per period. Fixed or term deposit are on deposit account, i.e. for a
definite period whereby the customer gives notice gives notice of indented withdrawal and is
allowed interest according to the length of notice given. They are repayable only on the period
for which the deposit has been made and are allowed the highest rate of interest.
2. The granting of loans to business borrowers and to others:
Having accumulated deposits, the commercial bank put them to use through loans to persons and
business having immediate use for them. The result of the polling of funds by the commercial
banks is a more utilization of funds. It does so, in order to pay interest on deposits and meet its
own establishment charges and pay dividends to its shareholders.
All those come from the profit it earns by charging more on its loans and advances than it has to
pay on deposits, the banker's refusal to finance on ill conceived venture, preventing is them from
engaging in an activity that will results in loss to them. Furthermore, the careful apportionment
of loan funds to those businesses with the best apparent chances of success makes possible the
development of the nation's resources to the greatest possible advantage.
3. Bills Discounting
Discounting a bill or other commercial paper means its purchase at its present worth, calculated
at the current market rate of interest. Bills are a handy asset for a bank to holds as they can be
easily resold or automatically turn into cash on maturity. They are so easily re discounted or sold
that they offer an ideal means of utilizing a banker' surplus of liquid funds. On discounting, the
seller of the bill may have its price paid in cash or his deposit may be increased by the amount of
the against which he can draw cheque.
4. Purchase and sale of foreign exchange:
The bank also carries on the business of buying and selling foreign currencies.
5. Agency Functions of the Bank:
The various agency services rendered by the bank are as follows.
Transfer of funds:
The bank helps its customers in transferring funds from one place to another through an
instrument known as the 'bank draft'.
Collecting customer's funds:
The bank collects the funds of its customers from other banks and credits them to their accounts.
Purchase and sale of shares and securities for the customers:
The bank buys and sells stocks and shares of private company as well as government securities
on behalf of its customers.
Collecting dividends on the shares of customers :
The bank collects dividends interest on the shares and debentures of the customers and credits
them to their account.
2.4 An introduction of Nepal SBI Bank Ltd.
Nepal SBI Bank ltd. Is the fifth joint venture bank in Nepal. It was established on 24 th jestha
2050 B.S. under Nepal commercial Bank Act2031. Nepal SBI Bank is established with the
assistance of state bank of India. It was established with the authorized capital of
RS.24'00,00,000 (24,00,000 shares @RS.100) issued capital of RS.120,0,0,0,000 (1200000
shares@RS100-) and paid up capital of R s .11,99,46,000(11,99,460 shares @Rs.100)
2.5 Financial Statement
The basis for financial planning, analysis and decision making is the financial information.
Financial information is needed to predict, compare and evaluate the firm's earning ability. It is
also required to aid in economic decision making – investment and financing decision making.
The financial information of an enterprises is contained in the financial statement or accounting
Financial information contains summarized information of the firm's financial affairs, organized
systematically. They are the means to present the firms financial situation to the users.
Preparation of the financial statements the responsibility of the top management. As investors
and financial analyst to examine the firm's performance in order to make investment decision use
these statements, they should be prepared carefully and contained as much information as
The basis for financial planning, analysis and decision making is the financial information.
Financial information is needed to predict, compare and evaluate the firm's earning ability. It is
also required to aid in economic decision making – investment and financing decision making.
The financial information of an enterprises is contained in the financial statement or accounting
Financial information contains summarized information of the firm's financial affairs, organized
systematically. They are the means to present the firms financial situation to the users.
Preparation of the financial statements the responsibility of the top management. As investors
and financial analyst to examine the firm's performance in order to make investment decision use
these statements, they should be prepared carefully and contained as much information as
Two basic financial statements prepared for the purpose of external reporting to owners,
investors and creditors are; 1. Balance sheet or statement of financial position and 2.Profit and
loss account or income statement. These statements are contained in a company's annual report.
For internal management purpose, i.e. planning and controlling, much more information than that
contained in the published financial statements are needed. Therefore, the financial accounting
information is prepared in different statements and reports in such a way as to serve the internal
needs of the management
2.6 Financial Analyses
Profit is essential for an enterprise for its survival and growth and to maintain capital adequacy
through profit retention. Profit is one of indication of sound business management i.e. cost
control, credit risk management and general efficiency of operation. Profit is important for any
business concern including joint venture banks but the sole objective of such institution is not
Financial institution must maintain adequate liquidity to meet a wide range of contingencies. If
financial institution fails to maintain adequate liquidity, it faces many difficulties. Excess
liquidity is the loss income. A bank must maintain adequate cash and balance to meet day to day
operation as well as for remote contingencies. It measures the extent to which it can oblige its
short-term obligation. Investors are more concerned with a firm's long term financial strength.
Which evaluating the financial performance, it is more concerned with resource mobilization.
Failure to collect enough deposit exhibit inefficiency
Of the bank.
A bank communicates financial information to the public through financial statements and
reports. The financial statement contains summarized information of the bank's financial affairs.
The two basic financial statements of the bank are balance sheet and profit and loss accounts.
Investors and financial analyst examine the banks performance to make investment decision by
analyzing the financial statement of the bank. Thus financial analysis is the process of analyzing
the financial statement of the bank. Thus, financial analysis is the process of identifying the
financial strength and weakness judging profitability and overall efficiency of a business.
Analysis of financial statement, therefore, refers to such treatment of the information contained
in the income statement and balance sheet so as to provide full diagnosis of the profitability and
financial soundness of the business.
Analysis of financial statement is the purposeful and systematic presentation of information in
the financial statement by developing relationship between one fact with other in order to
measure the profitability, solvency, liquidity, operational efficiency the growth potential of the
business. Thus ratio is one of the widely used financial tools that have been used to analyses the
balance sheet and income statement. The income statement or profit and loss account reflects the
performance of the bank over a period of time. In other words it shows the result of business
activities or operating during a certain period usually a year. It represents the summary of income
obtained and the cost incurred by the bank during a year. The analysis of financial statements is
an important aid to financial analysis.
2.6.1 Users of financial analysis
Financial analysis can be undertaken by management of the firm, or by parties out side the firm,
viz. owners, creditors, investors and others the natures of analysis will differ depending on the
purpose of analyst. The main users of financial analysis are;
Ø Trade creditors are interested in firm's ability to meet their claims over every short period of
time. Their analysis will, therefore, confined to the evaluation of the firm's liquidity position.
Ø Suppliers of long term, debt are concerned with the firm's long term solvency and survival.
They analyses the firm's profitability overtime, its ability to generate cash to be able to pay
interest and repay principal and the relationship between various sources of funds. Long term
creditors do analyses the historical financial statement, but they place more emphasis on the
firm's projected financial statements to make analysis about its future solvency and profitability.
Ø Investors, who have invested their money in the firm's shares, are most concerned about the
firm's earnings. As such, they concentrate on the analysis of the firm's present and future
profitability. They are also interested in the firm's financial structure to the extent it influences
the firm's earnings ability and risk.
Ø Management of the firm would be interested in every aspect of the financial analysis. It is
there overall responsibility to see that the resources of the firm are used most effectively and
efficiently, and that the firm's financial condition is sound.
2.7 Ratio Analysis;
Of the various method of financial statement analysis, ratio analysis is the most widely used
method. Ratio analysis is a major device of measuring the financial activities of enterprises. A
ratio analysis is a significant way by which financial stability of a business concern can be
judged. It also helps to draw future plans and forecasting. The processes of determine and
interpreting numerical relationship are based on financial statement. The relationship between
two accounting figures, expressed mathematically is known as financial ratio. This relationship
can be expressed as percentage or as quotient. In other words, ratio may be expressed in
percentage, time or as proportion. Thus, it is very valuable tool of management control. Ratio
analysis is widely used tool for financial analysis.
"Ratio analysis is defined as the systematic use of ratio to interpreter the financial statements so
that the strengths and weaknesses of affirm as well as its historical performance and current
financial condition can be determined. The term ratio refers to the numerical or quantities
relationship between two variables".
A ratio is defined as, "The indicated quotient of two mathematical expressions" and as "the
relationship between two or more things". [8]
In financial, analysis, the relationship between two accounting figures, expressed
mathematically, is known as financial ratio. Ratio helps to summarize the large quantities of
financial data and to make qualitative judgment about the bank's financial performance.
From the view point of this study, ratios have been classified in to four groups;
Liquidity ratio
Leverage ratio
Activity ratio
Profitability ratio
Liquidity Ratio
It is extremely essential for a firm to be able to meet its obligations as they become due.
Liquidity ratios measure the ability to meet its current obligation.
A firm should ensure that it does not suffer from lack of liquidity, and also that it does not have
excess liquidity. The failure of a company to meet its obligations due to lack of sufficient
liquidity, liquidity, will result in poor creditworthiness, loss of creditor' confidence, or even in
legal tangles resulting in the closure of the company. A very high degree of liquidity is also bad,
idle assets earn nothing. The firm's fund will be necessarily tied up in current assets. Therefore, it
is necessary to strike a proper balance between high liquidity and lack of liquidity.
II. Leverage ratio:
The short- term creditors are more concerned with the firm's current debt paying ability. On the
other hand, long-term creditors are more concerned with the firm's long-term financial strength.
In fact, a firm should have a strong short- as well as long-term financial position. To judge the
long-term financial position of the firm, financial leverage, or capital structure, ratios are
calculated. These ratios indicate mix of funds provided by owners and lenders. As a general rule,
there should be an appropriate mix of debt and owners' in financing the firm's assets.
III. Profitability ratio:
A company should earn to profits and grow over a long period of time. Profit are essential, but it
would be wrong to assume that every action initiated by management of a company should be
aimed at maximizing profits, irrespective of social consequences. Profit is difference between
revenues and expense over a period of time. Profit is the ultimate 'output' of a company, and it
will have no future if it fails to make sufficient profits. Therefore, the financial manager should
continuously evaluate the efficiency to measure the operating efficiency of the company. Besides
management of the company, creditors and owners are also interested in the profitability of the
firm. Creditors want to get interest and repayment of prepayment of principal regularly. Owners
want to get a required rate of return on their investment. This is possible only when the company
earns enough profits.
2.7.1 Utility of Ratio Analysis
The ratio is analysis is most powerful tool of financial analysis. Many diverse groups of people
are interested in analyzing the financial information to indicate the operating and financial
efficiency, and the firm. These people use ratios to determine those financial characteristics of
the firm in which they are interested.
Performance analysis: A short-term creditor will be interested in the current financial position of
the firm, while a long-term creditor will pay more attention to the solvency of the firm. The long-
term creditor will also be interested in the profitability of the firm. The equity shareholders are
generally concerned with their return and may bother about the firm's financial condition only
when their earning is depressed. If a short- term creditor analyses only the current position and
finds it satisfactory, he/she cannot be certain about the safety of his her claim if the firm's long
term financials position or profitability is unfavorable. The satisfactory current position would
become adverse in future if the current recourses are consumed by the unfavorable long term
financial condition. Similarly, the good long term is no guarantee for the long term creditor's
claim if the current position or the profitability of the firm is 'bad'.
Credit analysis ; in credit analysis, the analyst will usually select a few important ratios. He she
may use the current ratio or quick – assets ratio to judge the firms liquidity or debt paying ability;
debt –equity ratio is to determine the stake of owners in the business and the firm's capacity to
determine the firm's earning prospects. If the profitability is high, the current ratio is high, the
current ratio is low and the debt equity ratio is high, the extinction of credit may be approved to
the firm, because a profitable company will grow and will have improvement in its current ratio
and other ratio.
Security analysis: the ratio analysis is also useful in security analysis. The major focus in security
analysis is on the long term profitability. Profitability is depend on a number of factors and,
therefore, the security analyst also analysis other ratios. He would certainly be concerned with
the efficiency with which the firm utilizes its assets and the financial risk to which the firm is
exposed. Therefore, besides analyzing profitability ratio meticulously, he will also analysis
activity ratio and leverage ratios . The detailed analysis of the earning power is important for
security analysis.
Competitive analysis: The of a firm by themselves do not revival anything. For a meaningful
interpretation, the ratio of a firm should be compared with the ratio of similar firm and industry.
This comparison will reveal whether the firm is significantly out of line with its competitors. If it
is significantly out of line, the firm should undertake a detailed analysis spot out troubled areas.
2.7.1 Limitations of ratio Analysis
The ratio analysis is a widely used techniques to evaluate the financial position and performance
of business. But there are certain problems in using ratios. The analyst should be aware of these
problems. The following are some of the limitations of the ratio analysis:
· It is difficult to decide on the proper basis of comparison.
· The comparison is rendered
difficult because of differences in
situation of two companies or of one company over years.
· The price level changes make the interpretation of ratio invalid.
· The difference in definition of item in
balance sheet and the profit and loss statement make the interpretation of ratios more difficult.
· The ratio calculated at a point if time are
less informative and
defectives they suffer from short term changes.
· The ratio are generally calculated from past financial statements and thus are no indicator of
Research Methodology
Research Methodology may be defined as a systematic that i.e. adopted by the researcher in
studying a problem with certain objective in view. In other words, research methodology
describes the methods and process applied in the entire aspect of the study.
The basic objective of the study is to evaluate the overall performance of Nepal SBI bank Ltd.
and to suggest for its improvement of its performance. Data of the fiscal year 061/062 to 063/064
has been presented and analyzed through appropriate financial ratios.
3.2. Nature and sources of Data:
The study conducted on the basis of secondary data. It is collected from Nepal SBI Bank Ltd.
The published financial data are mostly used in the study to analyze the overall performance of
Nepal SBI Bank Ltd. from 061/062 to 063/064.
3.3.Methods of data collection:
Collection of data means the methods that are to be used for getting the necessary information
from the units under investigation. Collection of relevant data is essential for correct and
important decisions.
Generally, data can be obtained from primary and secondary sources. The data, which are
obtained through a study under proper investigation, are known as primary data. The primary
data are original in character and obtained by personal interviews, indirect oral interviews and
information from correspondent and so on. The data, which are obtained from some published or
unpublished source, are known as secondary data.
In course of data collection, the narrator collected primary data from the manager, employees of
the bank, the process employed to collect such was questionnaires to the employee. The
secondary data were collected from different booklist, fusibilities of bank.
3.4. Procedure of the Fieldwork
Selection of the topic in which the report is to be prepared.
Selection of the firm in which analysis is to be done.
Collection of data like annual reports income statements and various books of different writers.
3.5. Tools and Techniques of Analysis
Some tools and techniques have been followed to analyze and evaluate the information of
financial statement, viz. Balance Sheet and P/L A/c.
A. Liquidity ratio
i. Current ratio
ii. Quick ratio
B. Leverage ratio
i. Debt ratio
ii. Debt equity ratio
iii. Interest coverage ratio
C. Profitability ratio
· Return on assets
· Return on eqity
· Earnings per share
· Price earnings ratio
· Earning yield
· Dividend yield
· Dividend per share
· Dividend payout ratio
Presentation and Analysis of Data
In this chapter, the annual report of respective bank has been collected for analyzing the financial
tools i.e. ratio analysis.
4.1.1. Liquidity ratio
The liquidity measures the ability of the firm to meet its current obligations. Liquidity by
establishing a relationship between cash and other current assets to current obligation provide a
quick measure of liquidity. This ratio has been analyzed with the help of current ratio and super
quick ratio.
a. Current ratio:
This is the ratio of current assets to current liabilities. "This is used to test the solvency as well as
to determine short term financial strength of the business organization. This ratio is the indicator
of the relationship between total of current assets and total of current liabilities."
Table -1
Year Current Assets Current Liabilities Ratio
2062 9668416579 8804379328 1.098:1
2063 12716170029 11241036746 1.131:1
2064 13592593847 11722544489 1.1595:1
Source: Appendix -1
The standard for this ratio is 2:1. The above table shows that the current ratios of the bank are
below standard in each f/y. It shows that the weakness of the bank in paying the current
b. Quick ratio:
It is also known as liquid or acid test ratio. It established a relationship between quick asset &
current liabilities.
Table -2
Year Quick Assets Current Liabilities Ratio
2062 9668416579 8804379328 1.098:1
2063 12716170029 11241036746 1.131:1
2064 13592593847 11722544489 1.16:7
Source: Appendix -1
The standard deviation for this ratio is 1:1. The above table shows that all the banks quick ratio
higher than 1 during the fiscal year 061/62 to 063/64, so it is considered satisfactory.
4.1.2.Leverage ratio
a.Debt ratio :
It is the ratio of total debt to total asset. It measures the percentage of the firms asset financed by
Table -3
Year Total Debt Total Assets Ratio
2062 9274008191 9963021251 0.93 times
2063 12053465396 13035839124 0.848 times
2064 12737909708 13901200559 0.916 times
Source: Appendix -1
Highest ratio is not preferable for a company. The table shows that ratio increased in f/y 2062.
b. Debt equity ratio :
It measures the relationship between debt capital and equity capital. Debt equity ratio can be
expressed in different ways; one of the most popular method is related to debt to the shareholder
Table -4
Year Total Debt Shareholder fund Ratio
2062 9274008191 689013060 13.46 times
2063 12053465396 982373728 11.25 times
2064 12737909708 1163290941 10.95 times
Source: Appendix -1
The book can decrease Rs.13.46 debt by decreasing Rs.1 equity and so on.
c. Interest coverage ratio :
It measures the ability of the firm to meet its annual interest payments. It is calculated by
dividing the EBIT by the interest.
Table -5
Year EBIT Interest Ratio
2062 84688216 258430003 0.32 times
2063 168488987 334770096 0.50 times
2064 300790495 412261744 0.73 times
Source: Appendix -1
The interest coverage ratio shows increasing ratio from f/y 062 to 064. Highest ratio shows that
the firm can pay the interest easily. So the increasing ratio in each f/y is satisfactory.
4.1.3.Profitability ratio
a. Return on Assets
It shows the overall efficiency of the bank in generating profit with its available assets.
Table -6
Year Net Profit Total Assets Ratio
2062 57386634 9963021251 0.576%
2063 117001973 13035839124 0.898%
2064 254908844 13901200559 0.184%
Source: Appendix -1
Higher ratio indicated the better utilization of its assets. The table focuses the increasing ROA. It
is considered good to have increasing ROA.
b. Return on Equity :
It is calculated by dividing NPAT by shareholder equity.
Table -7
Year Net Profit Shareholders equity Ratio
2062 57386634 689013060 8.33%
2063 117001973 982373728 11.91%
2064 254908844 1163290941 32.913%
Source: Appendix -1
Here the table show increasing ROSE in each f/y. Higher ROSE is desirable for the company,
which indicate that the company is able to paid dividend to its shareholders.
c. Earning per share :
It measures the profit available to the equity holder on per share basis.
Table -8
Year Net Profit No. of equity Ratio
2062 57386634 4318656 13.29
2063 117001973 642361 18.27
2064 254908844 6477984 39.35
Source: Appendix -1& 2
The table shows that EPS has increased in each f/y which is positive signal for the company.
d. Price Earnings Ratio:
The ratio of the market price per share to earnings per share. It shows Rs. amounts the investors
will pay for Rs.1 of current earning.
Table -9
Year MPS (Rs.) EPS (Rs.) Ratio
2062 335 13.29 25.20 times
2063 612 18.27 33.5 times
2064 1176 39.35 29.89 times
Source: Appendix -1& 2
This table indicates the increasing trend of P/E ratio over the year 2062 to 2063 and decreasing
trend from the year 2063 to 2064.
e. Earning Yield Ratio:
It shows the relation between the market value per share and earning per share. It is closely
related to the earning per share. EPS is expressed in terms of market value per share is known as
earning yield ratio.
Table -10
Year EPS (Rs.) MPS (Rs.) Ratio
2062 13.29 335 3.96%
2063 18.27 612 2.985%
2064 39.35 1176 3.35%
Source: Appendix -1& 2
The earning yield increases from 2063 to 2064, which is positive for the company that is why it
is satisfactory.
f. Dividend yield :
It defines the relationship between dividend per share and market value per share it is very useful
for the investors.
Table -11
Year DPS MPS Yield
2062 - 335 -
2063 5 612 0.817%
2064 12.59 1176 1.07%
Source: Appendix -1
The dividend yield in 2062 has no yield but in 2063 and 2064 has increasing trend of dividend
g. Dividend per Share :
The whole amount of earning may or may not be distributed to shareholders by a company. How
much per share the dividend is distributed to common shareholder can be known from this ratio.
The dividend distributed among the common shareholder on a per share basis can be determined
by this ratio.
Table -12
Year Dividend No. of share DPS
2062 - 4318656 -
2063 32011805 642361 5
2064 81554021 6477984 47.59
Source: Appendix -1
The dividend per share has an increasing trend from the year 2063 to 2064.
h. Dividend payout ratio :
The purpose for calculating this ratio is to know the portion of dividend distributed out of total
earning. This ratio shows the relation between the returns belonging to equity shareholders and
the dividend paid to them.
Table -13
Year DPS EPS Ratio
2062 - 13.29 -
2063 5 18.27 27.36%
2064 12.59 39.35 32%
Source: Appendix -1
The dividend payout ratio from the year 2063 to 2064 has an increasing trend.
Summary, Conclusion & Recommendation
5.1. Summary
In this chapter, the evaluation of SBI Bank is done with the help of answers derived from
available data. In fact this chapter is based on some conclusion and suggestion attached with the
Table-14: Comparative Ratios
Ratio 061/62 062/63 063/64 Mean
1. Liquidity Ratio
a) Current Ratio 1.098:2 1.1316:1 1.16:1 1.13:1
b) Quick Ratio 1.096:1 1.131:1 1.16:1 1.31:1
2. Leverage Ratio
a) Debt equity ratio 13.46 times 11.25 times 10.95 times 11.87 times
b) Debt ratio (time) 0.93 times 0.848 times 0.916 times 0.898times
c) Interest coverage ratio 0.32 times 0.50 times 0.73 times 0.512 times
3. Profitability Ratio
a) ROSA (%) 0.576% 0.898% 0.184% 0.553%
b) ROSE (%) 8.33% 11.91% 21.913% 14.05%
c) EPS (Rs.) Rs.13.29 Rs.18.27 Rs.39.35 Rs.23.64
d) P/E Ratio (times) 25.20 33.5 29.09 29.263
e) Earning Yield (%) 3.96% 2.985% 3.35% 3.432%
f) Dividend Yield (%) - 0.817% 1.07% 0.629%
g) DPS (Rs.) - Rs.5 Rs.12.59 Rs.5.86
h) DPR (%) - 27.36% 32% 18.456%
Source: Appendix -1 & 2
The average current ratio is 1.13:1, which is less than standard, so their current ratio is not
satisfactory. Similarly the average quick ratio is also less than standard. So quick ratio is also not
satisfactory. The average debt equity ratio of SBI Bank is 11.89 times and debt ratio is 0.898
times. Similarly the average interest coverage ratio is 0.512 times. The average ROA and ROSE
of the SBI Bank is 0.555% and 14.051% respectively. The average EPS is Rs/23.64. Similarly
P/E ratio is 29.264 times and earning yield is 3.432%. The average dividend yield, DPS, DPR are
Rs.5.86 and 18.456% and 3.432% respectively.
5.2. Conclusion
The SBI Bank was established on 24 th Jestha, 2050 B.S. and is now the prominent commercial
bank in Nepal. It has been providing the services to businessman, factory and general people,
also by accepting deposits. The important role played by the bank in our country is very
significant. The bank is providing high quality of services.
Most of the ratio calculated above seems to be much volatile. Three years analysis of the
financial statement shows the current ratio increase in last two fiscal years and remains constant.
It shows the negative sign for the bank performance in the future. Similar is in quick ratio.
Leverage ratio measures the ability of the bank to pay the long-term liabilities. So for this debt
ratio, debt equity ratio and interest coverage ratio is calculated. Debt ratio increases in third f/y
after being decreased in 2 nd f/y debt equity ratio decreases in second f/y and third f/y also. This
shows that the bank has taken lower financial risk in second f/y as well as in third year.
Profitability ratio measures the overall efficiency of the firm. ROA increases in each f/y. ROSE
also increases in each f/y similarly EPS also increases. This shows the satisfactory result of bank.
The P/E ratio decreases in second f/y as compared to first f/y but decreases in third f/y as
compared in second f/y. Earning yield increases in third year but decreases in 2 nd year. This is
positive result of the bank. The DPS in 2 nd f/y is Rs.5 and Rs.12.59 in 3 rd year. The DPR in
third f/y is increased from first two years.
5.3. Recommendation
Since the bank has current ratio below standard it should pay attention on the utilization of
current liabilities. Since the bank has low ROA it should mobilize its funds in more productive
sectors to increase profit and should take care in utilization of its assets.
They should maintain its present management sound and extend more facility to its customers to
increase its transaction. They should try to keep proper liquidity level in all year to increase
current assets.
[1] 1sayers, R.S. MODERN Banking, Oxford Clearendo press, India, 1967
[2] Chandler, L.V. The economics of money and banking 5 th edition, University of Chicago
press 1985
[3] Horace White in money and Banking, Pg. 109
[4] Crowther Geoffery, An Outline of Money, revised Edition, 1989.
[5] American Institute of Bankings,"Principle of Banking Operation" USA, 1972, p. 345
[6] Commercial Bank Act, 2021 B.S.
[7] M. Y. khan and P.K. jain: 1988
[8] Webster: 1975 p. 958