FINANCIAL PERFORMANCE ANALYSIS OF

EVEREST BANK LIMITED

A Research Proposal

Presented by

Sujan Nakarmi

T.U Reg. no. 7-2-39-1052-2017

Koteshwor Multiple Campus (KMC)

Jadibutti, Kathmandu, Nepal

Submitted To:

Research Management Cell

Faculty Of Management

Tribhuvan University

Kathmandu, Nepal

1
 In partial fulfillment of the requirement for the degree of Bachelor of Business Studies (BBS)

Kathmandu, Nepal

2021

TABLE OF CONTENTS

Cover Page ……………………………………………………………………. 1

Table of Contents ……………………………………………………………... 2

Introduction

1.1 Background …………………………………………………… 3

1.2 Statement of Problem …………………………………………. 4

1.3 Objective of Study……………………………………………... 5

1.4 Significance of Study ………………………………………...... 6

1.5 Literature Review ……………………………………………… 7

1.6 Research Methodology ………………………………………… 8

2
References

3
Introduction

1.1 Background

Financial performance is a complete evaluation of a company’s overall standing in

categories such as assets, liabilities, equity, expenses, revenue, and overall profitability. It is

measured through various business-related formulas that allow users to calculate exact details

regarding a company’s potential effectiveness. For internal users, financial performance is

examined to determine their respective companies’ well-being and standing among other

benchmarks. For external users, financial performance is analyzed to dictate potential

investment opportunities and to determine if a company is worth their while. According to

Wikipedia “Nepal is an officially called the Federal Democratic

Republic of Nepal is a landlocked central Himalayan country in South Asia. It has 33.4

million since last census 2001 A.D and is the 93 fd largest country by area. Bordering China

in the north and India in the south, east, and west, it is the largest sovereign Himalayan

state." The development and progress of economy of this country depends upon several

factors. Financial institutions among others are seen as vehicle in the process of

economic improvement and enlargement. They play significant role or responsibility in

utilizing saving, and put them into productive use. Commercial banks are the most necessary

financial institution, existing in important place in the economy of a country because the

deposits accumulated by them provide much needed capital for the development of

infrastructure, industry, trade and commerce and other sectors, thereby contributing to the

economic development of the nation. However, investment steps do not go without risks.

They have to follow sound Principles of investment policy, the rules and regulations,

4
 directives issued by the Central Bank. The performance analysis of a commercial bank is

usually related to effective use of the bank assets, shareholder’s equities and liabilities,

revenues

expenses. The performance evaluation of banks is important for all parties including

depositors, investors, bank managers and the government authorities. The evaluation of a

firm’s

performance usually employs the financial ratio methods, because it provides a simple

description about the firm’s financial performance in comparison with previous periods

and helps to improve its performance of management. Moreover, the

ratio analysis assists in determining the financial position of the bank compared to

other banks.

1.2 Statement of Problem

Establishment of Joint Venture banks concentrate only in urban area, like Kathmandu,

Pokhara, Birgung, Hetauda, Biratnagar, etc. has raised certain questions. This application is

not able to contribute the socio-economic development of the country where around 80%

people live in rural and 79% of the population depends upon agriculture. These banks should

expand their operation in rural areas. NRB, as the central bank has ruled that joint venture

banks should invest 10% of their total investment in the rural areas. These banks are inclined

to pay fines rather than investing their resources to such less profitable sector. In Nepal, the

profitability rate, operating expenses and dividend distribution rate among the shareholders

has been found different in the financial performance of the banks in different period of time.

The problem of the study will i ultimately find out the reasons about the financial

5
 performance. An analysis of financial performance of the banks would be highly beneficial for

pointing out their strength and weakness. In such a situation the study tries to analyze the

present performance of banks, which would give the answers of following queries.

• What are the liquidity, activity turnover ratio and leverage ratio of EBL banks?

• How is the financial performance through the use of appropriate financial and

statistical tools?

1.3 Objective of the study

The primary objective of this internship is to gain valuable insights into the business

sector, more specifically the banking industry in addition to this another major purpose is also

to relate the theoretical knowledge with the practical experience and to enable us to be more

prolific in acquiring the real life techniques of achieving results through both individual effort

and team building along with the knowledge gained from the academic environment. The

other specific objectives of the study are:

• To study the banking procedure carried out in branch.

• To examine different product and services offered by Everest Bank Limited.

• To identify the various activities done under the "Customer Service Department".

• To gain knowledge and skills necessary to be an effective manager as well as a leader

in an organization.

6
1.4 Significance of the study

The following will be the main significance of study

• The study will reflect the rise and fall pattern of the financial condition of the bank.

• The study will help to understand the importance of liquidity ratio, profitability ratio

and solvency ratio.

• The study will show the position of bank the comparative bank world fřom the last

year. i.e. F/Y 2072/73 to F/Y 2076/77

• The study will also help those outsiders who are willing to know the bank is operating

and progressing. If they feel, the bank is progressing they want to enter into bank

various means.

• Junior friends who are going to prepare the fieldwork in füture can also refer this

fieldwork and take certain data and ideas.

1.5 Limitations of the study

Every research has more or less limitation. Lack of experiences, time, financial resources

and accurate information are some of the limitation of the study.

• Data are collected from the past five years only.

7
 • Only some limited tools have been used in this study which might not be sufficient to

give exact scenario of financial performance of Everest Bank Limited.

• Due to time and resources constraint commercial bank namely Everest Bank Limited

have been sampled in the study.

1.6 Literature review

I have studied several books, research reports previously done by BBS students to gain

knowledge with regard to the process of research writing. Similarly, I have collected data

and information through internet so I can understand the research problems better to know

methodology. It provides through understanding related to the present study by the insights

of the previous research works and besides it avoids investigating problems that have

already been answered.

1.7 Research Methodology

The main purpose of the study is to evaluate and assess the financial position or

performance of Everest Bank Limited. Proper use of appropriate methods play significant

role in achievement of the research objectives. Therefore it will be given utmost priority.

Research methodology consists of the following particulars:

• Research Design

Research design is the task of desiging the research problem. In brief, “A research

design is the arrangement of conditions, for the collection and analysis of data in a manner

that aims to combine relevance to the research purpose with economy in process. General
8
objective of this research is to examine & evaluate the financial performance of Everest

Bank Limited.

• Population and Sample

The population for this study comprises 28 commercial bank currently operating

in the country. All the commercial banks perform the function of commercial banks under

rules, regulation & directives of Nepal Rastrya Bank. The sample consists of judgmentally

selected bank i.e. Everest Bank Limited.

• Types of Data

The data relating to the financial ratios are studied and compared which are

collected from Primary & Secondary data.

 Primary data : In this research, Data are collected by the researchers as per

the objectives of research.

 Secondary data : In this research, Data are developed by others in the past for

their purpose & used by the researchers in the present.

• Data Collection Procedures

The data required for the analysis are directly obtain from the Balance Sheet &

Profit and Loss account of the concerned bank annual reports. All the secondary data

compiled, processed & tabulated in the time series as per the need & objectives of the study.

Likewise data & information are collected from the economic journals, periodical,

magazines & other published and unpublished report & document from various sources.

9
 • Data Analysis Tools

A brief explanation of the tools or techniques of financial statement analysis presented

below.

1. Comparative Statements

Comparative statements deal with the comparison of different items of the Profit and

Loss Account and Balance Sheets of two or more periods. Separate comparative statements

are prepared for Profit and Loss Account as Comparative Income Statement and for Balance

Sheets.

As a rule, any financial statement can be presented in the form of comparative

statement such as comparative balance sheet, comparative profit and loss account,

comparative cost of production statement, comparative statement of working capital and the

like.

2. Comparative Income Statement

Three important information are obtained from the Comparative Income Statement.

They are Gross Profit, Operating Profit and Net Profit. The changes or the improvement in

the profitability of the business concern is find out over a period of time. If the changes or

improvement is not satisfactory, the management can find out the reasons for it and some

corrective action can be taken.

3. Comparative Balance Sheet

10
 The financial condition of the business concern can be find out by preparing

comparative balance sheet. The various items of Balance sheet for two different periods are

used. The assets are classified as current assets and fixed assets for comparison. Likewise,

the liabilities are classified as current liabilities, long term liabilities and shareholders’ net

worth. The term shareholders’ net worth includes Equity Share Capital, Preference Share

Capital, Reserves and Surplus and the like.

4. Common Size Statements

A vertical presentation of financial information is followed for preparing common-

size statements. Besides, the rupee value of financial statement contents are not taken into

consideration. But, only percentage is considered for preparing common size statement.

The total assets or total liabilities or sales is taken as 100 and the balance items are

compared to the total assets, total liabilities or sales in terms of percentage. Thus, a common

size statement shows the relation of each component to the whole. Separate common size

statement is prepared for profit and loss account as Common Size Income Statement and for

balance sheet as Common Size Balance Sheet.

5. Trend Analysis

The ratios of different items for various periods are find out and then compared under

this analysis. The analysis of the ratios over a period of years gives an idea of whether the

business concern is trending upward or downward. This analysis is otherwise called as

Pyramid Method.

6. Average Analysis

11
 Whenever, the trend ratios are calculated for a business concern, such ratios are

compared with industry average. These both trends can be presented on the graph paper also

in the shape of curves. This presentation of facts in the shape of pictures makes the analysis

and comparison more comprehensive and impressive.

7. Statement of Changes in Working Capital

The extent of increase or decrease of working capital is identified by preparing the

statement of changes in working capital. The amount of net working capital is calculated by

subtracting the sum of current liabilities from the sum of current assets. It does not detail the

reasons for changes in working capital.

8. Fund Flow Analysis

Fund flow analysis deals with detailed sources and application of funds of the

business concern for a specific period. It indicates where funds come from and how they are

used during the period under review. It highlights the changes in the financial structure of the

company.

10. Ratio Analysis

Ratio analysis is an attempt of developing meaningful relationship between

individual items (or group of items) in the balance sheet or profit and loss account. Ratio

analysis is not only useful to internal parties of business concern but also useful to external

parties. Ratio analysis highlights the liquidity, solvency, profitability and capital gearing.

 Variables

12
 Variables are characteristics of person, things, and groups and object. Nature of the

business, number of women in business sector, family support, capital availability, risk

bearing capacity, entrepreneurship. age, education are variables under study.

 Dependent Variable

A variable is called dependent variable if its values depend upon the other variables. The

researcher's purpose is to identify the variability in the dependent variable. Here dependent

variables are: growth, nature of business.

 Independent Variable

A variable is called independent variable if its value is not influenced by any other variable under

study. Any change in the independent variable either positive or negative, leads to change in the

dependent variable. Thus, the independent variables are those, which are used as the basis of

prediction and the dependent variables are those variable that is being predicted are: Women's

age, qualification, ethnicity and women's inspiration like profit potentiality, extra income and

social status.

 Method of Analysis

There are two main methods of data analysis:

 Qualitative Analysis

Qualitative analysis uses subjective judgement to analyze a company’s value or prospects

based on non qualifiable information, such as management expertise, industry cycles, strength of

13
research and development, and labor relations.

 Quantitative Analysis

Quantitive analysis is a tool that provides analysts with tools to examine and analyze past,

current, and anticipated future events. Any subject involving numbers can be quantified. It is a

technique that uses mathematical and statistical modeling, measurement, and research that to

understand behaviour.

14
 REFERENCES
Business Research Methods Kathmandu:

ASMITA BOOKS PUBLISHERS & DISTRIBUTORS (P) LTD.

Definition of Nepal in introduction is retrieved from source:

https://en.wikipedia.or/wiki/Nepal

Robinson, R.I.(1951)., The management of bank fund, New York:McGraw Hill

Luitel, G.(2003), A study on financial performance of Nepal Bank Limited.

Mahato, B. (2007), A comparative study of financial performance of Everest Bank Limited

and NIBL.

Websites name:

https://www.investopedia.com/

https://accountlearning.com/

https://www.google.com/

https://everestbankltd.com/

15