AN ANALYSIS OF FINANCIAL PERFORMANCE OF

BHARGAV BIKASH BANK LIMITED

A Project Work Report

By

Urusha Kushatha
TU Registration No: 7-2-0927-0284-2015
Symbol No.: 9270099
Group: Account
Shwoyambhu International College

Submitted to

The Faculty of Management

Tribhuvan University
Kathmandu

In Partial Fulfillment of Requirement for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Bhaktapur, Nepal
May, 2019
 DECLARATION

I hereby declare that the project work entitled AN ANALYSIS OF

FINANCIAL PERFORMACE OF BHARGAV BIKASH BANK LIMITED
submitted to the Faculty of Management, Tribhuwan University, Kathmandu is a
piece of work under the supervision of Mr. RAJU RAUT, faculty member,
SHWOYAMBHU INTERNATIONAL COLLEGE, Kathmandu and is submitted in
partial fulfillment of the requirements for 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.

Signature:
Name of Student: Urusha Kushatha
Date: May, 2019

ii
 SUPERVISOR’S RECOMMENDATION

The project report entitled AN ANALYSIS OF FINANCIAL

PERFORMANCE OF BHARGAV BIKASH BANK LIMITED submitted by
URUSHA KUSHATHA, SHWOYAMBHU INTENATONAL COLLEGE,
KATHMANDU, is prepared under my supervision as per the procedures and format
requirements laid by 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.

Signature:
RAJU RAUT
SHWOYAMBHU INTERNATIONAL COLLEGE
Date: 2076-2-02

iii
 ENDORSEMENT

We hereby endorse the project work report entitled AN ANALYSIS OF

FINANCIAL PERFORMANCE OF BHARGAV BIKASH BANK LIMITED
submitted by URUSHA KUSHATHA of SHWOYAMBHU INTERNATIONAL
COLLEGE, KATHMANDU, in partial fulfillment of the requirements to award
Bachelor of Business Studies (BBS) for external evaluation.

DR. HARI SHARAN CHAKHUN SUMAN PRASAD CHAUDHARY

Chairman Campus Chief
Management Research Committee Date: 2019.04.25
Date: 2019.04.25

iv
 ACKNOWLEDGEMENT

This study is mainly concern with the analysis of AN ANALYSIS OF

FINANCIAL PERFORMANCE OF BHARGAV BIKASH BANK. It has been
prepared as per the course of Bachelor of Business Studies, fourth year. The report
could not be initiated without the assistance of some gracious people whom I must
thank.
I am greatly thankful to Faculty Member Mr. Raju Raut who gave me fruitful
suggestion and guidance to frame out this report and Tribhuvan University for their
generous encouragement and undertaking the supervision of my entire research work.
I would like to thank Campus Chief Suman Prasad Chaudhary for making me
available needed resource materials. I also want to remember the Central Library, T.U.,
who helped me a lot by providing necessary books, thesis and information as well.
Similarly, I express my thanks to staff of the thesis departments for their kind co-
operations, help and support.
I am thankful to my friends who directly or indirectly supported me during my
research, especially Sadikshya Bhattari and Babita Mahat for being with me all the
time till the completion of this research. At last, I would like to express my sincere
gratitude to my parents for always encouraging and inspiring me in whatever way it is
possible.

Signature:
Name of Student: Urusha Kushatha
Date: May, 2019

v
 TABLE OF CONTENTS

Title page i
Declaration ii
Supervisor's recommendation iii
Endorsement iv
Acknowledgement v
Table of content vi
List of tables vii
List of figures vii
Abbreviations viii
CHAPTER I:INTRODUCTION.............................................................................................1
1.1 Background of the Study..................................................................................................1
1.2 Profile of Organization/ Place/Events. Etc.......................................................................2
1.3 Statement of Problem.......................................................................................................5
1.4 Objectives of the Study....................................................................................................6
1.5 Rationale of the study.......................................................................................................6
1.6 Theoretical Framework....................................................................................................7
1.7 Definitions of variables....................................................................................................7
1.8 Statement of hypothesis..................................................................................................11
1.9 Limitation of the study...................................................................................................11
1.10 Literature Review.........................................................................................................11
1.11 Research gap.................................................................................................................12
1.12 Research Methodology.................................................................................................12
1.13 Chapter Plan.................................................................................................................14
1.14 Major Findings.............................................................................................................29
CHAPTER II:RESULTS AND ANALYSIS........................................................................15
2.1 Data Presentation and Analysis......................................................................................15
CHAPTER III:SUMMARY AND CONCLUSION............................................................30
3.1 Summary.........................................................................................................................30
3.2 Conclusion......................................................................................................................32

vi
BIBLIOGRAPHY..................................................................................................................33
Appendix.................................................................................................................................34

LIST OF TABLES

Table 2.1 Liquid Ratio............................................................................................................16

Table 2. 2 Current Ratio...........................................................................................................17
Table 2. 3 Debt-Total Capital Ratio.........................................................................................18
Table 2. 4 Debt-Equity Ratio...................................................................................................19
Table 2. 5 Return on Shareholder’s Equity..............................................................................20
Table 2. 6 Return on Capital Employed...................................................................................21
Table 2. 7 Earnings Per Share..................................................................................................22
Table 2. 8 Is Earnings Per Share distributed by BBBL satisfactory?......................................23
Table 2. 9 Is the bank transparent about its funds investment?...............................................24
Table 2. 10 Are the staffs of the bank friendly?.......................................................................25
Table 2. 11 How do you evaluate your relationship with bank?..............................................26
Table 2. 12 Is the interest rate on deposits adequate in current situation?...............................27
Table 2. 13 Is the money collected invested in profitable sector?...........................................28

LIST OF FIGURES
Figure 2. 1 Liquid Ratio ..........................................................................................................16
Figure 2. 2 Current Ratio.........................................................................................................17
Figure 2. 3 Debt to Total Captal Ratio.....................................................................................18
Figure 2. 4 Debt to Equity Ratio .............................................................................................19
Figure 2. 5 Return on Shareholder’s Equity.............................................................................20
Figure 2. 6 Return on Capital Employed.................................................................................21
Figure 2. 7 Earnings Per Share.................................................................................................22
Figure 2. 8 Is Earnings Per Share distributed by BBBL satisfactory?.....................................23
Figure 2. 9 Is the bank transparent about its funds investment?..............................................24
Figure 2. 10 Are the staffs of the bank friendly?.....................................................................25
Figure 2. 11 How do you evaluate your relationship with bank?............................................26
Figure 2. 12 Is the interest rate on deposits adequate in current situation?.............................27
Figure 2. 13 Is the money collected invested in profitable sector?..........................................28

vii
 ABBREVIATIONS

BBS Bachelors in Business Studies

EPS Earnings per Share
FI Financial Institution
FY Fiscal Year
L Liquidity
T.U Tribhuvan University
% Percentage
ROE Return on Equity
F/Y Fiscal Year
i.e. That is
No. Number
NRB Nepal Rastra Bank
Rs. Rupees
BBBL Bhargav Bikash Bank Limited

viii
 1

CHAPTER I
INTRODUCTION

1.1 Background of the Study

Financial performance refers to the act of performing financial activity. The
word performance is derived from word `parfourmen’, which means `to do’, `to carry
out’, or `to render’. It refers to the accomplishment of a given task measured against
preset known standards of accuracy, completeness, cost, and speed. In simple words
performance is completion of a task with application of knowledge, skills and
abilities. Performance is used to indicate firm’s success, conditions, and compliance.
In broader sense, financial performance refers to the degree to which financial
objectives being or has been accomplished. It is the process of measuring the results
of a firm's policies and operations in monetary terms which helps to maintain the
records in systematic way.
Pandey, I.M. (1997) has defined as “The financial statement provides a
summarized view of the financial operation of the firm. Therefore, something can be
learnt about a firm and careful examination of the financial statements as invaluable
documents or performance reports. Thus, the analysis of financial statement is an
important aid to financial analysis or ratio analysis is main tool of financial statement
analysis.
Ahuja, B.N. (1998), “Financial Performance analysis is a study or relationship
among the various financial factor in business a disclosed by a single set of statement
and a study of the trend of these fact as shown in a series of statements. By
establishing a strategic relationship between the item of a balance sheet and income
statements and other operative data, the financial analysis unveils the meaning and
signification of such items.”
Metcalf, R.W (1996), “Financial Performance analysis is a process of
evaluating the relationship between components parts of a financial statement to
obtain a better understanding of a firm’s position and performance.”
 2

Financial performance in broader sense refers to the degree to which financial

objectives being or has been accomplished and is an important aspect of finance risk
management.
It is used to measure firm’s overall financial health over given period of time
and can also be used to compare similar firms across the same industry or to compare
industries or sectors in aggregation.
Financial Analysis is structural and logical way to present overall financial
performance of financial institution. It involves the use of financial statements. A
financial statement is an organized collection of data according to logical and
consistent accounting procedures. Thus, the term ‘financial statements’ generally
refers to two basic statements: the Balance Sheet and the Income Statement.
The Balance sheet shows the financial position of the firm at a given period of
time. “Balance Sheet is a summary of a firm’s financial position on a given date that
shows Total assets= Total Liabilities+ Owner’s equity.”
The income statement shows the performance of the firm over a period of time.
“Income statement is a summary of firm’s expenses and revenues over a specified
period of time, ending with net income or loss for the period.”
The analysis of financial statements is a process of evaluating the relationship
between component parts of financial statements to obtain a better understanding of
the firm’s position and performance.
The financial performance analysis identifies the financial strength and
weakness of the firm by properly establishing relationships between the items of
balance sheet and profit and loss account. In short, “Financial performance analysis is
the process of selection, relation, and evaluation.”

1.2 Profile of Organization/ Place/Events. Etc.

A bank is a financial institution licensed to receive deposits and make loans.
Banks may also provide financial services, such as wealth management, currency
exchange, and safe deposit boxes. As per the Bank and Financial Institutions Act
(BAFIA), 2006, `Bank’ means a corporate body on the transactions as referred to in
sub-section (1) of Section 47.
 3

There are different types of bank such as commercial banks, development

banks, cooperative bank etc. A development bank is a financial institution dedicated
to fund new and upcoming business and economic development projects by providing
equity capital or loan capital. Development banks play an important role for the
economic growth of the nation.
There are 33 development banks being operated in Nepal. The history of
banking in Nepal dates back to the year 1937 AD with the establishment of Nepal
Bank Limited as the first commercial bank in Nepal. Some reknown development
banks being operated in Nepal are listed below:
1. Garima Bikash Bank
2. Om Development Bank
3. Jyoti Bikash Bank
4. Gandaki Bikash Bank
5. Lumbini Bikash Bank
6. Western Development Bank
7. Kamana Bikash Bank
8. Bhargav Bikash Bank Limited
9. Kailash Bikash Bank
10. Saptakoshi Development Bank

Bhargav Bikash Bank Limited

Bhargav Bikash Bank is one of the regional level development bank of Mid
Western Region of Nepal established formally in the year 2064 which commenced
operation on 13th Bhadra, 2064. The bank has been established solely with the aim of
getting exclusive confidence of Nepalese market by rendering global standard of
services through professional and quality management. BBBL has been promoted as a
dedicated bank with a primary focus in the development of industries, trades, services
and agricultures sector in mid western regional of Nepal.
BBBL is committed to provide superior banking products and financial to its
customers through efficient and cost-effective service delivery; offering of new
innovative products and friendly customer service; and at the same time maintaining
 4

confidentially, professionalism & good governance. It consistently upgrades its

processing systems and technology support besides broadening its scope, range and
quality of services.
The Bank believes in continuously offering new and value added services to
customers with commitment to quality and value to clients. Accordingly, the Bank has
been in the forefront in launching Superior products with unique customer friendly
features with immense success.
BBBL will always operate according to the listed norms and values:

 Customer Service, Security & Respect

 Transparency in Operation

 Professionalism in Management

 Corporate Governance in Organization

 Role of  Corporate Citizen in Society
The BOD of the bank consist of 6 members. Mr. Dambar Bahadur Thapa is
the Chairman of the bank and other board members are Mrs. Kanti Sijapati (Bhadari),
Mr. Krishna Prasad Banskota, Mr. Amar Bahadur Bista, Mr. Jagannath Gotame, Mr.
Jagdis Chandra Bhatt.
Now with a paid up capital of over 501.6 million rupees, 17 Branch Offices
BBBL provides services like ABBS service, remittance service, mobile/sms banking
and cheque clearing service. It has its head office in Karkando, Nepalgunj, Banke and
its branch offices in Nepalgung, Narayanpur, Tulsipur, Bansgadhi, Kohalpur,
Magaragadhi, Ghorahi, Bhurigaun, Hapure, Lalmatiya, Patabhar, Lamahi, Gulariya,
Rajpur, Mainapokhari, Katarniya and Agaiya.
Its core mission is to collect the financial liquidity of the country in the form
of deposit and to prop up the economic development of the country by investing on
the locale like industry, business, agriculture and the other entire possible production
sector which are fit in the outlook of business and financial service to its customers.
 5

Organizational Structure

Board of Directors

CEO

Internal Audit General Council

Board

Government Human Resource Operation and Chief Finance Chief Risk

Relation Group Group IT Group Officer Office

Chief Operation
Officer

Accounts Client Service Monitoring and Operation Information

Reporting Control Technology

Front Office Corporate Finance Wealth Management

 6

1.3 Statement of Problem

A statement of problem is a brief description of the issues that needs to be
addressed by a problem solving team and should be presented to them or created by
them before they try to solve a problem. The statements of the problem of this study
are briefly addressed below:

1 What is the relationship between financial performance of BBBL and its

profitability?

2 Whether the solvency ratio of BBBL is able to pay its long term debts in time or
not?

1.4 Objectives of the Study

Objectives of the study are guidelines by which the study can be conducted in a
systematic manner. The main objective of this report is to assess the strengths and
weakness and to analyze the financial position of Bhargav Bikash Bank Limited. The
specific objectives were as following:
 To evaluate the relationship between financial performance and profitability of
BBBL.
 To determine the solvency position of BBBL.

1.5 Rationale of the study

The Thesis report will help the development banks to fill up a research gap on
the study of credit management. The suggestions made by this report will help to
improve their resource mobilization in the form of credit to generate income.
Beside thesis, this study no doubt will have importance to various groups but
particular it is directed towards the certain groups of individuals/institutions which are
under:
 It is important to the shareholders.
 Important to the management bodies of the bank for the evaluation of the
performance of the bank
 7

 Has an importance to the outsiders which the customers, financing agencies,

stock exchange etc.
 Has an importance to the government bodies or the policy makers such as the
central bank.
 Has an importance to the interested outside partied such as the investors,
customers, competitors, personnel of the banks, stockbrokers, dealers and
market makers.

1.6 Theoretical Framework

Theoretical Framework of solvency ratio like Debt-to-Equity Ratio, Total Debt-to-
Total Assets Ratio, Interest-coverage Ratio on performance of Bhargav Bikas Bank
Limited is shown as below:

Liquidity Ratio

Solvency Ratio Performance of bank

Profitability Ratio

Independent Variables Dependent Variable

1.7 Definitions of variables

Various financial tools are used to complete the research study such as
percentage change in net working capital, differences among current ratio, ability to
hold the cash, different types of charts, table and trends are used as required.

Liquidity Ratios
Liquid ratios show the short term solvency position of an entity. These ratios
ascertain whether an entity would be in a position to pay its short term debts in time
or not. The following ratios would help to judge short term solvency position of an
entity.
 8

a) Current Ratio

This ratio is used to compute the relationship between current assets and current
liabilities. It shows the position of an entity to pay its current liabilities and ascertain
short term financial strengths and solvency position. The higher the ratio is taken as
margin of safety for trade creditors. This ratio is calculated as follows:

Current Ratio = Current Assets ÷ Current Liabilities

Current assets are those assets which can be converted into cash or cash equivalents
within short period of time, not exceeding one year. Current liabilities are those debts
which would be paid within short period of time, not exceeding one year. Current
ratio of 2:1 is considered as standard; however, higher ratio is preferable to maintain
better short term solvency position.

b) Quick Ratio or Liquid Ratio or Acid-test Ratio

This ratio is used to compute the relationship between liquid assets and current
liabilities. It shows the position of an entity to pay its current liabilities out of liquid
assets.

Quick Ratio = Quick Assets ÷ Current Liabilites

Liquid assets are the current assets which can be converted into cash or cash
equivalents within more short time easily. All current assets are taken as liquid assets
except closing stock and prepaid expenses as they cannot be converted into cash
quickly at their value. Liquid ratio of 1:1 is considered as standard, but higher ratio is
taken as better to pay quick debts.

Solvency Ratios

Solvency ratios are also known as leverage ratios and capital structure ratios.
The ratios judge the long term solvency position of an entity. It means these ratios
show whether a company would be able to pay its long terms debts in time or not. The
following are the ratios to measures long term solvency position of a company.
 9

a) Debt to Total Capital Ratio

This ratio is determined to establish the relationship between long term debts and
capital employed or total debts and capital employed. It shows the proportion of long
term fund that have been raised as loan and capital employed. It ascertains the ratio of
outsider's loan and shareholders' investment. It can be calculated as follows:

Debt to Total Capital Ratio = Total Debt ÷ Total Capital Employed

Total debts involve both long term debts and current liabilities or current debts.
Capital employed is also known by permanent capital or total capital. It is determined
by adding shareholders fund and long term debts.

b) Debt Equity Ratio

The debt equity ratio is determined to establish the relationship between debts and
shareholder's equity. It shows the safety margin of long term creditors or lenders. It
also indicates the extent to which the company depends upon outsiders for its
functioning and existence. This ratio is calculated in the following ways:

Debt- Equity Ratio = Total debt ÷ Shareholder’s fund

The standard or ideal debt equity ratio is considered as 1:1, but in normal course of
business the acceptable debt equity ratio may be 2:1. However, higher debt equity
ratio is considered to be more risky.

Profitability Ratios

Generally, the efficiency of a business entity is measured by its profitability position.

Profit is essential both for survival of the entity and for expansion and diversification
of business activities. Therefore, profitability is essential requirement of every
business entity. It measures the overall efficiency of the management to generate
profit on sales and investment.
 10

a) Return on Shareholders' Equity

This ratio shows the relationship between net profit after tax and shareholders fund.
The purpose of this ratio is to ascertain the efficiency to utilize investment or
shareholders. The higher of this ratio means the more efficiency of the management to
mobilize the shareholders' investment. The following formula can be used to calculate
this ratio:

Return on Shareholder’s Equity = Net profit after tax ÷ Shareholder’s Fund

b) Return on Capital Employed

This ratio shows the relationship between net profit and permanent capital. The
purpose of this is to indicate return on shareholders' fund and long term debts after
deduction of interest and tax. It is calculated in percentage. This ratio can be
calculated by using the following formula:

Return on Capital Employed = Earnings Before Interest and tax ÷ Capital Employed

Earning Evaluation Ratio

Earning evaluation ratios, especially those under the Income and Market valuation
approaches, require that you estimate business earning power in order to determine
business value. There are a number of accounting ways to assess business income:

a) Earnings Per Share (EPS)

EPS measures the profit available the profit available for equity shareholders on the
basis of every share. The purpose of this ratio is to ascertain the amount of profit
available on every share. The elements of this ratio are net profit after tax, preference
dividend, and number of equity shares. This ratio can be calculated as under:

Earnings Per Share = Earnings available for equity ÷ No. of outstanding shares

In case, investment of preference shareholders are not in the company, EPS can be
calculated dividing net profit after tax by number of equity shares. High EPS is
 11

preferable which shows the efficiency of the management to utilize shareholders'

investment.

1.8 Statement of hypothesis

Null Hypothesis (H0)
There is no significant impact of the liquidity, solvency and profitability ratios
to performance of the BBBL.
Alternative Hypothesis
There is significant impact of the liquidity, solvency and profitability ratios to
performance of the BBBL.

1.9 Limitation of the study

Following are the limitations of this study:
 This study has come to its conclusion only based on the published financial
reports of BBBL.
 This study is merely a comparative analysis of financial performance of
BBBL.
 This study has analyzed and evaluated the data of past five years only.

1.10 Literature Review

Literature review means both a summary and explanation of the complete and
current state of knowledge on related area of the study. Researcher used to do
literature review to understand research problems better and know the methodology
that is to be used in the research. Researcher also tries to seek the research gap and
problems of the past and current status of the topic.
Review of literature is an essential part of all studies. It is a way to discover
what other research in the area of our problem has uncovered. A critical review of the
literature helps the researcher to develop a thorough understanding and insight into
previous research works that relates to the present study. It is also a way to avoid
investigating problems that have already been definitely answered.
Mittal and Dhademade (2005) they found that higher profitability is the only
major parameter for evaluating banking sector performance from the shareholders
point of view. It is for the banks to strike a balance between commercial and social
 12

objectives. They found that public sector banks are less profitable than private sector
banks. Foreign banks top the list in terms of net profitability. Private sector banks earn
higher non-interest income than public sector banks, because these banks offer more
and more fee based services to business houses or corporate sector. Thus there is
urgent need for public sector banks to provide such services to stand in competition
with private sector banks.
In the book “Financial Management” Pandey, I.M. (1997) has defined as “The
financial statement provides a summarized view of the financial operation of the firm.
Therefore, something can be learnt about a firm and careful examination of the
financial statements as invaluable documents or performance reports. Thus, the
analysis of financial statement is an important aid to financial analysis or ratio
analysis is main tool of financial statement analysis.”
Khan and Jain (1990) have defined “The ratio analysis is defined as the systematic
use of ratio to interpret the financial performance so that the strength and weakness of
firm as well as its historical performance and current financial condition can be
determined.”

1.11 Research gap

Various researches have been conducted on financial performance analysis
especially on commercials and cooperative banks. As the research gap is concerned,
there are various changes takes place in the performance of the bank as compared to
last few years.
As we know that environment is not static i.e. constantly changing in nature, due to
which the data included in the analysis and hence the results of the study may differ.
Likewise there are also several factors affecting the performance of a bank. Hence
summarizing the overall information, various ratios are systematically analyzed and
evaluated in this study. This study tries to show the depth analysis of financial
performance by using various statistical tools and techniques. This study covers the
more recent financial data than those of the study which were previously conducted.

1.12 Research Methodology

Research methodology implies the basic research method to be carried out
throughout the entire study. Methodology is the most important part for the study. It
 13

describes the site selection, research design, population and sample, sources of data,
data collection procedure, techniques of analysis and limitation of the methodology.
1.12.1 Research Design
Research design is blue print of research, road map of research, strategy of research
which shows the overall plan of actions of the research. It is the specific method and
procedure, which guides the study and yields ways for doing research. The types of
research design are:- Exploratory Research Design, Causal comparative Research
Design, Experimental Research Design and Descriptive Research Design. Among
them this research paper uses a descriptive and analytical financial ratio analysis to
measure, describe and analyze the performance of BBBL of past five years.
1.12.2 Population and Sample
The population refers to the industries of the same nature and its services and
products in general. Thus, the total number of development bank constitutes the
population of data and the bank under study constitutes the sample for the study. So
from the population of 33 development banks operating in the country, Bhargav Bikas
Bank Limited has been selected as the sample bank for the study.
1.12.3 Nature and sources of data
For achieving the specific objective of the study data will be gathered entirely
from secondary source.
Secondary sources
 Website of BBBL.
 Annual reports, Brochures, manuals and publication of BBBL
 Manual published by BBBL.

The financial data of past five years starting from F.Y 2070/71 to F.Y 2074/75 has
been used for this study. Most of the data are used in financial ratio analysis of bank.
The data was obtained from bank scope and the banks financial statements and
websites.
1.12.4 Methods of data presentation
The data collected from various sources will be presented with the help of
different tools such as pie chart, tabulation, bar-diagram which helps to describe
information at a glance.
 14

1.13 Chapter Plan

CHAPTER I- INTRODUCTION
This first chapter of this study includes general background, statement of the
problem, objectives of the study, statement of hypothesis, theoretical framework,
definition of terminology, rationale of the study and limitations of the study and
methodology used in the study.
CHAPTER II- RESULT AND ANALYSIS
In this chapter the study has done data analysis and presentation about the
collected data by using statistical and financial analysis. It includes pictures, graphs,
presentation, tables and hypothesis testing.
CHAPTER III- SUMMARY AND CONCLUSION
This chapter comprises summary and major conclusion of prevailing issues to
the organization.
 15

CHAPTER II
RESULTS AND ANALYSIS

This chapter deals with the presentation, analysis and interpretation of

statistics, evidence and facts to clarify the research works. The analyzed data and
results are presented clearly using tables and figures along with interpretation of
results in each topics and sub topics.
2.1 Data Presentation and Analysis
This chapter represents the data collected from various sources and
also presents and analyzes them to measure the various dimensions of the problems of
the study. This is the section where, the filtered data are presented and analyzed. This
is the one of the major chapters of this study because it includes detail analysis and
interpretation of data from which concrete result can be obtained. This chapter consist
of various calculation made for the analysis of credit risks of the sample banks. To
make out study effective, precise and easily understandable, this chapter is
categorized in three parts: presentation analysis and interpretation.
2.1.1 Liquidity Ratios
Liquid ratios show the short term solvency position of an entity. These ratios
ascertain whether an entity would be in a position to pay its short term debts in time
or not. The following ratios would help to judge short term solvency position of an
entity.
Liquid Ratio
Liquid ratio is an important class of financial metrics used to determine a
debtor's ability to pay off current debt obligations without raising external capital.
Liquidity ratios measure a company's ability to pay debt obligations and its margin of
safety through the calculation of metrics including the current ratio, quick ratio.
Liquid assets include those current assets that presumably can be quickly converted to
cash as close to their book values. A company with a quick ratio of less than 1 cannot
currently fully pay back its current liabilities.
 16

Table 2. 1
Quick Assets and Current Liabilities

Fiscal Year Quick Asset Current Liabilities Liquid Ratio

2070/71 413,465,100 1,048,092,820 0.39
2071/72 528,109,410 1,562,810,690 0.34
2072/73 788,731,590 1,966,018,080 0.40
2073/74 1,201,839,68 3,195,637,410 0.38
2074/75 995,147,980 3,335,574,220 0.30
(Source: Financial Report of BBBL, FY 2070/71 to FY 2074/75)
Table 2.1 shows the liquid ratio of BBBL for the financial years 2070/71 to 2074/75.
The liquid ratio of the fiscal year 2072/73 is 0.40 which is the highest among all other
fiscal years under the study. The liquid ratio of the fiscal year 2074/75 is 0.30 which
is the lowest among all other fiscal years under study. The liquid ratio of the fiscal
year 2070/71 is 0.39 and the ratio in the subsequent year has decreased to 0.34. The
ratio of the fiscal year 2073/74 and the fiscal year 2074/75 has been decreasing
continuously. This shows that the liquidity position of BBBL is fluctuating.
Figure 2. 1
Liquid Ratio

Liqud Ratio
0.45
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
2070/71 2071/72 2072/73 2073/74 2074/75

Figure 2.1 has represented the Quick ratio for different past five years from
FY 2070/71 to FY 2074/75. It is clear that QR has increased at the beginning years
and has been decreasing continuously. The QR is 0.4 that is maximum at FY 2072/73.
Liquid ratio of 1:1 is considered as standard, but higher ratio is taken as better to pay
quick debts.
 17

Current Ratio
Table 2. 2
Current Assets and Current Liabilities

Fiscal Year Current Asset Current Liabilities Current Ratio

2070/71 413,465,100 1,048,092,820 0.39
2071/72 528,109,410 1,562,810,690 0.34
2072/73 788,731,590 1,966,018,080 0.40
2073/74 1,201,839,68 3,195,637,410 0.38
2074/75 995,147,980 3,335,574,220 0.30
(Source: Financial Report of BBBL, FY 2070/71 to FY 2074/75)
Table 2.2 shows the Current Ratio of BBBL for the financial year 2070/71 to 2074/75.
The current ratio of the fiscal year 2072/73 is 0.40 which is the highest. The current
ratio of the fiscal year 2075/76 is 0.30 which is the lowest among all other fiscal years
under the study. The current ratio of 2070/71 is 0.39 and that of 2071/72 has
decreased to 0.34. The current ratio of 2073/74 is 0.38 and has decreased to 0.30 in
the fiscal year 2074/75. This shows that the bank under study is experiencing a
fluctuating scenario on regards to the current ratio.
Figure 2. 2
Current Ratio

Current Ratio
0.45
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
2070/71 2071/72 2072/73 2073/74 2074/75

Figure 2.2 exhibit the current ratio of BBBL for the study period 2070/71 to
2074/75. The ratio is highest at FY 2072/73 where CR is 0.4 and continuously
decreasing to year 2074/75. So from this figure it can be said that the total assets of
BBBL is increasing at the beginning and decreasing at 2074/75. The higher ratio is
taken as margin of safety for trade creditors.
 18

2.1.2 Solvency Ratio

Debt to Total Capital Ratio
Table 2. 3
Debt to Total Capital Ratio

Debt to Total
Fiscal Year Total Debt Capital Employed
Capital Ratio
2070/71 1,033,137,890 143,131,770 7.22
2071/72 1,540,224,890 162,709,350 9.47
2072/73 1,962,067,110 316,597,230 6.20
2073/74 3,113,549,840 520,821,460 5.98
2074/75 3,262,821,250 624,177,910 5.23
(Source: Financial Report of BBBL, FY 2070/71 to FY 2074/75)
Table 2.3 shows the Debt to Total Capital Ratio of the fiscal years 2070/71
to 2074/75 of BBBL. The DTC Ratio of the fiscal year 2071/72 is 9.47 which is the
highest. The DTC Ratio of the fiscal year 2074/75 is 5.23 which is the lowest. The
ratio of 2070/71 is 7.22 and has been increased to 9.47 in 2071/72. The ratio of
2072/73 is 6.20 and has been decreased to 5.98 in 2073/74.
Figure 2. 3
Debt to Total Capital Ratio

Debt to Total Capital Ratio

10.00
8.00
6.00
4.00
2.00
0.00
2070/71 2071/72 2072/73 2073/74 2074/75
Figure 2.3 shows the situation of debt to total capital ratios of five years from
FY 2070/71 to FY 2074/75. The ratio is increasing from FY 2070/71 to FY 2071/72
and DTC ratio is 9.47 that is higher at FY 2071/72 and decreasing continuously. It
shows the proportion of long term fund that have been raised as loan and capital
employed.
Debt Equity Ratio
 19

Table 2. 4
Total Debt and Shareholder’s Equity

Debt to Equity
Fiscal Year Total Debt Shareholder’s Equity
Ratio
2070/71 1,033,137,890 143,131,770 7.218
2071/72 1,540,224,890 162,709,350 9.466
2072/73 1,962,067,110 316,597,230 6.197
2073/74 3,113,549,840 520,821,460 5.978
2074/75 3,262,821,250 624,177,910 5.227
(Source: Financial Report of BBBL, FY 2070/71 to FY 2074/75)
Table 2.4 shows the Debt to Equity Ratio of the fiscal years 2070/71 to
2074/75 of BBBL. The DE Ratio of the fiscal year 2071/72 is 9.466 which is the
highest. The DE Ratio of the fiscal year 2074/75 is 5.227 which is the lowest. The
D/E ratio of 2070/71 is 7.218 and has been increased to 9.466 in 2071/72. The D/E
ratio of 2073/74 is 6.197 and has been decreased to 5.978 in 2073/74.
Figure 2. 4
Debt to Equity Ratio

Debt to Equity Ratio

10.000
9.000
8.000
7.000
6.000
5.000
4.000
3.000
2.000
1.000
0.000
2070/71 2071/72 2072/73 2073/74 2074/75

Figure 2.4 reflects the debt-equity ratio of financial statement of BBBL for
different past five years from FY 2070/71 to FY 2074/75. Here debt to equity ratio
was increased at second fiscal year. DE ratio was maintained at lower rates at FY
2072/73, 2073/74 and FY 2074/75 with their respective DE ratio 6.197, 5.978, 5.227.
However, higher debt equity ratio at FY 2071/72 is considered to be more risky.
2.1.3 Profitability Ratio
 20

Return on Shareholders' Equity

Table 2. 5
Earnings Available for Equity and Shareholder’s Equity

Earnings Available For Return on Equity

Fiscal Year Shareholder’s Equity
Equity (%)
2070/71 30,966,990 143,131,770 21.64
2071/72 25,856,300 162,709,350 15.89
2072/73 35,175,630 316,597,230 11.11
2073/74 39,625,210 520,821,460 7.61
2074/75 33,164,550 624,177,910 5.31
(Source: Financial Report of BBBL, FY 2070/71 to FY 2074/75)
Table 2.5 shows the Return on Shareholder’s Equity for the fiscal years
2070/71 to 2074/75 of BBBL. The ROSE of BBBL is continuously decreasing. The
ROSE in 2070/71 is 21.64 which is the highest. The ROSE of 2074/75 is 5.31 which
is the lowest. The ROSE of 2071/72 is 15.89 and is decreased to 11.11 in 2072/73,
7.61 in 2073/74 and 5.31 in 2074/75.
Figure 2. 5
Return on Equity

Return on Equity(%)
25.00

20.00

15.00

10.00

5.00

0.00
2070/71 2071/72 2072/73 2073/74 2074/75

Figure 2.5 indicates the diminishing trend of return on equity (ROE) of BBBL.
It is clear that ROE has been extended up to 21.64 in the FY 2070/71, 15.98 at FY
2071/72, 11.11 at FY 2072/73, 7.61 at 2073/74 and 5.31 at 2074/75. The higher ratio
at FY 2070/71 means the more efficiency of the management to mobilize the
shareholders' investment.
Return on Capital Employed
 21

Table 2. 6
Net Profit after tax and Capital Employed

Net Profit After Return on Capital

Fiscal Year Capital Employed
Tax (NPAT) Employed(%)
2070/71 30,966,990.00 143,131,770.00 21.635
2071/72 25,856,300.00 162,709,350.00 15.891
2072/73 35,175,630.00 316,597,230.00 11.111
2073/74 39,625,210.00 520,821,460.00 7.608
2074/75 33,164,550.00 624,177,910.00 5.313
(Source: Financial Report of BBBL, FY 2070/71 to FY 2074/75)
Table 2.6 shows the ROCE for the fiscal years 2070/71 to 2074/75 of BBBL. The
ROCE is continuously decreasing from 2070/71. The ROCE in 2070/71 is 21.635
which is the highest. The ROCE of 2074/75 is 5.313 which is the lowest. The ROCE
of 2071/72 is 15.891 and is decreased to 11.111 in 2072/73, 7.608 in 2073/74 and
5.313 in 2074/75. This shows that the bank is not consistent in regards to employing
its capital in order to generate a good profit.
Figure 2. 6
Return on Capital Employed

Return on Capital Employed(%)

25.000

20.000

15.000

10.000

5.000

0.000
2070/71 2071/72 2072/73 2073/74 2074/75

Figure 2.6 reveals the return on capital employed (ROCE) of BBBL from FY
2071/72 to FY 2075/76. Here ROCE was gradually declining from initial fiscal year.
ROCE of 21.635% maintained at highest level that represents more efficient use of
capital. Thereafter in ROCE gradually in coming fiscal years that indicates BBBL is
not employing its capital effectively.
2.1.4 Earning Evaluation Ratio
 22

Earnings per Share

Table 2. 7
Earnings per Share

Earnings
No. of Equity
Fiscal Year Available For Earnings Per Share (EPS)
Shares
Equity
2070/71 30,966,990 1,000,000 30.97
2071/72 25,856,300 1,200,000 21.55
2072/73 35,175,630 2,640,000 13.32
2073/74 39,625,210 4,084,294 9.70
2074/75 33,164,550 5,016,000 6.61
(Source: Financial Report of BBBL, FY 2070/71 to FY 2074/75)
Table 2.7 shows the Earnings per Share of the fiscal years 2070/71 to 2074/75
of BBBL. The EPS of 2070/71 is Rs. 30.97 which is the highest. The EPS of the fiscal
year 2074/75 is Rs. 6.61 which is the lowest. The EPS of 2071/72 is Rs. 21.55 and
decreased to Rs. 13.32 in 2073/74, Rs. 9.70 in 2075/74 and Rs. 6.61 in 2074/75. This
shows that the bank is not able enough to earn such profit which can increase the EPS.
Figure 2. 7
Earnings Per Share

Earings Per Share (EPS)

35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
2070/71 2071/72 2072/73 2073/74 2074/75

Figure 2.7 represents the EPS of BBBL for past five years from FY 2070/71 to
FY 2074/75. Here EPS was similar at FY 2070/71 is Rs.30.97.After which the EPS is
continuously decreasing.
 23

2.1.5 Questionnaire Findings

Various questions regarding the bank have been asked to the customers and
the employees of the bank. The response towards my questions has been presented in
tabular form below:
Table 2. 8
Is Earnings Per Share distributed by BBBL satisfactory?
Response Result in %
Yes 45
No 55

Table 2.8 depicts the results of the customers’ satisfaction regarding the EPS
distributed by the bank. Response has shown that 55% of among the total response is
not satisfied with the EPS distributed whereas 45% among total respondents are
satisfied.
Figure 2. 8
Satisfaction regarding Earnings Per Share

Result in %

Yes
45%
No
55%

Figure 2.8 shows the response of the customers regarding their satisfaction for
EPS distributed by the bank. Response has shown that 55% of among the total
response is not satisfied with the EPS distributed whereas 45% among total
respondents are satisfied.
 24

Table 2. 9
Is the bank transparent about its funds investment?

Response Result in %
Yes 60
No 40

Table 2.9 depicts the results of the customers’ response regarding the
transparency of bank for the fund investment. Response has shown that 60% of
among the total respondents think that the bank is transparent regarding its fund
investment whereas the rest 40% is not positive regarding this matter.

Figure 2. 9
Response for bank transparency regarding funds investment

Result in %

No
40%

Yes
60%

Figure 2.9 depicts the results of the customers’ response regarding the
transparency of bank for the fund investment. Response has shown that 60% of
among the total respondents think that the bank is transparent regarding its fund
investment whereas the rest 40% is not positive regarding this matter.
 25

Table 2. 10
Are the staffs of the bank friendly?

Response Result in %
Yes 35
No 65

Table 2.10 depicts the response of the customers regarding the friendly behavior
by the staffs of BBBL. The response is more negative than positive. 65% amongst the
respondents has not received friendly behavior and the rest 35% has received friendly
behavior.

Figure 2. 10

Result in %

Yes
35%

No
65%

Response of customers regarding behavior of staffs of BBBL

Figure 2.10 depicts the response of the customers regarding the friendly
behavior by the staffs of BBBL. The response is more negative than positive. 65%
amongst the respondents has not received friendly behavior and the rest 35% has
received friendly behavior.
 26

Table 2. 11
How do you evaluate your relationship with the bank?

Response Result in %
Excellent 10
Very Good 10
Good 30
Bad 50

Table 2.11 depicts the result regarding the relationship of the customers with
the bank. The response is more towards fair but excellent. 50% of the respondents
speak about their bad relationship with the bank. 30% of the respondents think that
their relationship is good while 10% of the respondents think their relationship with
the bank is very good and 10% think their relation is excellent.

Figure 2. 11
Customers’ Evaluation of their relationship with bank

Result in %
Excellent
10%
Very Good
10%
Bad
50%
Good
30%

Figure 2.11 depicts the result regarding the relationship of the customers with
the bank. The response is more towards fair but excellent. 50% of the respondents
speak about their bad relationship with the bank. 30% of the respondents think that
their relationship is good while 10% of the respondents think their relationship with
the bank is very good and 10% think their relation is excellent.
 27

Table 2. 12
Is the interest rate on deposits adequate in current situation?

Response Result in %
Yes 40
No 60

Table 2.12 depicts the results regarding the satisfaction of the customers on
interest rate on deposits in current situation. 60% of the respondents are of thinking
that the current interest rate is not adequate whereas rest 40% thinks that the current
interest rate is reasonably adequate.

Figure 2. 12
Response towards adequacy of the interest rate of BBBL

Result in %

Yes
40%

No
60%

Figure 2.12 depicts the results regarding the satisfaction of the customers on
interest rate on deposits in current situation. 60% of the respondents are of thinking
that the current interest rate is not adequate whereas rest 40% thinks that the current
interest rate is reasonably adequate.
 28

Table 2. 13
Is the collected money invested in profitable sector?

Response Result in %
Possibly 30
Probably 60

Table 2.13 depicts response of the customers regarding the utilization of the
money collected by the bank as deposits. 60% of the respondents think that the
collected money is probably invested in profitable sector and the rest 30% think that
the utilization of the funds collected might be possibly profitable.

Figure 2. 13
Utilization of funds in profitable sector

Result in %

Possibily
33%

Probably
67%

Figure 2.13 depicts response of the customers regarding the utilization of the
money collected by the bank as deposits. 60% of the respondents think that the
collected money is probably invested in profitable sector and the rest 30% think that
the utilization of the funds collected might be possibly profitable.
 29

2.2 Major Findings

1. BBBL holds average cash and bank balance to current assets ratio. Liquidity
position is fluctuating in nature.

2. The company’s current ratio is at consistent level over the past five years.

3. Liquidity ratio of the firm is not in satisfactory condition which may affect the
debt payment ability of the company.

4. Net profits are fluctuating but increasing during the period of study, which
indicates that firm’s efficient operation of management.

5. The profit of the company is fluctuating throughout the period of study.

6. It emphasis on more training to its employees that enhance productivity and

efficiency which minimize mistakes while performing the tasks.

7. Total debts and total capital employed is satisfactory.

8. Optimum utilization of total assets yields to increase their dividend paid to

their shareholders.
 30

CHAPTER III
SUMMARY AND CONCLUSION

This chapter is divided into three distinct parts. The first part is concerned he
with the summary of the whole study from the beginning to the end. The second part
deals with the conclusion where inferences and generalization were made or drawn
from findings and the analysis of the study formed the recommendation section which
brought the research to an end.

3.1 Summary
The study seeks to examine the factors that influence the financial
performance analysis of Bhargav Bikash Bank Limited. The study relating to
determinants of company’s liquidity, solvency, profitability, earning evaluation has
become an important issue for financial and economic researcher and scholars as
some of the company are found to be more liquid than other and the liquidity if found
to be controlled by some common factor.
The main objective is to assess the strengths and weakness of Bhargav
Bikash Bank Limited. It analyzes the contribution of Bhargav Bikash Bank Limited in
total revenue of government of Nepal as a rational tax payer of a nation.
The liquidity position of Bhargav Bikash Bank Limited is not favorable as the ratios
of the period in study are less than 1. Higher ratio is preferable to maintain better
short term solvency position. Liquid ratio of 1:1 is considered as standard.
The solvency position of Bhargav Bikash Bank Limited is satisfactory. The debt to
total capital ratio yields up to 5.23 at F.Y. 2074/75 which shows the proportion of
long term fund that have been raised as loan and capital employed. Bhargav Bikash
Bank Limited is able to pay its long term debts in time. Debt equity ratio is at
optimum level to 5.227 at F.Y. 2074/75 indicates how much debt a company is using
to finance its assets relative to the amount of value represented in shareholders
'equity.
The profitability position of Bhargav Bikash Bank Limited is adequate for survival of
the company and for expansion and diversification of business activities. Return on
shareholders' equity is highest at 21.64% in the FY 2070/71 means the more
 31

efficiency of the management to mobilize the shareholders' investment. Return on

capital employed was 21.635% maintained at highest level that represents more
efficient use of capital in F.Y. 2072/71. EPS at FY 2070/71 of Rs.30.97 is highest
which shows the efficiency of the management to utilize shareholders' investment.
Liquidity ratios and solvency ratios are tools investors use to make investment
decisions. Liquidity ratios measure a company's ability to convert its assets to cash.
On the other hand, solvency ratios measure a company's ability to meet its financial
obligations. Solvency ratios include financial obligations in both the long and short
term, whereas liquidity ratios focus more on a company's short-term debt obligations
and current assets. Generally, a higher current ratio indicates that the company is
capable of paying off all of its short-term debt obligations. Generally, a company with
a higher solvency ratio is considered to be a more favorable investment.
The investors look at the market and try to determine whether it is going up or down,
in order to make investment decisions. In the second, it is a field used by marketers to
analyze the target market of their clients and determine the best courses of action to
take to improve sales and profitability.

For the analysis of data various financial ratios, average, graph and tables
were used to obtain a clear performance of the bank. A trend analysis was used to
forecasting the future trend of bank’s performance and correlation analysis was used
to investigation the relationship between different variable. The financial and
statistical analyses are summarized as below:
1. The study shows that the BBBL is experiencing a fluctuating scenario on
regards to the current ratio and liquid ratio.
2. Due to the fluctuations in liquid and current ratio, the liquidity position of
BBBL is not fairly good.
3. The study shows a moderate solvency position of BBBL as the Debt-Equity
ratio and Debt-Total Capital ratio is fluctuating.
4. The study shows that the bank is not consistent in regards to its profitability as
the Return on Shareholders’ Equity and the Return on Capital Employed is in
decreasing trend.
 32

5. The study shows that the bank is not able enough to earn such profit which can
increase the EPS so the Earnings Evaluation Ratio is not good enough.
3.2 Conclusion
The financial condition through various financial ratio analysis made in this
report suggest a conclusion that Bhargav Bikash Bank Limited is fetching a
satisfactory financial condition for a healthy business prospect. Although some ratio is
not lying under the standard limit, they have considered as a satisfactory level. As a
whole, Bhargav Bikash Bank Limited has efficient financial environment with good
management.

1. Net profits are fluctuating but increasing during the period of study, which
indicates that firm’s efficient operation of management.

2. The profit of the company is fluctuating throughout the period of study.

3. It emphasis on more training to its employees that enhance productivity and

efficiency which minimize mistakes while performing the tasks.

4. Total debts and total capital employed is satisfactory.

5. Optimum utilization of total assets yields to increase their dividend paid to

their shareholders.

6. The study shows that the BBBL is experiencing a fluctuating scenario on

regards to the current ratio and liquid ratio.
7. Due to the fluctuations in liquid and current ratio, the liquidity position of
BBBL is not fairly good.
8. The study shows a moderate solvency position of BBBL as the Debt-Equity
ratio and Debt-Total Capital ratio is fluctuating.
9. The study shows that the bank is not consistent in regards to its profitability as
the Return on Shareholders’ Equity and the Return on Capital Employed is in
decreasing trend.
33
 34

BIBLIOGRAPHY
Adhikari, D.R&Pandey D.L.(2016); Business Research Methods, Kathmandu: Asmita
Publications.
Agarwal N.P. (1982), Financial Appraisal of State Ware-housing Corporations: A
Case Study of Rajasthan State Ware housing Corporation, Lokudyog, XVI.
Dangal and Kapoor (2010). Financial Performance of nationalized banks in India,
International Journal ISSN-2231-1009.
Fernando Ferreng (2012). How to create indices for bank branch financial
performance, ISBN-978-989-678-139-2 School of Management and
Technology, Portugal.
Gautam K.G & Gautam K.P (2017). Business Research Methods, Kathmandu: Januka
publications.

Manish Mittal and Arunna Dhademade (2005). A comparative study on profitability

and productivity in Indian Banks, ISBN-978-81-7446-983-0.
Medhat Tarawnen (2006). A comparision of financial performance in the banking
sector, ISSN-1450-2887.
Shrestha, M.k&Bhandari D.B (2008). Financial Markets and Institutions,
Kathmandu: Asmita publications.

ThapaKiran (2016). Fundamentals of Corporate Finance; Kathmandu: Januka

Publications.

Financial Report 2070/71, Bhargav Bikash Bank, www.bhargavbank.com.np

Financial Report 2071/72, Bhargav Bikash Bank, www.bhargavbank.com.np

Financial Report 2072/73, Bhargav Bikash Bank, www.bhargavbank.com.np

Financial Report 2073/74, Bhargav Bikash Bank, www.bhargavbank.com.np

Financial Report 2074/75, Bhargav Bikash Bank, www.bhargavbank.com.np

 35

Appendix
Questionnaire
Dear sir/madam,
For the preparation of research report as per the course requirement of BBS 4 th year we
kindly request you to give response to my questionnaire by ticking the most suitable
option for you.
Name:
Age:
Profession:
Phone no:
1. Is the Earnings per Share distributed by BBBL satisfactory?
 Yes
 No
2. Is the bank transparent about its funds investment?
 Yes
 No
3. Are the staffs of the bank friendly?
 Yes
 No
4. How do you evaluate your relationship with bank?
 Excellent
 Very good
 Good
 Bad
5. Is the interest rate on deposits adequate in current situation?
 Yes
 No
6. Is the collected money invested in profitable sector?
 Yes
 No