CHAPTER-I

INTRODUCTION

1.1 Background of the study

Cooperatives in Nepal are member-owned organizations that operate on the
principles of self-helped mutual assistance and democratic decision making. They
aim to provide financial social and economic benefits to their members by pooling
their resources and utilizing them for common purposes. A cooperative is a
financial institution established under the Cooperative Act, which is engaged in
the business of receiving deposits and providing credit facilities to its members.
The main objective of a cooperative is to provide financial services to its
members, including savings, credit and other financial services at a reasonable
cost. There are different types of cooperatives in Nepal, such as agricultural
cooperatives, credit cooperatives, housing cooperatives, consumer cooperatives
and saving and credit cooperatives.

The history of cooperatives in Nepal dates back to the early 20th century when the
first cooperative society was established in the country. However, it was only in
the 1950's, following the enactment of the Cooperative Act, that the cooperative
momentum in Nepal. The Cooperative Act of 1956 provided a legal framework
for the formation and operation of cooperatives in Nepal. It recognized
cooperatives as a means of promoting rural development, empowering
marginalized communities and enhancing economic opportunities for small
farmers, artisans and entrepreneurs. During the 1960's and 1970's the cooperatives
movements in Nepal expanded rapidly, with the establishment of various types of
cooperatives. In the 1980's however the cooperative movement in Nepal faced a
setback due to political instability and economic crisis. Many cooperatives were
unable to sustain themselves leading to a decline in their number and
membership. In the 1990's and 2000's the government of Nepal introduced

1
various reforms and policies to revive the cooperatives movement and promote
their development. The Cooperative Act was amended in 1999 and 2007 to
address the challenges faced by cooperatives and provide a more conducive
environment for their growth. Today, cooperative in Nepal play a crucial role in
promoting rural development, empowering marginalized communities and
providing financial and social benefit to their members. They are country's
economy and are regulated by the Cooperative Act of 2017 and other relevant
laws and regulations.

Financial ratios are useful indicators to measure a firms performance and financial
situation. The present study aims to analyze the liquidity analysis of " SHREE
BALMIKI SAVING AND CREDIT COOPERTIVE LIMITED" . Liquidity
refers to the ability of an organization to convert its assets into cash quickly and
easily without a significant loss of value. In other word it is the availability of
sufficient cash or cash equivalents to meet short- term financial obligations and
unexpected cash needs. Liquidity is an essential aspect of financial obligation on
time. For cooperatives maintaining adequate liquidity is a crucial for smooth
operations as it enables them to pay employees, creditors and invest in growth
opportunities. Liquidity can be measured using various ratios such as current
ratio, quick ratio, and cash ratio. These ratios indicate the level of cash and cash
equivalents available to an organization to meet its short- term obligations. A high
liquidity ratio is generally considered a positive indicator of financial health as it
reflects the ability to meet short-term obligations promptly.

Cooperatives typically maintain liquidity by holding sufficient cash reserves and

investing sufficient cash reserves and investing in liquid assets such as short-term
government securities, bank deposits and other low risk investments. They also
use prudent lending practices to manage credit risk and ensure that their loan
portfolio is of a high quality. Cooperatives are subject to regulatory requirements
related to liquidity management. Cooperatives in Nepal are required to maintain

2
adequate liquidity levels and are subject to regular supervision and inspection by
regulatory authorities. The regulatory authorities also set specific liquidity
requirements and ratios that cooperatives must comply with to ensure their
financial stability and solvency.

Overall, maintaining a strong liquidity position is crucial for the financial health
and sustainability of a cooperative. It enables cooperatives to meet their short-
term financial obligations and provide timely credit and financial services to their
members, contributing to the economic development of the communities they
serve.

1.2 Organization Profile

"Shree Balmiki Saving And Credit Cooperative Limited" is one of the leading
cooperative established on Falgun 18, 2057 B.S. During its established period this
cooperative had only 25 members later on this number has increased with passage
of time. This prestigious cooperative is located in Pratappur rural municipality
ward no.2, Gopigunj, Bardaghat-Susta West, Nawalparasi. According to FY
2078/79 there were 1199 members in this cooperative. Among 1199 members
there are 606 female members and 593 male members. This cooperative provides
financial services in Pratappur, Susta Rural Municipality. In the fiscal year
2078/79, it provides 10 percent interest to its members on saving and charges (10-
12) percent interest on loan.

The primary objective of Shree Balmiki Saving And Credit Cooperative Limited
is to provide financial services to its members and customers. The services
offered by the cooperative include saving accounts, fixed deposit accounts, loan,
remittance services and other financial services. The cooperative also provides
advisory services to its members to help them manage their financial better. This
cooperative has a strong commitment to social responsibility and community
development, It has been involved in various social and community development

3
activities including scholarship for needy students, health campus and disaster
relief programs. The cooperative mission is to provide quality financial services to
its members and customers promote financial literacy and contribute to the
economic development of its area.

1.3 Problem of Statement

There are several issues that have evolved when analyzing the liquidity analysis
of "SHREE BALMIKI SAVING AND CREDIT COOPERATIVE" which can
affect the accuracy of liquidity analysis. The problematic of the study is to inquire
into the liquidity position of this cooperative. This study has aimed to find out the
answer of following questions.

 Are the current assets are being utilized by ' Shree Balmiki Saving And
Credit Cooperative Limited'?
 Is 'Shree Balmiki Saving And Credit Cooperative Limited' is meeting its
short term obligations?
 How the net working capital is managed by 'Shree Balmiki And Credit
Cooperative Limited'?
 Is 'Shree Balmiki Saving And Credit Cooperative Limited' able to
maintain its liquidity position?
 Is the cash ratio maintained by the cooperative?

1.4 Objective Of The Study

The main objective of the study is to analyze the 'Shree Balmiki Saving And
Credit Cooperative' liquidity position. Its main objectives are:
 To determine the ability of the cooperative to meet its short-term
obligations.
 To assess the efficiency of the cooperatives working capital
management.

4
  To identify the sources of fund and uses of fund.
 To check the liquidity position of this cooperative

1.5 Rationale of the Study

Liquidity analysis helps to ensure the financial stability of the cooperative by
ensuring that it has sufficient cash or cash liquid assets to meet its short-term
obligations as they become due. Without adequate liquidity the cooperative may
be at risk of defaulting on its obligations, which could lead to financial instability
or even insolvency. Liquidity analysis provides information that can help the
cooperative make informed decisions about its financial management. By
understanding its liquidity position, the cooperative can make decisions about
financing, investment and working capital management that are informed by its
current financial situation. By analyzing liquidity ratios, the cooperatives can
identify potential problems with its cash flow or working capital management
early. This allows the cooperative to take corrective action before the problem
become more serious and potentially threatens the financial stability of the
cooperative. Liquidity analysis can help to improve the accuracy and reliability of
financial reporting for the cooperative. By providing a clearer picture of the
cooperative fund position, liquidity analysis can help to ensure that financial
statements accurately reflect the cooperatives financial situation. Finally liquidity
analysis is often required by stakeholders. By conducting liquidity analysis, the
cooperative can ensure that it is meeting regulatory requirements and providing
stakeholders with the information they need to make informed decisions about the
cooperative.

1.6 Review of Literature

Literature review refers to the study of previous research works and established
theories in the same area of the study. It helps to find out the study gap from the
review of literature. Reviewing of previous research reports has helped me to

5
define problems and find out methods that are suitable to study the research
problem and issues. It has shown me the way to conduct research and
simultaneously has helped me to develop theoretical framework. Here are some
research reports that has shown me the way of conducting research in the related
field.

"Liquidity Analysis of Saving and Credit Cooperatives in Nepal" by Shahi And

Thapa (2018). This study analyzes the liquidity ratios of saving and credit
cooperatives in Nepal. This study found that most of the cooperatives have
adequate liquidity, but some of them have a high level of non-performing loans
which posses a risk to their liquidity position.

"Liquidity Management of Saving and Credit Cooperatives in Nepal" by Shrestha

and Bhhattari (2019). This study analyzes the liquidity management practices of
saving and credit cooperative in Nepal. The study found that most of the
cooperatives in Nepal. This study founded that most of the cooperatives in Nepal
have high level of liquidity, but they face challenges in managing their liquidity
due to limited investment options and weak credit management practices.

"Liquidity And Solvency Analysis of Cooperatives in Nepal" by R.K Pokharel

and B.Adhilkari (2019). The study examines the liquidity and solvency of
cooperatives. The study finds that the cooperative have adequate liquidity and
solvency but there is a need for better management of working capital.

"Financial Performance of Cooperatives in Nepal:A Study of Selected Diary

Cooperatives" by Manita Neupane (2020). This study examines the financial
performance of selected diary cooperatives in Nepal using liquidity ratios such as
current ratio, quick ratio and cash ratio. This study finds that the liquidity position
of the cooperatives is generally satisfactory but some cooperatives need to
improve their working capital.

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Overall, after reviewing the literature, I would say that the cooperatives have
adequate liquidity levels but they are facing challenges in managing their liquidity
due to limited investment options and weak management practices. I would be
suggesting the need for effective liquidity management practices in saving and
credit cooperatives to ensure financial stability and sustainability. Similarly,
addressing to the problems relating to investment options, I would be
recommending various solutions to the problems.

1.7 Research Methodology

The method which is used in the research is called research methodology. It refers
to the systematic process and approach use to collect and analyze data in order to
answer the research questions. During the research process of Shree Balmiki
Saving and Credit Cooperatives the following components are used:

1.7.1 Research Design

The research design refers to the overall plan or strategy for conducting the
research. It is the arrangement conditions for the collection and analysis of data in
a manner that aims to combined relevance to the research purpose.

This study aims on the liquidity analysis of Shree Balmiki Saving And Credit
Cooperative Limited. This study is mainly based on primary data and secondary
data. The primary data are collected directly from the question answer, direct
interview with office staffs and the members of the cooperative. This secondary
data are collected from annual reports of Shree Balmiki Saving And Credit
Cooperatives Limited.
1.7.2 Data Collection Technique
Regarding the data collection, I went to the main office of Shree Balmiki Saving
and Credit Cooperative and obtain the crucial information. I collected the main
annual reports of this cooperative. And the other various articles and journals

7
from various publications Similarly, previous field reports are also taken into
considerations.

1.7.3 Data Analysis Tools

Data analysis tools are techniques used to process, transform and analyze data in
order to extract insights and information from it.
After the crucial data relating to the cooperative are obtained, various liquidity
ratios are calculated to analyze the liquidity position of the cooperative. Hence
with the view of analyzing the liquidity position followings are calculated on the
basis of five years annual report of the cooperative.
 Current Assets:
Current assets are those assets that can be easily converted into cash or used up
within one year or operating cycle of business whichever is longer. These assets
are typically listed in the balance sheet of a company and are important indicators
of a company's liquidity and ability to pay its short-term debts. In the process of
liquidity analysis of the cooperative current assets such as balance with banks and
other financial institution, short term investments and purchase of bills etc.
 Current liabilities:
Current Liabilities are the debts and obligations of a company that are expected to
be paid off within one year or operating cycle of a business, whichever is longer.
These liabilities are typically listed in the balance sheet of a company and are
important indicators of a company's short- term financial obligations. In the
process of liquidity analysis of the cooperative current liabilities current liabilities
such as deposit liabilities and other current liabilities are used.
 Quick Assets:
Quick assets also known as liquid assets are those assets that can be easily
converted into cash within short period of time. Such assets helps to find the
quick ratio which is another major indicator of liquidity. In the process of

8
liquidity analysis of the cooperative quick assets such as deposit liabilities and
other current liabilities are used.

 Cash and Cash equivalents:

It refers to those assets that are readily convertible into cash and have short
maturity period, typically less than three months. Examples of cash and cash
equivalents include physical cash, bank deposits, and money market funds.

 Current Ratio:
The current ratio compares all current assets to all current liabilities. It is
calculated as:

Current Ratio= Current assets/ Current liabilities

 Quick Ratio:

The quick ratio is the same as the cash ratio but includes account receivable as an
asset. It is also known as acid test ratio. It is calculated as:
Quick ratio=Quick assets / Current liabilities

 Net Working Capital:

Net working capital is the difference between current assets and current liabilities.
Higher the value of net working capital shows the strong liquidity and vice versa.
It is calculated as:
Net Working Capital = Current assets- Current liabilities

9
  Cash Ratio:
It can be defined as the liquidity measure that shows a cooperative ability to
cover its short-term obligations using only cash and cash equivalents. A cash
ratio greater than 1, it shows that the cooperative have more cash and cash
equivalents the current liabilities. It is calculated as:
Cash Ratio= Cash + Cash equivalent/ Total current liabilities

1.8 Limitations of the study

During the process of conducting the research there remains various things which
are not attempted by me as a researcher due to time and resources constraints
which shows the limitation of the research. Such limitations are:
 Only liquidity ratios are analyzed other financial indicators are ignored
 Very few liquidity indicators are used for analysis
 Research is restricted to only 5 years data.
 The findings of this study cannot be generalized to other similar
cooperatives because the information collected is limited.

10
 CHAPTER II
DATA PRESENTATIONANDANALYSIS

2.1 Data Presentation and Analysis:

The main purpose of analyzing the liquidity is to highlight the strength and
weakness of the cooperative. Therefore this chapter includes the analysis and
result of gathered information and data with a view to assessing the liquidity of
the cooperative for the period of 5 years. Based on the framework and theories,
ratio analysis has been used for the presentation of data. Liquidity position of
'Shree Balmiki Saving And Credit Cooperative Limited' has been analyzed with
the help of general liquidity ratios and net working capital calculated from the
annual report of the cooperative. The data has been presented in form of tables
and figures for purpose comparison.

2.1. 1Cash and cash at bank

It includes the bank balance present at various banks at every fiscal year. The data
of balance with banks and other financial institutions are presented in a table
given below:
Table 2.1.1
Cash and cash at bank of SBSCCL
FY 2078/79 2077/78 2076/77 2075/76 2074/75

particular

Rastrya 11767.4 299467. 46778.4 38773.4 400007.

banijya 8 48 8 8 48
bank
Global ime 241768. 297659. 350000. 199463 *
bank 86 08 62

11
citizen 2101069 2691083 6223017 1478459 1979463
bank ltd .18 .28 .22 .86 .72
Prabhu 547265. 501605. 1051246 1220714 785356.
bank ltd 09 13 023 .01 74
muktinath 5285725 6146095 38650.8 7434552 1369017
bank ltd .09 .06 9 .51 0.25
National 5854433 2838195 7948747 128868. 125687.
cooperativ 3.31 .42 .6 1 16
Janata * * * * 388586.
bank ltd 51
Total 1404212 1277410 1565844 1050083 1700897
9.01 5.45 1.04 1.37 1.86

Source: Annual report of SBSCCL from FY 2074/75 to FY 2078/79.

It can be presented in the bar graph given below.

1.2E+09

1E+09

800000000 Janata Bank

National Cooperatiive
600000000
Muktinath development Bank

400000000 Prabhu bank Limited

Citizen Bank Ltd
200000000
Global Ime Bank
0 Rastriya banijya bank

Fig: 2.1.1
Cash and cash at bank of SBSCCL from FY 2074/75 to FY 2078/79

12
 2.1.2 Short Term investment
It includes the investments made by the cooperatives. It consists of investments in
shares, other cooperatives and various other financial institutions. The
investments can be summarized in a table listed below.
Table 2.1.2
Short Term Investment of SBSCCL
FY 2078/79 2077/78 2076/77 2075/76 2074/75
Particular
National 103925 103925 103925 103925 103925
cooperative
share
Deposit in 312000 312000 12000 12000 12000
district
cooperative
union
Salt trading 1000 1000 1000 1000 1000
Cooperatio
n

Nepse 160092.1 105232.3 81232.3 572320 51232.3

Shares
District 108274.5 96274.52 84274.5 66274.5 43876
developme
nt and
credit
cooperative
union
Total 595291.6 528431.8 192431.8 156431.8 150431.8
9 3 3 3 3
Source: Annual report of SBSCCL from FY 2074/75 to FY 2078/79

13
 The above data can be presented in the bar diagram given below.

800000
700000 District development and
600000 credit cooperative union
500000 Nepse Share
400000
300000 Salt Trading Cooperation
200000
100000
Deposit in district
0 cooperative union
National Cooperative
Share

Fig: 2.1.2
Short Term Investment of SBSCCL from FY 2074/75 to FY 2078/79

2.1.3 Loan borrowing and purchase of bills:

It includes the short term bills purchased by the cooperation and credit given to
the business or agriculture which can be presented in the table given below.
Table 2.1.3
Loan borrowing and purchase of bills SBSCCL
FY 2078/79 2077/78 2076/77 2075/76 2074/75

particular
Business 1932315 1699598 1466147 1300668 10564317
loan 78.36 53 90 31.3 1
Agriculture * * * 943600 2180526
loan
Total 1932315 1699598 1466147 1310104 10782369
78.36 53 90 31.31 7.47
Source: Annual report of SBSCCL from FY 2074/75 to FY 2078/79.

14
 The data presented in the above table can be summarized in the line graph given
below.

200000000

150000000

100000000
Business Loan
50000000
Agriculture Loan
0 Agriculture Loan
Business Loan

Fig: 2.1.3
Loan Borrowing and Purchase Bill of SBSCCL from FY 2074/75 to FY
2078/79

2.1.4 Deposit Liabilities:

It includes various deposit liabilities including monthly deposit liabilities,
provident fund deposit liabilities, etc which are presented in the table given below
Table 2.1.4
Deposit Liabilities SBSCCL
FY 2078/79 2077/78 2076/77 2075/76 2074/75

particular
Monthly 1720058 1495333 13025344 11003566. 8952409
saving 33.97 86.15 4.93 82 4.82
Periodic 1356863 1271319. 1185273.1 1072067.1 899561.

15
saving .10 10 0 0 10
Provident 1494165 1162067. * 634017.78 5433970
Fund .26 51 .49
Saving
Total 1748568 1519667 13148387 11278096 9585762
32.33 72.76 18.06 51.70 6.41
Source: Annual report of SBSCCL from FY 2074/75 to FY 2078/79.
The data in the above table can be presented in the bar graph given below.

180000000
160000000
140000000
120000000
100000000
Monthly Saving
80000000
60000000 Periodic Saving
40000000 Provident Fund Saving
20000000
Provident Fund Saving
0
Monthly Saving

Fig: 2.1.4
Deposit liabilities of SBSCCL from FY 2074/75 to FY 2078/79.

2.1.5 Other Current liabilities

It includes various liabilities that are remaining to be paid by the cooperative.
The data can be presented in the table given below.

16
 Table 2.1.5
Other Current liabilities of SBSCC
FY 2078/79 2077/78 2076/77 2075/76 2074/75

particular
Different 5360 22300 31750 19038 4800
payables
Auditing 75000 50000 50000 50000 50000

Social 13042.1 9734.70 9002.89 9301.63 8289.56

security tax 5
Tax 101182 54459.0 33837.00 7888.0 5365.00
liabilities
Total 194584. 136493.7 124589.8 86227.6 68774.5
15 0 9 3 6
Source: Annual report of SBSCCL from FY 2074/75 to FY 2078/79
The above tabulated data can be presented in the given pie chart.

120000

100000

80000
Different payables
Auditiing
60000
Social Security Tax
40000 Tax liabilities

20000

0
2078/79 2077/78 2076/77 2075/76 2074/75

Fig: 2.1.5
Other Current Liabilities of SBSCCL from FY 2074/75 to FY 2078/79

17
 2.1.6 Prepaid Expenses
It includes the expenses that have been paid by the cooperative in advance. It
includes advance rent, Insurance paid in advance and other miscellaneous
expenses paid in advance such as membership fee paid by the cooperative in
advance.
Table2.1.6
Prepaid expense of SBSCCL
FY 2078/79 2077/78 2076/77 2075/76 2074/75

Particular
Insurance 95642.4 69352.8 68245.2 66334.2 80029.8
premium
Advance rent 47821.2 40455.8 34122.6 27639.25 40014.9
paid

Membership 15940.4 5779.4 11374.2 9950.13 16005.96

fee of
accounting
software
Total 159404 115588 113742 110557 133383

Source: Annual report of SBSCCL from FY 2074/75 to FY 2078/79.

18
 The data can be summarized in the pie chart given below.

3000000

2500000

2000000 Insurance premium

1500000 Advance rent paid

Membership fee of accounting

1000000
software

500000

0
2078/79 2077/78 2076/77 2075/76 2074/75

Fig: 2.1.6
Prepaid Expenses of SBSCCL from FY 2074/75 to FY 2078/79
2.1.7 Current Assets:
These assets are typically used to support the daily operations of the cooperatives
and are essential in smooth functioning. A high ratio of current assets to current
liabilities is generally considered preferable as it indicates that the cooperative has
sufficient liquidity to meet its short- term obligations. Data of current assets from
FY 2074/75 to FY2078/79 are presented in a table below.
Table 2.1.7
Current Assets of SBSCCL

FY 2078/79 2077/78 2076/77 2075/76 2074/75

Particulars
Balance with 1404212 12774105. 15658441. 10500831. 1700897
banks and other 9.01 45 04 37 1.86
financial

19
institution

Short term 595291.6 528431.83 192431.83 156431.83 150431.8

investments 9 3
Purchase of 1932315 169959853 14661479 131010431 1078236
bills 78.36 0 .31 97.47
Total 2078689 183262390 16246566 124983101 1416676
99.1 .3 2.9 .2 94.5
Source: Annual report of SBSCCL from FY 2074/75 to FY 2078/79.
The above data can be presented in a bar diagram as follows:
250000000

200000000

Purchase of bills
150000000

Short term investments

100000000
Balance with banks and other
financial institution

50000000

0
2074/75 2075/76 2076/77 2077/78 2078/79

Fig: 2.1.7
Current assets of SBSCCL from FY 2074/75 to FY 2078/79

20
2.1.8 Current Liabilities
It refers to the amount that the cooperatives expected to pay off within 12 months
or one operating cycle, whichever is longer. It's important for cooperatives to
keep track record of their current liabilities as they represent short-term
obligations that must be paid off in a timely manner to maintain financial health
and stability. Data of current liabilities from FY 2074/75 to FY2078/79 are
presented in a table below.
Table 2.1.8
Current Liabilities SBSCCL
FY 2078/7 2077/78 2076/77 2075/76 2074/75
9
particular
Deposit 17485 15196677 131483871 112780965 95857626
liabilities 6832.3 2.76 8.06 1.70 .41
3
Other 19458 136493.70 124589.89 86227.63 68774.56
current 4.15
liabilities
Total 17505 15210326 131563308 95926400.9 11279568
1449.5 6.5 7 79.8
Source: Annual report of SBSCCL from FY 2074/75 to FY 2078/79.
Now the above data can be presented in a pie-chart as follows:

Deposit Liabilities

2078/79
2077/78
2076/77
2075/76
2074/75

21
 Fig: 2.1.8
Current liabilities of SBSCCL from FY 2074/75 to FY 2078/79

2.1.9 Cash and Cash Equivalents

It can be defined as the liquidity measure that shows a cooperative ability to cover
its short-term obligations using only cash and cash equivalents. A cash ratio is
greater than one shows that the cooperative has more cash and cash equivalents
the current liabilities. Data of cash and cash equivalents from FY 2074/75 to
FY2078/79 are presented in a table below.
Table 2.1.9
Cash and Cash Equivalents of SBSCCL
FY 2078/79 2077/78 2076/77 2075/75 2074/75

Particulars
Balance with 140421 1277410 1565844 1050083 17008971
banks and other 29.01 5.45 1.04 1.37 .86
financial
institution
Total 140421 1277410 1565844 1050083 17008971
29.01 5.45 1.04 1.37 .86
Source: Annual report of SBSCCL from FY 2074/75 to FY 2078/79.
Now the above data can be presented in the given line graph.

Balance with banks and financial

institution
20000000
15000000
10000000
Balance with banks
5000000 and financial
0 institution

22
 Fig: 2.1.9
Cash and cash equivalent of SBSCCL from FY 2074/75 to FY 2078/79

2.1.10 Quick Assets

Quick assets also known as liquid assets are those assets that can be easily
converted into cash within short period of time. Such assets help to find the quick
ratio which is another major indicator of liquidity. In the process of liquidity
analysis of the cooperative quick assets such as deposit liabilities and other
current liabilities are used. Data of quick assets from FY 2074/75 to FY2078/79
are presented in a table below.
Table 2.1.10
Quick Assets of SBSCCL

FY 2078/79 2077/78 2076/77 2075/76 2074/75

Particulars
Balance with 1404212 12774105. 15658441. 10500831. 1700897
banks and other 9.01 45 04 37 1.86
financial
institution
Short term 595291.6 528431.83 192431.83 156431.83 150431.8
investments 9 3
Purchase of 1932315 169959853 14661479 131010431 1078236
bills 78.36 0 .31 97.47
Less : prepaid 159404 115588 113742 110557 133383
expenses
Total 2077095 183146802 16235192 124872544 1415343
95.1 0.9 .2 11.5
Source: Annual report of SBSCCL from FY 2074/75 to FY 2078/79.
The above data can be presented in a bar diagram as follows:

23
 250000000

200000000

Purchase of bills
150000000

Short term investments

100000000
Balance with banks and other
financial institution

50000000

0
2074/75 2075/76 2076/77 2077/78 2078/79

Fig: 2.1.4
Quick Assets SBSCCL from FY 2074/75 to FY 2078/79.

2.2.11 Liquidity Ratios

Liquidity ratios are financial ratio that measures a cooperative ability to pay its
short term debts and obligations using its current assets. Liquidity ratios are
important indicators of the cooperatives organization to meet its short-term
obligations and other expenses. They are used by investors, creditors and other
stakeholders to assess the cooperative financial stability and to make informed
decisions about investing. There are several types of liquidity ratios, including the
current ratio, quick ratio, and cash ratio. Each of these ratios uses different
components of a company's current assets and liabilities to provide a different
perspective on its liquidity.

24
2.2.11.1 Current Ratio
Current ratios establish a relationship between current assets and liabilities. Its
main objective is to check the ability of the cooperative to meet its short term
obligations. There are two components of current assets they are current assets
and current liabilities.
Here the current ratios from FY 2074/75 to FY 2078/79 are given below:

For FY 2074/75:
Current Ratio = Current assets/ Current liabilities
= 141667694.5/112795879.8
= 1.255

For FY 2075/76:
Current Ratio = Current assets/ Current liabilities
= 124983101.2/95926400.97
= 1.302

For FY 2076/77
Current Ratio = Current assets/ Current liabilities
= 162465662.9/131563308
= 1.234

For FY 2077/78
Current Ratio = Current assets/ Current liabilities
= 183262390.3/152103266.5
= 1.204

For FY 2078/79
Current Ratio = Current assets/ Current liabilities
= 207868999.1/175051449.5

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 = 1.187

The above calculated data can be presented in a table given below:

Table 2.2.11.1
Current ratios of SBSCCL
Years Current Assets Current Current Ratio
Liabilities
2078/79 207868999.1 175051449.5 1.187
2077/78 183262390.3 152103266.5 1.204
2076/77 162465662.9 131563308 1.234
2075/76 1249893101.2 95926400.97 1.302
2074/75 141667694.5 112795879.8 1.255
Source: Annual reports of SBSCCL from FY 2074/75 to FY 2078/79

The data in the table 2.2.11.1 shows that in the FY 2074/75 the current ratio was
1.255.Similarly in the FY 2075/76, FY 2076/77, FY 2077/78, FY 2078/79 was
1.302, 1.234, 1.204 and 1.187 respectively. This shows that the current ratios are
in declining phase. It is decreasing continuously each year. The above table shows
that the current ratio of the cooperative is just satisfactory. However it has enough
cash to meet its short term obligations. The information of the above table can be
summarized in the line graph given below.

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 Current Ratios
1.32
1.3
1.28
1.26
1.24
1.22
Current Ratios
1.2
1.18
1.16
1.14
1.12
2078/79 2077/78 2076/77 2075/76 2074/75

Fig 2.2.1.1
Current ratio of SBSCCL from FY 2074/75 to FY 2078/79

2.2.11.2 Quick Ratio

Quick Ratio establishes the relationship between quick assets and current
liabilities. There are two components of the ratio i.e. quick assets and current
liabilities. Here the quick ratios from FY 2074/75 to FY 2078/79 are given below:

For FY 2074/75:
Quick Ratio = Quick assets/ Current Liabilities
=141534311.5 /95926400.97
= 1.301
For FY 2075/76:
Quick Ratio = Current assets/ Current liabilities
=124872544.2 /95926400.97
= 1.254

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For FY 2076/77
Quick Ratio = Current assets/ Current liabilities
= 162351920.9 /131563308
= 1.234
For FY 2077/78
Quick Ratio = Current assets/ Current liabilities
= 183146802 /152103266.5
= 1.204
For FY 2078/79
Quick Ratio = Current assets/ Current liabilities
= 207709595.1 /175051449.5
= 1.186

The above calculated data can be presented in a table given below:

Table 2.2.11.2
Quick ratios of SBSCCL
Years Quick Assets Current Current Ratio
Liabilities
2078/79 207709595.1 175051449.5 1.186
2077/78 183146802 152103266.5 1.204
2076/77 162351920.9 131563308 1.234
2075/76 124872544.2 95926400.97 1.301
2074/75 141534311.5 112795879.8 1.254
Source: Annual reports of SBSCCL from FY 2074/75 to FY 2078/79

The data in the table 2.2.11.2 shows that in the FY 2074/75 the quick ratio was
1.254.Similarly in the FY 2075/76, FY 2076/77, FY 2077/78, FY 2078/79 was
1.301, 1.234, 1.204 and 1.186 respectively. This shows that the quick ratios are in
declining phase. It is decreasing continuously each year. The above table shows
that the quick ratio of the cooperative is above normal standard. It has enough

28
cash to meet its short term obligations. The information of the above table can be
summarized in the line graph given below.

Quick Ratios
1.32
1.3
1.28
1.26
1.24
1.22
1.2
1.18
1.16
1.14
1.12
2078/79 2077/78 2076/77 2075/76 2074/75

Fig 2.2.1.2
Quick ratio of SBSCCL from FY 2074/75 to FY 2078/79

2.2.11.3 Net Working Capital

It can be defined as the difference between current assets and current liabilities. A
positive working capital of a cooperative shows that the cooperative is able to pay
off its short term obligations while a negative working capital means that the
cooperative is not able to meet its obligations. Here the Net Working Capital from
FY 2074/75 to FY 2078/79 is calculated below:
For FY 2074/75
Net Working Capital = Current assets – Current liabilities
= 141667694.5 – 112795879.8
= 28871814.7
For FY 2075/76

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Net Working Capital = Current assets – Current liabilities
= 141667694.5 – 28871814.713022
The above calculated data can be summarized in the table given below.

Table 2.2.11.3
Net working Capital of SBSCCL
Year Current Assets Current Net Working
Liabilities Capital
2078/79 207868999.1 175051449.5 32817549.6
2077/78 183262390.3 152103266.5 31159123.8
2076/77 162465662.9 131563308 30902354.9
2075/76 1249893101.2 95926400.97 28871814.7
2074/75 141667694.5 112795879.8 29056700.23
Source: Annual reports of SBSCCL from FY 2074/75 to FY 2078/79

From the table it was found that the net working capital from FY 2074/75 to FY
2078/79 are 29056700.23, 28871814.78, 30902354.9, 3115923.8 and 32817549.6
respectively. The data in the table 2.1.1.3 shows that the cooperative has positive
working capital and it is in increasing consistently each year which indicates
positive sigh in the liquidity position of the cooperative. The above tabulated data
can be presented in a pie-chart as:

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 Net Working Capital

2074/75
2075/766
2076/77
2077/78
2078/79

Fig: 2.1.1.3
Net Working Capital from FY 2074/75 to FY 2078/79

2.2.11.4 Cash Ratio

It is the liquidity measure that shows s cooperative ability to cover its short-term
obligations using only cash and cash equivalents. If is the ratio is greater than 1, it
means the cooperative has more cash on hand than current debts, while a
calculation less than 1 means that the cooperative has short-term debts than cash.
Here the cash ratio from FY 2074/75 to FY 2078/79 is calculated below:

For FY 2074/75
Cash Ratio = Cash and cash equivalents / current liabilities
= 17008971.86 / 95926400.97
= 0.177

31
For FY 2075/76
Cash Ratio = Cash and cash equivalents / current liabilities
= 10500831.37 / 112795879.8
= 0.09
For FY 2076/77
Cash Ratio = Cash and cash equivalents / current liabilities
= 15658441.04 / 131563308
= 0.119
For FY 2077/78
Cash Ratio = Cash and cash equivalents / current liabilities
= 12774105.45 / 152103266.5
= 0.083
For FY2078/79
Cash Ratio = Cash and cash equivalents / current liabilities
= 14042129.01 / 175051449.5
= 0.080
The above calculated can be presented in a tabular form as given below table.

Table 2.2.11.4
Cash Ratio of SBSCCL
Year Cash and cash Current Cash Ratio
equivalents Liabilities
2078/79 14042129.01 175051449.5 0.080
2077/78 12774105.45 152103266.5 0.083
2076/77 15658441.04 131563308 0.119
2075/76 10500831.37 95926400.97 0.09
2074/75 17008971.86 112795879.8 0.177
Source: Annual reports of SBSCCL from FY 2074/75 to FY 2078/79

32
From the above data the cash ratio of FY 2074/75, FY 2075/76, FY 2076/77, FY
2077/78, FY 2078/79 were 0.177, 0.09, 0.119, 0.083, 0.080. The data in the table
show that the cooperative has cash and cash equivalent to pay only few percent of
its current liabilities. It suggests that the cooperative does not have enough cash
on hand to pay off its short- term debts. The above tabulated data can be presented
in the doughnut given below.

Cash Ratios

2074/75
2075/76
2076/77
2077/78
2078/79

Fig: 2.2.1.4
Cash Ratio of SBSCCL from FY 2074/75 to FY 2078/79

2.2 Analysis of Result

The current ratio of the cooperative is below the normal standard. In the FY
2074/75 the current ratio of the cooperative was 1.302. Similarly in the FY
2075/76, FY 2076/77, FY 2077/78, FY 2078/79 were 1.255, 1.234, 1.201 and
1.187 respectively. This trend of the current ratio of the cooperative is below the
normal standard. As a traditional rule current ratio of 2:1 is preferable. For
interpretation the ratio under 1 indicates that the cooperative liabilities are greater
than its assets and suggests that the cooperative in question would be unable to

33
pay off its obligations if they come due at that point. While a current ratio below 1
show that the cooperative is not in good financial health, it does not necessarily
mean that it will go bankrupt. Analyzing the current ratio of 'Shree Balmiki
Saving and Credit Cooperative Limited', the cooperative seems to have a low
current ratio. The results and findings of the evaluation and analysis has also been
presented in a line graph in order to provide clear view of data. The reasons for
this decreasing current ratio maybe increase in current liabilities, decrease in
current assets, in efficient collection of accounts receivable, decline in revenue
and poor cash management.

Similarly the quick ratio of the cooperative is good and preferable. As a

traditional rule the quick ratio of 1:1 is said to be satisfactory. As calculated in the
above section, the quick ratio of the cooperative was 1.186 and 1.204 in FY
2078/79 and FY 2077/78. Similarly in the FY 2076/77, FY 2075/76, FY 2074/75
was 1.234, 1.254 and 1.301. This shows that the quick ratio of the cooperative is
preferable and is above standard. For interpretation and analysis a quick ratio
lower than 1 does not necessarily mean that the bank is going into default, it could
mean that the bank is relying heavily on other assets to pay its short term
liabilities. The higher the quick ratio, the better liquidity position it indicates. In
order to increase quick ratio, the cooperative should collect its account receivables
more quickly and should improve its cash flow management.

The net working capital in the FY 2078/79 and FY 2077/78 was 32817549.6 and
31159123.8. Similarly the net working capital of year FY 2076/77, FY2075/76
and FY 2074/75 were 30902354.9, 28871814.7 and 29056700.23. The working
capital of the bank is also preferable. Each and every year the current assets of the
cooperative are more than the current liabilities. As a result the working capital of
the cooperative is positive. Higher the positive working capital better is the
liquidity position. The calculation of the net working capital of this cooperative
shows that the cooperative has enough liquid assets to pay for its immediate

34
expenses such as salaries, bills etc. This shows a good sign for the financial health
of the cooperative, as it has enough resources to continue operating and growing
of its business.

Similarly, the cash ratios of the cooperative in year 2078/79 was found to be 0.08
and in the FY 2077/78 was 0.083.This level of cash ratio shows that the
cooperative is unable to cover all of its short-term obligations. Similarly the cash
ratios of FY 2076/77, FY 2075/76, FY 2074/75 were 0.119, 0.09 and 0.177. This
cash ratio of various years shows that the cooperative has more short-term debts
than cash. The reasons for such decreasing and low cash ratio maybe too much
borrowing short-term debts and investments in long term assets. In order to
maintain good cash ratio the cooperative should collect its accounts receivable,
manage its cash flow effectively and should avoid unnecessary borrowings.

2.3 Major Findings:

The financial statements of 'Shree Balmiki Saving and Credit Cooperative
Limited' have been used to analyze the liquidity position of the cooperative. Some
major findings from the data presented and analyzed in previous section are
derived which are listed below.
a) Current ratio of 'Shree Balmiki Saving and Credit Cooperative Limited' is
below the normal standard.
b) Quick ratio suggests strong liquidity position of 'Shree Balmiki Saving
and Credit Cooperative Limited'. It is above the normal standard.
c) The net working capital of 'Shree Balmiki Saving and Credit Cooperative
Limited' is positive and is increasing consistently each year. This indicates
that the bank holds more current assets than the current liabilities. It
indicates that the liquidity position is strong enough.
d) The cash ratio of the cooperative is relatively low. It suggests that the
cooperative is facing some problem in the payment of its short-term debts
and obligation.

35
 CHAPTER-III
SUMMARY, CONCLUSION AND
RECOMMENDATION
This chapter of the report is intended to provide summary, conclusion and
recommendation after analyzing the liquidity position of 'Shree Balmiki Saving
and Credit Cooperative Limited'.

3.1 Summary:
This study is mainly based on secondary data. All the data are taken from 'Shree
Balmiki Saving and Credit Cooperative Limited' annual report, journals, balance
sheet, profit and loss account. After collecting the data from different sources, it is
analyzed by using liquidity ratios. In the attempt to fulfill the objectives of the
research work, the required secondary data are tabulated as per necessity and
figures and charts. This study suffers from different limitation it considers only
data of 5 years because of time and resources constraints. We have analyzed the
performance of the cooperative over the period of FY 2074/75 to FY 2078/79. To
evaluate the liquidity analysis we have divided whole report into different
chapters. In every chapter, there are several sub-chapters. The first chapter
introduction gives background information about project work, introduction of the
cooperative, Review of Literature etc.

In the FY 2074/75 the current ratio was 1.255.Similarly in the FY 2075/76, FY

2076/77, FY 2077/78, FY 2078/79 was 1.302, 1.234, 1.204 and 1.187
respectively. This shows that the current ratios are in declining phase. It is
decreasing continuously each year. This trend of the current ratio of the
cooperative is below the normal standard. As a traditional rule current ratio of 2:1
is preferable. For interpretation the ratio under 1 indicates that the cooperative
liabilities are greater than its assets and suggests that the cooperative in question
would be unable to pay off its obligations if they come due at that point. While a

36
current ratio below 1 shows that the cooperative is not in good financial health, it
does not necessarily mean that it will go bankrupt. Analyzing the current ratio of
'Shree Balmiki Saving and Credit Cooperative Limited', the cooperative seems to
have a low current ratio. The results and findings of the evaluation and analysis
has also been presented in a line graph in order to provide clear view of data. The
reasons for this decreasing current ratio maybe increase in current liabilities,
decrease in current assets, in efficient collection of accounts receivable, decline in
revenue and poor cash management.

In the FY 2074/75 the quick ratio was 1.254.Similarly in the FY 2075/76, FY

2076/77, FY 2077/78, FY 2078/79 was 1.301, 1.234, 1.204 and 1.186
respectively. This shows that the quick ratios are in declining phase. It is
decreasing continuously each year. The above table shows that the quick ratio of
the cooperative is above normal standard. It has enough cash to meet its short
term obligations. This shows that the quick ratio of the cooperative is preferable
and is above standard. For interpretation and analysis a quick ratio lower than 1
does not necessarily mean that the bank is going into default, it could mean that
the bank is relying heavily on other assets to pay its short term liabilities. The
higher the quick ratio, the better liquidity position it indicates. In order to increase
quick ratio, the cooperative should collect its account receivables more quickly
and should improve its cash flow management.

It was found that the net working capital from FY 2074/75 to FY 2078/79 are
29056700.23, 28871814.78, 30902354.9, 3115923.8 and 32817549.6
respectively. The data in the table 2.1.1.3 shows that the cooperative has positive
working capital and it is in increasing consistently each year which indicates
positive sigh in the liquidity position of the cooperative. The working capital of
the bank is also preferable. Each and every year the current assets of the
cooperative are more than the current liabilities. As a result the working capital of
the cooperative is positive. Higher the positive working capital better is the

37
liquidity position. The calculation of the net working capital of this cooperative
shows that the cooperative has enough liquid assets to pay for its immediate
expenses such as salaries, bills etc. This shows a good sign for the financial health
of the cooperative, as it has enough resources to continue operating and growing
of its business.

The cash ratio of FY 2074/75, FY 2075/76, FY 2076/77, FY 2077/78, FY

2078/79 were 0.177, 0.09, 0.119, 0.083, 0.080. The data in the table show that the
cooperative has cash and cash equivalent to pay only few percent of its current
liabilities. It suggests that the cooperative does not have enough cash on hand to
pay off its short- term debts. This cash ratio of various years shows that the
cooperative has more short-term debts than cash. The reasons for such decreasing
and low cash ratio maybe too much borrowing short-term debts and investments
in long term assets. In order to maintain good cash ratio the cooperative should
collect its accounts receivable, manage its cash flow effectively and should avoid
unnecessary borrowings.

3.2 Conclusion
Liquidity analysis is the primary reason why the cooperative exists as it is stated
in the literature part. The main aim of the report is to analyze the liquidity position
of 'Shree Balmiki Saving and Credit Cooperative Limited'. From the annual report
of the cooperative data from FY 2074/75 to FY 2078/79 has been used to analyze
the liquidity of the cooperative. The liquidity analysis of the cooperative shows
that cooperatives current ratio is below the normal standard. But the current ratio
is also decreased analyzing in the five years periods. Depending on the liquidity
ratio of 'Shree Balmiki Saving and Credit Cooperative Limited' , it has been seen
that the cooperative would have no difficulties in paying its short-term obligations
as its quick ratio is preferable. Moreover these ratios have a problem in a future an
account of quick assets but it must address the current assets.

38
The good quick ratio suggests that the cooperative has sufficient short-term assets
that can be quickly converted into cash to cover its immediate obligations.
Similarly the good and increasing positive net working capital indicates that the
cooperative has enough current assets to cover its current liabilities and is
therefore in a position to continue its operations. Similarly the cash ratio is
relatively poor which suggests that the cooperative may have a high amount of
non-cash assets such as account receivables which are not easily convertible into
cash. Overall the cooperative may need to re-evaluate its management practices to
meet its short-term obligations while still maintaining enough inventories to
satisfy customer demand. The conclusion of the study can be summarized as
follows:
 The analysis of current ratio is found to be below the normal standard. The
reasons for this decreasing current ratio maybe increase in current
liabilities, decrease in current assets, in efficient collection of accounts
receivable, decline in revenue and poor cash management
 The analysis of quick ratio shows that the quick ratio of 'Shree Balmiki
Saving and Credit Cooperative Limited' is satisfactory and preferable.
 The net working capital analysis of 'Shree Balmiki Saving and Credit
Cooperative Limited' shows positive working capital which indicates that
the cooperative holds greater amount of current assets than current
liabilities.
 The cash ratio of 'Shree Balmiki Saving and Credit Cooperative Limited'
is below normal standard which indicates that the cooperative inability to
meet its short-term obligations.

3.3 Recommendation
The following recommendations based on the above study findings are
forwaded in order to enhance the liquidity position of 'Shree Balmiki Saving
and Credit Cooperative Limited'.

39
 In order to improve the current ratio of this cooperative the
management of the cooperative should be improved. Similarly the
number of members should be increased so that the cooperative can
generate more funds.
 Also the cooperative should encourage its members to save more
money by offering high interest rates on deposit. This will increase
amount of cash and can be used to pay off debts and improve current
ratio.
 Likewise reducing expenses of the cooperative and increasing the
income of cooperative can also improve current ratio.
 The cooperative should maintain sufficient cash reserve by setting
aside a portion of its profit as cash reserve to maintain good quick
ratio.
 The cash flow of the cooperative should be regularly monitored and
managed so that preferable quick assets can be seen.
 In order to enhance the net working capital the cooperative should
collect its receivables on time as late payments can create cash flow
problems.
 Similarly to improve and enhance the cash ratio the cooperative should
increase inflow and decrease cash outflow by promoting saving among
members and reducing admin expenses and negotiating better deal
with suppliers.
 The cooperative can also improve its cash management practices in
order to improve cash ratio.
 The investments of surplus cash in low risk financial instruments that
can earn reasonable rate of return improving liquidity ratio.

40
 BIBLIOGRAPHY

Pokharel R.K and Adhikari B (2019),"Liquidity and Solvency Analysis of

Cooperative in Nepal".

Neupane Manita (2020), "Financial Performance of Cooperative in Nepal: 'A

study of selected Diary Cooperatives'

Thapa Shahi (2018),"Liquidity Management of Saving and Credit Cooperatives in

Nepal".

Shrestha Raman (2019), "Liquidity Management of Saving and Credit

Cooperatives in Nepal".
Rijal Santosh (2018), "Liquidity Analysis of Cooperatives in Nepal"
Lamsal (2017), "An Assessment of Liquidity Management of Cooperatives in
Nepal"

Websites:
www.wikipedia.com
www.chatgpt.com
www.tuedulibrary.com

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