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Interpretation of Financial Statement of Nepal SBI

Bank LTD.(2070/71)

Submitted by:
Prabesh Maharjan
MBA 1st Semester
Section B

Submitted to:
Hari Dallakoti
IIMS College
Lincoln University
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Introduction
Financial statements are written records of a business's financial situation.
They include standard reports like the balance sheet, income or profit and
loss statements, and cash flow statement. They stand as one of the more
essential components of business information, and as the principal method
of communicating financial information about an entity to outside parties. In
a technical sense, financial statements are a summation of the financial
position of an entity at a given point in time. Generally, financial statements
are designed to meet the needs of many diverse users, particularly present
and potential owners and creditors. Financial statements result from
simplifying, condensing, and aggregating masses of data obtained primarily
from a company's accounting system.
The components of Balance sheet are as follows:
 Balance sheet
 Income statement
 Cash Flow statement

1. Balance Sheet:-

Balance sheet information allows us to calculate several financial ratios that

measure company performance. Additionally, current balance sheets often
present data from at least one previous period, so you can compare how
financial performance has changed. A balance sheet is a statement of the
financial position of a business that lists the assets, liabilities, and owner's
equity at a particular point in time. In other words, the balance sheet
illustrates your business's net worth.

The balance sheet may also have details from previous years so you can do a
back-to-back comparison of two consecutive years. This data will help you
track your performance and will identify ways to build up your finances and
see where you need to improve. 
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2. Income Statement:-

An income statement is a financial statement that shows you how profitable

your business was over a given reporting period. It shows your revenue,
minus your expenses and losses. Also sometimes called a “net income
statement” or a “statement of earnings”, the income statement is one of the
three most important financial statements in financial accounting, along
with the balance sheet and the cash flow statement (or statement of cash
flows).Small businesses typically start producing income statements when a
bank or investor wants to see how profitable their business is. When a
business makes an income statement for internal use only, they’ll
sometimes refer to it as a “profit and loss statement” (or P&L).

3. Cash Flow Statement:-

Cash Flow Statement is a report that gives the movement of cash during the
period under consideration. It gives an idea about the inflow and outflow of
cash from operating, investing and financing activities. Statement of cash
flows is one of the three basic financial statements, along with Balance
Sheet and Income Statement. These three statements help the investors
gauge the performance of the company in terms of the profitability,
financial position and movement of cash.
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Interpretation of Income Statement

According to the above table, the amount of net profit of Nepal SBI bank in
2070/71 is 922984007 and in 2069/70 were 771471129. There is profit of Rs
Rs 151512878 (922984007 - Rs771471129). The total operating expenses of
the particular year is Rs 2390542860 and the operating profit before
provision for possible loss is Rs 1441436231. The operating profit is Rs
1358469532 and non operating income is Rs Rs 8728276. So the net income
after staff and other expenses is 922984007 (1443139127-131194466-
388960654)
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Interpretation on Balance Sheet

In comparison to the financial statement of previous year and this year,

there is decrease in total assets of Rs 3713180467 (64796152822-
61082972355) . in the year 2070/71 the assets stand at Rs. 61082972355
and for 2069/70 it stands at Rs. 64796152822. We can see the cash balance
of the bank is 1527028783 and other items. The investing done by the bank
for the particular year is 17722395654. Loans, Advances and Bill purchase
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stands for Rs 35279583339. The fixed and other assets of the bank for the
particular year are 607446572 and 818575670 respectively. So the total
asset of Nepal SBI bank for the particular year is 61082972355.

The share capital of the bank for the particular year is 3049083104 which
means the value or amount that shareholders have invested in the bank and
it has increased because due to the issuance of new share capital. Likewise
there is also increase in reserve and debentures. Further there is decrease in
bills payable, deposits and increase in proposed dividend.
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Interpretation on cash flow statement

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 Cash flow from operating activities

A company's operating activities are the primary means to generate
revenue. Cash flow for operating activities generally means revenues
and expenses. Revenue could come from sales, accounts receivable,
refunds, and any settlements. Expenses could be payments to
employees and suppliers, fines, fees, lawsuits, cash payments for
interest, refunds to customers, etc. From the annual report of the
given bank, Cash flow from Operating activities for the year 2070/71 is
(1,207,953,976) and in year 2069/70 is Rs2060734242. It has decrease

then previous year so there is a less flow which means company is

generating less cash than profit.

 Cash Flow from Investing Activity

These are less common sources of cash. Usually they are associated
with buying or selling assets. Cash inflows could come from loan
collection, or sales of securities (from other entities) or long-term
assets. Cash outflows could come from buying fixed assets, debt or
equity (from other entities) or loans. From the above data Cash flow
from Investing Activity of previous year was (60247554) and this year
is (55192460) which are negative. All in all there is better for the bank
as it increased than previous year. Therefore Bank should focus on
Investing property, plant and equipment.

 Cash Flow from financing Activity

These cash flows come from changes in equity and borrowing. Cash
inflows here could come from a company selling its own equity or
proceeds from derivatives. Cash outflows could come from paying out
dividends, debt issuance costs or outstanding debt. Cash flow from
financing activity of the bank for both previous year and this year is Rs
200000000
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Conclusion

. Overall the financial status of the company is really good as compare to

previous year due to the increased income from the business and the profit
earned this year. The net income of the bank is also good or the net profit is
in surplus which denotes that the bank is healthy and stable. The capital
structure of the company is only share capital that is used to finance its
overall operations and growth. It shows that company will have more
money for its share holder and itself as retained earnings. Therefore due to
the possible growth of the company, it is beneficial to all customers,
employees, investors and shareholders.