A PROPOSAL ON

LIQUIDITY POSITION OF PRABHU BANK LIMITED

1.1 Background of the Study

Liquidity refers to the firm’s ability to meet the short term obligations or commitments
from current and liquid assets. To measure the liquidity of any firm’s liquidity ratio can
be used as an important analytical tool. Liquidity ratio measure the firm’s ability to meet
its current obligations. It compares short term obligations to short term resources
available to meet those obligations. So, it reflects the short term financial strength of
business concern profitability refers to the organization ability to earn profit. Profit
simply means excess of income and expenditure incurred over a period of time.
Profitability ratio measures overall efficiency of the business enterprises in terms of profit
from its operation and also shows the combined effects of liquidity, assets management
and working capital policies on operating results. The profitability ratio measures the
earning capacity of the business and used to analyze the financial strength and weakness
of the firm (Brigham, 2004).

Liquidity management therefore involves the strategic supply or withdrawal from the
market or circulation the amount of liquidity consistent with a desired level of short-term
reserve money without distorting the profit making ability and operations of the bank. It
relies on the daily assessment of the liquidity conditions in the banking system, so as to
determine its liquidity needs and thus the volume of liquidity to allot or withdraw from
the market. The liquidity needs of the banking system are usually defined by the sum of
reserve requirements imposed on banks by a monetary authority Nepal Rastra Bank
(NRB). Liquidity management is a concept that is receiving serious attention all over the
world especially with the current financial situations and the state of the world economy.
The concern of business owners and managers all over the world is to devise a strategy of
managing their day to day operations in order to meet their obligations as they fall due
and increase profitability and shareholder’s wealth. Liquidity management, in most cases,
are considered from the perspective of working capital management as most of the
indices used for measuring corporate liquidity are a function of the components of
working capital.

1.1.1 Profile of the Organization

Table 1
Profile of Prabhu Bank Limited
Basis Descriptions
Type of Industry: Financial industry
Classification: Commercial Bank
Country of origin: Nepal
CEO: Ashok Sherchan
Establishment: 2002
Branch: 217 Branches
ATMs: 198 Atm Counters
Head Quarter: Prabhu Building, Babarmahal, Kathmandu
Competitors: Commercial banks, development and Financial Sectors.
Website: prabhubank.com
Number of Employees: 2424
Assets: Rs 215,513,530,092
Total Equity: Rs 17111,272,092

(Sources: prabhubank.com)

Board of Director
- Chairman – Mr. Lila Prakash Sitaula
- Director – Mr. Pramod Ghimire
- Director – Mr. Rishi Ram Gautam
- Director – Mr. Shankar Prasad Koirala
- Director – Dr. Ramesh Singh Khadka
- Director - Mr. Rameshwor Sapkota
- Independent Director- Mrs. Anju Adhikari
1.2 Statement of the Problem

The problem statement shows the issue such as:

 What is the liquidity position of the PBL?

 What is the relationship between liquidity and profitability of the PBL?

1.3 Objective of the Study

The objectives of the study will find out the liquidity position of the PBL. The specific
objective of the study are as follows:

 To assess the liquidity position of the PBL.

 To explore the relation between liquidity & profitability of the bank.

1.4 Rationale of the Study

This study will focus on liquidity of Prabhu Bank Limited. After the study of this
research, it will be valuable for management of Prabhu Bank Limited that helps in
developing the strategic for managing its liquidity of the bank. These studies will provide
good insight about liquidity of commercial bank in Nepal. Moreover, this study will be
helpful for the researcher who wants to conduct research in Prabhu Bank Limited.

1.5 Methods

Research methodology is the research method used to test the hypothesis. It sequentially
refers to the various steps to be adopted by a researcher in studying a problem with
certain objectives in review. Generally, it refers to the numerous processes adopted by the
researcher’s during the research period. The purpose of the research methodology section
is to describe the nature of the research design, sampling, gathering and procedure and
data collection and analysis procedures.
Research design

This research will follow the descriptive research design. Research design that is
developed with the aim of studying the subject of details and explain the facts and
characteristics related to research problem is known as descriptive design. The main goal
of this report is to describe the data and characteristics about what is being studied.

Population and sample

Currently, there are 22 commercial banks in Nepal. Out of total 22 commercial bank of
Nepal, Prabhu Bank Limited will be select as a sample for this study.

Data collection procedure

While preparing the data in collected from secondary sources. Secondary data refers to
data that was collected by someone other than the user. It is originally collected from
different sources. So, in the course of preparing this report the necessary data and
documents are collected only from secondary sources.

Nature and sources of Data

While preparing this report, data will collect from secondary sources. The researchers
will use quantitative data. Data collection techniques used by secondary data collection
methods, which are presented below:

 Annual report
 Books
 Journals
 Websites
 Articles
Method of data presentation and analysis

In this report, the researchers will use the following presentation and analysis tools:

 Tables
 Trend lines
 Percentage
 Financial tools
1.6 Limitation of the Study

The present study will try to analyze and to examine the liquidity of Prabhu Bank
Limited. The main limitations of study will be as follows:

 The study will cover the period of five financial year starting from 2074/75 BS to
2078/79 BS.
 The information data and facts regarding the financial performance will be based
on secondary data.
 Presentation & analysis are conducted through financial and statistical tools.
 Only one bank will be taken as a sample for this report writing.
1.7 Organization of the Study
The present study will organize into three chapters. They are whole report summarized by
listed below:

Chapter-I: Introduction

The first chapter includes background, profile of organization, objectives, rationale,

literature review, methods, limitations and organization of the study.

Chapter-II: Results and Analysis

The second chapter included data presentation, analysis and results and findings.
Chapter-III: Summary and Conclusion

The third chapter includes summary and conclusion.

Lastly, bibliography and appendices are added at the end of this report.

1.8 Time Allotment of the study

Problem identification 3 days

Literature Review 9 days
Proposal writing 5 days
Data collection 7 days
Context writing 5 days
Data analysis 4 days
Summarizing & correction 4 days
Documentation 3 days
Total 40 days

Submitted By

Sapana Bhattarai

BBS 4th Year (Finance Group)

Aims College