WORKING CAPITAL MANAGEMENT OF NIC

ASIA BANK LTD.

A Project Report

Submitted By
Roshani Chand
T.U Registration. No: 7-2-554-93-2016
Symbol No: 2740027
Name of Campus: DilliBazar Kanya Multiple Campus
Campus Roll No/Batch.: 136 - 073
Group: Finance

Submitted To
The Faculty of Management
Tribhuvan University
Kathmandu

In partial fulfillment of the requirements for the degree of

Bachelor of Business Studies (BBS)

Dillibazar, Kathmandu
February 2021
 DECLARATION

I hereby declare that the project work entitled WORKING CAPITAL MANAGEMENT OF
NIC ASIA BANK LTD. submitted to the Faculty of Management, Tribhuvan University,
Kathmandu is an original piece of work under the supervision of HARI SUNDAR KHUSHI,
faculty member, DILLIBAZAR KANYA MULTIPLE CAMPUS,
DILLIBAZAR,
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.

……………………..
ROSHANI CHAND

February, 2021

ii
 SUPERVISOR'S RECOMMENDATION

The project work report entitled WORKING CAPITAL MANAGEMENT OF NIC ASIA
BANK LTD. submitted by MS. ROSHANI CHAND of DILLIBAZAR KANYA MULTIPLE
CAMPUS, DILLIBAZAR, KATHMANDU is prepared under my supervision as per the
procedure and format requirements laid by the Faculty of Management, Tribhuvan
University,
as partial fulfillment of the requirements for the degree of Bachelor of Business
Studies
(BBS).

…………………………….……
HARI SUNDAR KHUSHI

February, 2021

iii
 ENDORSEMENT

We hereby endorse the project work report entitled WORKING CAPITAL MANAGEMENT
OF NIC ASIA BANK LTD submitted by MS. ROSHANI CHAND of DILLIBAZAR
KANYA
MULTIPLE CAMPUS, DILLIBAZAR, KATHMANDU in partial fulfillment of the

……………………………. …………………………………….

Mr. NABIN PRAKASH POUDEL Mrs. APARAJITA ARYAL

Chairman, Research Committee Campus Chief
February 2021 February 2021

iv
 ACKNOWLEDGEMENT

This report has been prepared as a partial fulfillment of Bachelor of Business

(BBS) Research
report. The report is deeply indebted to DilliBazar Kanya Multiple Campus and
Tribhuvan
University for incorporating project report in the degree program which provides a
wonderful
opportunity to understand and study practically.

This is my immense delectation to present the report of Bachelor of Business

Studies (BBS)
assigned by Tribhuvan University. Unlike every student I also extended a lot of
pragmatic
knowledge while devising this task. I enjoyed each and every span of time while
creating this
report.

I would like to express my gratitude to many of them who provided me very

informative and
precious as well as proper information to complete this report. I would like to
thank
Tribhuvan University for providing us chance and allowing me for this study. I
would also
like to thank my supervisor Hari Sundar Khushi for guiding me in preparing this
report. I am
also thankful

Lastly, I would like to express our sincere thanks to all staff of ‘NIC ASIA BANK
LIMITED’
that provided me with the required data and also give guideline to fulfill the task
in time.

I hope readers; teachers and students who read this report will consider my mistake
and try to
give their advice, suggestion towards my report. I hope you will consider, as it
was our
starting step in the field of report writing.

Finally, I again send my warm greetings and gratitude to all those who have
involved in this
project directly or indirectly.

Roshani Chand

February, 2021

v
 TABLE OF CONTENTS

Declaration........................................................................
.................................................................ii

Supervisor's
Recommendation.....................................................................
......................................iii

Endorsement........................................................................
...............................................................iv

Acknowledgement....................................................................
............................................................v

Table of
Contents...........................................................................
....................................................vi

List of
Tables.............................................................................
........................................................vii

List of
Figures............................................................................
......................................................viii

Abbreviations......................................................................
...............................................................ix

CHAPTER-I
INTRODUCTION.......................................................................
..............................1

BACKGROUND.........................................................................
.........................................................1
PROFILE OF THE NIC ASIA BANK
LTD................................................................................
............3

OBJECTIVES.........................................................................
.............................................................3

RATIONALE..........................................................................
.............................................................3

REVIEW.............................................................................
...............................................................4

METHODS............................................................................
.............................................................5
LIMITATIONS OF THE
STUDY..............................................................................
.............................10

CHAPTER-II RESULTS AND

ANALYSIS...........................................................................
......11
 DATA
PRESENTATION.......................................................................
..............................................11
ANALYSIS OF
RESULTS............................................................................
.......................................11

FINDINGS...........................................................................
.............................................................21

CHAPTER-III SUMMARY AND

CONCLUSION......................................................................23

SUMMARY............................................................................
..........................................................23

CONCLUSION.........................................................................
.........................................................24

BIBLIOGRAPHY.......................................................................
......................................................25

APPENDICES.........................................................................
.........................................................26

vi
 LIST OF TABLES

Table no. Particular Page no.

1 Structure of Current Ratio 12
2 Structure of NRB Balance to Total Deposit Ratio 14
3 Structure of Total Liquid Funds to Total Deposit Ratio 15
4 Structure of Net Profit to Total Assets Ratio 17
5 Structure of Return on Equity 18
6 Structure of Net Profit to Net Working capital Ratio 20

vii
 LIST OF FIGURES

Figure no. Particular Page no.

1 Trend of Current Ratio 13

2 Trend of NRB Balance to Total Deposit Ratio 14
3 Trend of Total Liquid Funds to Total Deposit 16
4 Trend of Net Profit to Total Assets Ratio 17
5 Trend of Return on Equity 19
6 Trend of Net Profit to Net Working Capital Ratio 21

viii
 ABBREVIATIONS

BBS Bachelor of Business Studies

CA Current Assets
CL Current Liabilities
C.V. Coefficient of Variance
i.e. That is
Ltd. Limited
ROA Return on Assets
ROE Return on Equity
TU Tribhuvan University
& And
% Percentage

ix
 CHAPTER-I

INTRODUCTION

Background

Financial institution can be considered as the catalyst to the economic growth of a

country.
The development process of a country involves the mobilization and deployment of
resources. Development of trade, commerce and industry are the prime requisite for
the
attainment of the economic, political and social goals. To fulfill the purpose of
planning,
financial functions more often dominate the other functions. “There is always lack
of
finance in underdeveloped economy because natural resources are either
underutilized
or utilized in non-productive sectors. Likewise, underdeveloped countries are
not
efficient in mobilization of financial

So, in these countries for the rapid development of the economy, there should be
proper
mobilization of resources. Due to various difficulties or even ignorance of the
people, such
resources have not been properly utilized. Hoarding could be one of the reasons for
this. So,
financial institutions play a vital role to encourage thrift and discourage
hoardings by
mobilizing the resources and removing the habit of hoarding. Banks are the heart of
the
financial system, they pursue rapid economic growth, developing the banking habit
among the
people, collecting the small-scattered resources in one bulk and utilizing them in
further
productive purposes and rendering other valuable services to the country. Thus,
this gives the
individuals an opportunity to borrow funds against future income, which may improve
the
economic well-being of the borrower.

The growth of banking in Nepal is not so long in comparison with other developing
countries.
Nepal had to wait for a long time to come to the present banking system. The
development of
any countries cannot be imagined without economic activities. The development of
banking
system is one of the grounds for economic development. So, we should take bank as
strong
means for the economic development. The development of bank is interwoven with the
development of a person, a society and a nation. It is impossible to fulfill the
needs without
banks whether it is inside the nation or foreign country whether it is individual
development
or business and whether it is the people or the government. So, to solve the
problems
relating to
1
Banking in modern sense started with the inception of Nepal Bank Limited (NBL) on
B.S
1994- 7-30. NBL had a herculean responsibility of attracting people towards banking
sector from predominant money-lenders net and of expanding banking service. Being a
commercial bank, it was nature that NBL paid more attention to profit generating
business
and preferred opening

Government however had objective of providing banking services to the nook and
corners of
the country and also managing financial system in proper way. Thus, Nepal Rastra
Bank
(NRB) was set up on B.S. 2013-01-14 as a central bank under Nepal Rastra Bank act
2012
B.S. Since then it has been functioning as the government’s bank and has
contributed to the
growth of financial sector.

With the establishment of RBB and ADB banking services spread to both urban & rural
areas.
It helped the common people to reduce their burden of paying higher rate of
interest to money
lenders. It was natural that expectation of customer kept on increasing. Once they
got banking
services, they were expecting imprudence and efficiency. However, excess political
&
bureaucratic interference & absence of modern managerial concept in these
institutions was
hurdle in this regard. Banking services to the satisfaction of customer was a far
cry. The
inception of Nepal Arab bank Limited (Renamed as Nabil Bank Limited) in B.S. 2041-
03-29
as a first joint venture bank proved to be milestone in the history of banking
which gave a
new

Numbers of joint venture commercial banks are established now. These are Standard
Chartered Bank Ltd, SBI Bank Ltd, Nepal Bangaladesh Bank Ltd, NIC Asia Bank Ltd,
Nepal credit and commercial bank Ltd, Nepal industrial and commercial bank Ltd,
Machhapuchchre Bank Ltd, Laxmi bank Ltd, etc. These banks are playing a great role
for the
economic development of the

The term working capital management is closely related with short-term finance and
it is
concerned with collection and allocation of the resources. "Working capital
management is
related to the problems arises in attempting to manage the current assets and
current liabilities
and the relationship that exist between them." (Michael; 1976:17). The management
of
working capital plays a vital role for exiting of any public enterprises
successfully while
studies it. It is the centers on the routine day-to-day administration of current
assets and
current
2
Profile of the NIC ASIA Bank Ltd.

NIC ASIA Bank has its antecedents in NIC Bank which was established on 21st July
1998.
The
Bank was rechristened as NIC ASIA Bank after the merger of NIC Bank with Bank of
Asia
Nepal on 30th June 2013. This was a historic merger in the annals of Nepalese
financial
landscape as the first of its kind merger between two successful commercial banks
in the
country.

During the post-merger integration phase, NIC ASIA managed the transition very
smoothly
receiving accolades from the regulators as well as the stakeholders, paving the way
for other
mergers and consolidation in the Nepalese financial sector. After the merger, NIC
ASIA was
recognized as "Bank of the Year 2013-Nepal"by The Banker, Financial Times, UK.

NIC ASIA Bank is now, one of the largest private sector commercial banks in the
country in
terms of capital base, balance-sheet size, number of branches, ATM network and
customer
base. The Bank has 196 branches and 5 extension and 198 ATMs across Nepal with a
network covering all major financial centers of the country. The Bank strongly
believes in
Meritocracy, Transparency, Professionalism, Team spirit and Service Excellence.
These
core values are internalized by all functions within the Bank and are reflected in
all
actions the Bank takes

Objectives

The main objective of this study is to examine the analysis of working capital
management of
NIC Asia Bank Ltd. and the other specific objectives of this study are: -

 To examine liquidity position, assets utilization and

profitability position of
NIC Asia Bank Ltd.

 To analyze assets structure of the Bank.

Rationale

Working capital is regarded as the lifeblood for any enterprise because it is

needed for
sustaining the enterprise in day operation. If the business cannot maintain a
satisfactory level
of working capital, it is likely to become insolvent and may even push into
bankruptcy. So,
the

3
current's assets and current liabilities in such a way that a satisfactory level of
working is
maintained. The success or failure of any organization depends on its strategy
which is
affected by working capital management. Working capital management is the crux of
problem to prepare proper strategy on its favors. The study has multidimensional
significance which can

❖ Significance to the Shareholders: The study can be helpful to aware the

shareholders
regarding the working capital management, i.e., liquidity and profitability of
their banks.
The comparison will help them to identify the productivity of their funds.

❖ Significance to the Management: The study can be helpful to go deep into the
matters

❖ Significance to the Outsiders: Among outsiders, mainly the customers,

financing
agencies, stock exchanges and stock traders are interested in the performance of
banks
and the customers (both depositors and debtors) can identify the overall
position of bank.
The financial agencies can understand where they are secured or not, stock
brokers and
stock traders can find out the worth of the stock.

❖ Significance to the Policy Makers: The study will be helpful to them while
formulating the policy regarding commercial banks.

Review

A. Conceptual review

Working capital is part of the total capital employed by a company and is

often defined
as the difference between short-term liabilities and short-term assets.
Practically
speaking, it is the cash required to run the daily, weekly and monthly
operations of
a business. Working capital management is, therefore, the process of managing
the
short-term assets and liabilities so that a firm has sufficient liquidity to
run its operations
smoothly. In other words, working capital management refers to a
company's
managerial accounting strategy designed to monitor and utilize the two
components of
working capital, current assets and current liabilities, to ensure the most
financially
efficient operation of the company. The primary purpose of working
capital
management is to make sure the company always maintains sufficient cash flow
to
meet its short-term operating costs and short-term debt obligations. Other
purposes for
management of the working capital are for higher return on capital, for
improved
credit profile and solvency, for higher profitability, for higher

4
 B. Review of Previous Works

Singh (2013), conducted a study on “A Study on Working Capital Management of

MuktinathBikas Bank Ltd.” with the objectives to highlight various aspects
relating to
working capital management of Muktinath Bikas Bank for the period from
2065/2066
to2068/2069.Through his research he has presented the analysis of liquidity
position of
these bank shows different position here, the average current ratio of
Muktinath Bikas
Bank is lower than the standard ratio. Hence, these banks seem to be operating
with low
working capital. These ratios are used to judge how efficiently the firm is
using its
resources. However, the analysis of profitability of the bank is good. The
overall
calculation seems to be better for Muktinath Bikas Bank. From the calculation,
NCC
seems to tackle their investors more efficiently. Going through net profit to
total deposit
ratio, it can be said that Muktinath Bikash Bank seems to be successful in
mobilizing its
customer saving in much more productive sectors. Muktinath Bikas bank has
slightly
riskier debt financing position.

Lama (2015), conducted a study on "A Study on Working Capital Management of

Guheswori Merchant Banking & Finance Ltd." with the objective to highlight
various
aspects relating to working capital management of Guheswori Merchant Banking &
Finance Ltd., a "C" class licensed financial institution of Nepal, for the
period from
2066/67 to 2070/71.

Through his research he has presented the analysis on the minimization of

interest rate or
cost of capital. While going through the research, it seems that the finance
has high cost
of capital and has been operating in moderate profit. The report includes the
calculation of factors affecting the cost of capital of the finance company.
Although the
cost of capital of

Methods

Research Design
The research design is a systematic planning, organizing and executing a research
project within
specified time limit and resources allocation. Research design provides suitable
framework that
guides the collection and analysis of data.
5
Data Collection
The base of the study is primary and secondary data of NIC Asia Bank Ltd. The
sources of data
collection can be better being explained as:

Primary Data

Primary data are the original data gathered for the research project in hand.
This data is
collected for meeting the specific objective of the study. As the research design
was based
mostly on the exploratory design, primary data source was one of the vital
sources for data
collection. During the fieldwork, the primary data was obtained by conducting
structured
interviews with the

Secondary Data

Apart from the primary data, other data were also collected from the secondary
source.
Secondary sources of data refer to the readymade data which is already published
by the
concerned bank (i.e Annual Report). Secondary data is thus defined as the data
collected earlier
for a purpose other than the one currently being pursued. Secondary data are the
brochures,
annual reports, published reports and statements, published official documents,
etc.

Sample size:

NIC ASIA Bank was founded as NIC Bank on 2055/04/05. It was renamed NIC ASIA Bank
on
2070/03/16 after it merged with Bank of Asia Nepal. But this report is based on
only the data
and information relating to the last five fiscal years from 2071/72 to 2075/76. So,
the sample
for this

Data Analysis Tools and Technique

Similarly, after collecting the numerical data for statistical inquiry, it has to
be classified and
tabulated. Data analysis tools like tables, bar diagram, line charts been used for
this report.

Different techniques reveal different facts associated with the business, so some
or all the
following major techniques can be used for the analysis depending on the purpose
and
availability of the materials demanded by the techniques. Techniques used such as
profitability
ratio, turnover,
6
A. Financial Tools

Ratio analysis is used as an index of yardstick for evaluating the financial

position and
performance of the firm. It is a technique of analysis and interpretation of
financial
statements. It helps in making decisions as it helps establishing relationship
between
various ratios and interprets thereon. It helps to make quantitative judgment about
the
financial position and performance of the firm. Liquidity, turnover, capital
structure and
profitability ratios are

Liquidity Ratio:

One of the main objectives of working capital management is keeping sound liquidity
position. Cash is a main liquid asset and other assets which can be easily
converted into
cash are also called near cash and liquid ratio. So, managing or maintaining liquid
assets is termed as liquidity. In banking sector liquidity is very essential for
smooth
operation of day to day activities. Thus, liquidity is concerned with maintaining
adequate
liquid assets. The followings

I. Current Ratio:
It is a test of liquidity. It measures short-term debt paying ability of the firm.
In other words, it
measures the availability of current assets for meeting current liabilities. This
ratio is also called
working capital ratio. It is calculated by dividing current assets by current
liabilities. It indicates
the current short-term solvency position of the bank. Higher current ratio
indicates better
liquidity position. In other words, current ratio represents a margin of safety,
i.e. a ‘caution’ of
protection for creditors. Hence, higher the current ratio, greater the margin of
safety and larger
the amount
�������
obligations. Current Ratio= ������
�������
𝐋𝐢��𝐢�𝐢�𝐢��

II. NRB Balance to Total Deposits Ratio:

The NRB Balance to total Deposits Ratio indicates the portion of total deposits
collected held
with NRB. It is a measure of liquidity position of bank. Higher the amount held at
NRB,
greater

𝐍𝐑�
NRB Balance to Total deposit Ratio= �������
𝐓����
�����𝐢��
7
 Total Liquid Fund to Total Deposits Ratio:

The Total Liquid Fund to total Deposits Ratio indicates the proportion of liquid
funds to
total deposits. It is a measure of liquidity position of bank. Higher the amount
held as liquid
funds, greater is the liquidity. Liquid Funds include cash balance, bank balance
and money
at call.

𝐓���� 𝐋𝐢��𝐢�
Total Liquid Fund to Total Deposit Ratio= ����
𝐓����
�����𝐢��

Profitability Ratio:

This ratio shows the overall efficiency of the business concern. The relation of
the return of the
firm to either of its sales or equity or assets is known as profitability ratio. It
is related to the
profit of the business. Profit is essential for the survival of the business, so it
is regarded as the
engine that drives the business and indicates the economic progress. Different
profitability
ratios are required to support the purpose of the study. So, the various ratios
have been
developed as

I. Net Profit to Total Assets Ratio/Return on Assets (ROA):

This ratio is very much crucial for measuring profitability of funds

invested in the bank’s
assets. It measures the return on assets. It is computed by dividing the
net profit after tax
by total assets. The formula used for computing this ratio is as:

𝐍��
Net Profit to Total Assets Ratio = �����
𝐓����
������

II. Return on Equity Ratio (ROE):

Return on equity ratio shows how efficiency of the Banks and finance
companies have
utilized their resources to earn good return from equity investment. This
ratio is computed
by dividing net profit/loss by the total amount of equity. It can be
mentioned as;
 𝐍�� 𝐏���𝐢�
Return on Equity Ratio = �� 𝐋���
𝐓����
���𝐢��

8
Net Profit to Net Working Capital Ratio:

This ratio is very much crucial for measuring profitability of funds invested in
the bank’s
working capital. It measures the return on working capital investment. It is
computed by
dividing the net profit after tax by net working capital. The formula used for
computing
this

𝐍�� 𝐏���𝐢�
Net Profit to Net Working Capital Ratio = ����� 𝐓��
𝐍�� ����𝐢��
���𝐢���

A. Statistical Tools

In this study some statistical tools have been used for the analysis of data more
accurately.
The tools used are as follows:

I. Line Graph

The tool used to show the change in variables over a period of time is known as
Line
graph.
With the help of line graph, the analysis of variables over the period can be seen
clearly.
II. Mean:

The mean value is a single value within the range of the data that is used to
represent all
the values in the series. Since it is somewhere within the range of the data, it is
also called
a measure of central value. It is obtained by adding together all the terms and
dividing this
total by the number of items. If X1, X2, X3,.., Xn are the given n observations,
then their
mean, usually denoted by 𝑋̅ is given by 𝑿̅ = ∑ X /n.

III. Standard Deviation:

It is the square root of the variance standard deviation. The standard deviation is
the
absolute measure of dispersion in which the drawback present in other measure of
dispersion as it satisfied most of requites of a good dispersion. It is denoted by
(𝜎)
∑(𝑿−𝑿̅ )²
calculated as:𝝈=√
𝒏

Where,

𝑋̅= Arithmetic Mean π

n = Number of values
9
Limitations of the Study

Every research wants to have every facts and proof for the study however; this is
not possible
in the lack of authority. I have to believe in the provided information. Some of
the major
limitations of the study are listed below:

 The study covers 5 years of data from 2071/72 to 2075/76.

 Only secondary data have been used.

 Only limited financial and statistical tools have been used.

10
 CHAPTER-II

RESULTS AND ANALYSIS

Data Presentation

Presentation means the presentation of the collected data through table, figure
etc. Presentation is
the process of understanding the study or the report and calculating the opinion.
An analysis of a
data means the process where the statement or the report gets resolves by breaking
them into
simple statement. Analysis means to find out something and gives opinion about the
presented
data.

Analysis of Results

Current Ratio

This ratio measures the short-term solvency of the firm, i.e. bank’s ability to
meet the short-
term obligations. As a measure of creditors versus current assets, it indicates
each rupee of
cash availability by dividing current assets by current liabilities. The current
ratio of NIC
Asia Bank

11
Table
1
Structure of Current Ratio.

Fiscal year Current Current Current ratio

(In
Assets Liabilities Times)
071/072 509,772.00 461,275.00 1.11

599,525.00 545,206.00 1.10

072/073
799,192.00 725,739.00 1.10
073/074
981,994.00 886,472.00 1.11
074/075
1,618,759.00 1,450,991.00 1.12
075/076
Total 4,509,242.00 4,069,683.00 5.54

Mean 901,848.40 813,936.60 1.108

Standard Deviation 0.00748

(Source: Appendix 1)

Table 1 shows the Structure of current ratio of NIC Asia Bank Ltd. The above table
and Bar
graph show the current ratios of NIC Asia Bank Ltd. from the year 2070/71 to the
year
2074/75. The ratio was within the level from 1.10 to 1.11. The ratios became
consistent
within the level of 1.10 to 1.11 up to years 2073/74 and increased in year 2074/75
to 1.12.
Current ratios for the bank were above 1 over the five years period, which show
that they are
operating with high amount of working capital. The average current ratio over the
five
years period is 1.10. The

12
 1.125

1.12
CURRENT RATIO 1.12

1.115
1.11 1.11
1.11

1.105
1.1 1.1
1.1

1.095

1.09
71/72 72/73 73/74 74/75
75/76
FISCAL YEAR

Figure 1 Trade of Current Ratio

Figure 1 shows the structure of current ratio of NIC Asia Bank in a line graph.
This graph
shows the change in current ratio from fiscal year 2071 to 2076.

NRB Balance to Total Deposit Ratio:

The NRB Balance to total Deposits Ratio indicates the portion of total deposits
collected held
with NRB. It is a measure of liquidity position of bank. Higher the amount held
at NRB,
greater

The ratios calculated for NIC Asia Bank Ltd. has been tabulated as under:

13
Table 2
Structure of NRB Balance to Total Deposit Ratio (%).

NRB Balance to
Year NRB Balance Total
Deposits

Total Deposit Ratio

071/072 51,865.00
449,842.00 11.53%

072/073 47,630.00
534,772.00 8.91%

073/074 43,962.00
694,880.00 6.33%

074/075 102,618.00
866,791.00 11.84%

075/076 158,127.00
1,395,896.00 11.33%

Total 404,202.00
3,942,181.00 49.93%

Mean 80,840.40
80,840.40 9.99%
Standard Deviation

2.105
(Source: Appendix 2)

Table 2 shows the Structure of NRB balance to total deposit ratio of NIC Asia
Bank Ltd. The
above table and bar-graph depicts that the overall NRB balance to total deposit
ratio was
moderate. The ratio was 11.53 % in first year, and thereafter it decreased to
8.91% in second
year and again decreased to 6.33% in third year. However, the ratio increased to
11.84% in
fourth year. However, the ratio decreased to 11.33% in final year. The highest,
lowest &
average NRB balance to total deposits over the period for NIC Asia Bank Ltd. was
11.84% in
NRB BALANCE TO TOTAL DEPOSIT RATIO

fourth year, 6.33% in third year

14

11.84
12 11.53
11.33
 10 8.91

8
6.33
6

0
71/72 72/73 73/74
74/75 75/76
FISCAL YEAR

Figure 2 Trend of NRB Balance to Total Deposit Ratio

14
Figure 2 shows the NRB Balance to Total Deposit Ratio of NIC Asia Bank in a line
graph.
This graph shows the change in NRB Balance to Total Deposit Ratio from fiscal year
2071 to
2076.

Total Liquid Funds to Total Deposit Ratio:

The Total Liquid Fund to total Deposits Ratio indicates the proportion of liquid
funds to total
deposits. It is a measure of liquidity position of bank. Higher the amount held
as liquid funds,
greater is the liquidity. Liquid Funds include cash balance, bank balance and
money at call.

The ratios calculated for NIC Asia Bank Ltd. has been tabulated as under:
Table 3
Structure of Total Liquid Funds to Total Deposit Ratio (%).

Liquid
Funds to
Year Liquid Total Deposit Total
Deposit Ratio
Funds

071/072 71,833.00 449,842.00

15.97%

072/073 66,726.00 534,772.00

12.48%

073/074 78,295.00 694,880.00

11.27%

074/075 137,514.00 866,791.00

15.86%

075/076 229,013.00 1,395,896.00

16.41%

Total 583,381.00 3,942,181.00

71.98%

Mean 116,676.20 788,436.20

14.40%
Standard Deviation 2.103

(Source: Appendix 3)

Table 3 shows the Structure of liquid funds to total deposit ratio of NIC Asia
Bank Ltd. The
above table and bar-graph depicts that the overall liquid funds to total deposit
ratio was
moderate. The ratio was 15.97 % in first year, and thereafter it decreased to
12.48% in second
year. The ratio further decreased to 11.27% in third year. However, the ratio
increased to
15.86% in fourth year and further increased to 16.41% in final year. The highest,
lowest &
average liquid funds to total deposits over the period for NIC Asia Bank Ltd. was
16.41% in
final year, 11.27% in third year &

15
 TOTAL LIQUID FUNDS TO TOTAL DEPOSIT RA
18
15.97
15.86
16

14
12.48
11.27
11.33
12

10

0
71/72 72/73 73/74
74/75 75/76
FISCAL YEAR

Figure 3 Trend of Total Liquid Funds to Total Deposit Ratio

Figure 3 shows the Total Liquid Funds to Total Deposit Ratio of NIC Asia Bank in a
line
graph. This graph shows the change in Total Liquid Funds to Total Deposit Ratio
from fiscal
year 2071 to 2076.

Net Profit to Total Assets Ratio

This ratio aids to find out the profitability of all financial resources invested
in the firm’s assets.
This ratio is the focal point of the stakeholders. The return on assets or profit
to assets ratio is
calculated by dividing the amount of after-tax profit by the amount of total assets
employed.

The ratios calculated for NIC Asia Bank Ltd. has been tabulated as under:

16
Table 4
Structure of Net Profit to Total Assets Ratio (%).

Net Profit To Total

Year Net Total
Assets Asset
Profit

071/072 8,291.58
515,005.00 1.61%

072/073 6,717.65
605,194.00 1.11%

073/074 10,459.37
804,567.00 1.3%

074/075 14,889.86
992,657.00 1.5%

075/076 30,427.87
1,709,431.00 1.78%

Total 70,786.33
4,626,854.00 7.3%

Mean 14,157.27
925,370.80 1.46%
Standard Deviation
0.2343

(Source: Appendix 4)

Table 4 shows the Net profit to total assets ratio of NIC Asia Bank Ltd. The above
table and
graph depict that the overall return on assets ratio was moderate. The ratio was
1.61 % in first
year, and thereafter it decreased to 1.11 % in second year and gradually increased
to 1.33% in
third year and to 1.49% in fourth year and thereafter to 1.78% in final year. The
highest, lowest
& average return on assets over the period for NIC Asia Bank Ltd. was 1.78% in
fifth year,
1.11% in second year & 1.46%. The standard deviation of net profit to total assets
is 0.2343.
NET PROFIT TO TOTAL ASSETS RATIO

1.78
1.61
1.6
1.5
 1.4 1.3

1.2 1.11

0.8

0.6

0.4

0.2

0
71/72 72/73 73/74
74/75 75/76
FISCAL YEAR

Figure 4 Trend of Net Profit to Total Assets Ratio

17
 Figure 4 shows the Net Profit to Total Assets Ratio of NIC Asia Bank in a line
graph. This
graph shows the change in Net Profit to Total Assets Ratio from fiscal year 2071
to 2076.

Return on Equity Ratio (ROE):

Return on equity ratio shows how efficiency of the Banks and finance companies
have utilized
their resources to earn good return from equity investment. This ratio is
computed by dividing
net profit/loss by the total amount of equity.

The ratios calculated for NIC Asia Bank Ltd. has been tabulated as under:

Table 5
Structure of Return on Equity (%).

Year Net Profit Total Equity Return On Equity

(ROE)

071/072 8,291.58 48,730.00

13.96%

072/073 6,717.65 54,988.00

19.41%

073/074 10,459.37 73,828.00

14.45%

074/075 14,889.86 101,185.00

14.56%

075/076 30,427.87 107,267.00

12.44%

Total 70,786.33 385,998.00

78.43%

Mean 14,157.27 77,199.60

14.97%
2.348
Standard Deviation
(Source: Appendix 5)

Table 5 shows the Structure of current ratio of NIC Asia Bank Ltd. The above
table and bar-
graph depicts that the overall return on equity ratio was moderate. The ratio was
13.96 % in
the first year, and thereafter it increased to 19.41% in the second year and
decreased
thereafter to 14.45% in the third year. Again, the ratio increased to 14.56% in
the fourth year.
However, the ratio decreased to 12.44% in the final year. The highest, lowest &
average
return on assets over the period for NIC Asia Bank Ltd. was 19.41% in the second
year,
12.44% in the final year &

18
 NET PROFIT TO TOTAL ASSETS RATIO
25

19.41
20

14.45 14.56
15 13.96

12.44

10

0
71/72 72/73 73/74 74/75
75/76
FISCAL YEAR

Figure 5 Trend of Return on Equity

Figure 5 shows the Return on Equity of NIC Asia Bank in a line graph. This graph
shows
the change in Return on Equity from fiscal year 2071 to 2076.

Net Profit to Net Working Capital Ratio:

This ratio is very much crucial for measuring profitability of funds invested in
the bank’s
working capital. It measures the return on working capital investment. It is
computed by
dividing the net profit after tax by net working capital.

The ratios calculated for NIC Asia Bank Ltd. has been tabulated as under:

19
Table 6
Structure of Net Profit to Net Working capital Ratio (%).

Net Working Net Profit To

Net
Year Net Capital Working Capital
Profit

071/072 8,291.58 48,497.00 14.03%

072/073 6,717.65 54,319.00 19.65%

073/074 10,459.37 73,453.00 14.53%

074/075 14,889.86 95,522.00 15.43%

075/076 30,427.87 167,768.00 7.96%

Total 70,786.33 439,559.00 71.58%

Mean 14,157.27 87,911.80 14.32%

Standard Deviation
14.04376
(Source: Appendix 6 and Appendix 7)

Table 6 shows the Structure of net profit to net working capital of NIC Asia Bank
Ltd. The above
table and bar-graph depicts that the overall return on working capital employed
ratio was
moderate. The ratio was 14.03 % in first year, and thereafter it increased to
19.65% in
second year and decreased thereafter to 14.53% in third year. Again, the ratio
increased to
15.43% in fourth year. However, the ratio decreased to 7.96% in final year. The
highest, lowest
& average return on assets over the period for NIC Asia Bank Ltd. was 19.65% in the
second
year, 7.96% in final year & 14.32%. The above table depicts that the fluctuation in
net profit as
a result of changes in working capital is not regular. It should have been
inversely related.
However, such trend is not observed which is due to other factors affecting net
profit. The
standard deviation of

20
 NET PROFIT TO NET WORKING CAPITAL RATIO
25

19.65
20

15.43

14.03 14.53
15

10

7.96

0
71/72 72/73 73/74
74/75 75/76
FISCAL YEAR

Figure 6 Trend of Net Profit to Net Working capital Ratio

Figure 6 shows the Net Profit to Net Working capital Ratio of NIC Asia Bank in a
line
graph.
This graph shows the change in Net Profit to Net Working capital Ratio from
fiscal year
2071 to 2076.

Findings

The findings from the analysis of above results are as follows:

 While analyzing the current ratios of NIC Asia Bank Ltd. from the year 2071/72 to
the year
2075/76, the ratio was between the level from 1.10 to 1.15. The ratios
became consistent within
the level of 1.10 to 1.11 up to year 2072/73 and increased in year
2075/76 to 1.15. Current
ratios for the bank were above 1 over the five years period, which show
that they are
operating with high amount of working capital. The average current ratio
the five years
period is 1.10. The

 While analyzing the NRB Balance to total deposit ratio, the overall NRB balance
to total
deposit ratio was moderate. The ratio was 11.53 % in first year, and
thereafter it decreased to
8.91% in second year and again decreased to 6.33% in third year. However,
the ratio increased
to 11.84% in fourth year. However, the ratio decreased to 11.33% in final
year. The
highest, lowest & average NRB balance to total deposits over the period
for NIC Asia Bank
Ltd. was 11.84% fourth

21
 While analyzing the liquid funds to total deposit ratio, the overall liquid funds
to total deposit
ratio was moderate. The ratio was 15.97 % in first year, and thereafter it
decreased to 12.48% in
second year. The ratio further decreased to 11.27% in third year. However, the
ratio increased to
15.86% in fourth year and further increased to 16.41% in final year. The
highest, lowest &
average liquid funds to total deposits over the period for NIC Asia Bank Ltd.
was 16.41% in
final year, 11.27% in third year & 14.40%. The standard deviation of total
liquid funds to total
deposit is 2.103.
 While analyzing the net profit to total assets ratio, the overall return on
assets ratio was
moderate. The ratio was 1.61 % in first year, and thereafter it decreased
to1.11 % in
second year and gradually increased to 1.33% in third year and to 1.49% in
fourth year and
thereafter to 1.78% in final year. The highest, lowest & average return on
assets over the
period for NIC Asia Bank Ltd. was 1.78% in fifth year, 1.11% in second year &
1.46%. The
standard deviation of net profit to total assets is 0.2343.
 While analyzing the return on equity ratio, the overall return on equity ratio
was moderate. The
ratio was 13.96 % in first year, and thereafter it increased to 19.41% in
second year and
decreased thereafter to 14.45% in third year. Again, the ratio increased to
14.56% in fourth
year. However, the ratio decreased to 12.44% in final year. The highest, lowest
& average
return on assets over the period for NIC Asia Bank Ltd. was 19.41% in second
year, 12.44% in
final year & 14.97%.

 While analyzing the net profit to net working capital ratio, the overall
return on working
capital employed ratio was moderate. The ratio was 14.03 % in first year, and
thereafter it
increased to 19.65% in second year and decreased thereafter to 14.53% in third
year. Again,
the ratio increased to 15.43% in fourth year. However, the ratio decreased to
7.96% in final
year. The highest, lowest & average return on assets over the period for NIC
Asia Bank
Ltd. was 19.65% in second year, 7.96% in final year & 14.32%. The above table
depicts
that the fluctuation in net profit as a result of changes in working capital
is not regular. It
should have been inversely related. However, such trend is not observed which
is due to
other factors affecting net profit. The standard deviation of net profit to
net working
capital is 3. 747.Hence, the overall working capital performance of NIC Asia
bank seems
good as the current ratio is also greater than the standard ratio and the
profitability
ratio is also in
22
 CHAPTER-III

SUMMARY AND CONCLUSION

Summary

For many developing countries, banking sector has become the medium of developing
economic situation, as banks help in capital formation in the country. Bank fills
the gap
between the searcher and the provider of the fund. Bank provides sufficient back
support for
the growth and expansion of trade and industry of the country, which eventually
helps to
develop the economic condition of the country. In this process, JVBs are putting
their best
effort. Such banks help to transfer foreign investment and advanced technology from
one
country to the other. Nepal has adopted different liberal and free economic policy
to
encourage such foreign

The main purpose of this study is to make the comparative analysis of the working
capital as
well as financial performance of NIC Asia Bank Ltd. To make this thesis more
understandable to the readers, available data and information are presented in
different
suitable tables and diagrams with appropriate analysis and interpretations. This
thesis work
has been divided into five chapters. They are- Introduction, Review of Literature,
Research Methodology, Presentation, Data Analysis and Findings and finally Summary
and Recommendations. To carry out the thesis work secondary data have been
utilized.
The necessary data are derived from the Balance Sheet and Profit and Loss Account
of NIC
Asia Bank Ltd. for the period of

To fulfill the objectives mentioned in the chapter one, a suitable research

methodology has
been developed, which includes the ratio analysis as a financial tool and trend
analysis &
correlation coefficient as statistical tools. The major ratio analysis consists of
the composition
of working capital position, liquidity position, and profitability position. Under
these main
ratios, their trend values are also studied in the chapter four. In order to test
the relationship
between various components of working capital. And at last in this very chapter,
findings of
the whole study with some suggestions and recommendations are presented which might
be
useful for the concerned bank to improve the performance.

23
Conclusion

This study is basically related to various aspect of working capital which

particularly deals
about the working capital position with financial analysis of NIC Asia Bank Ltd and
an
attempt to give account of comparative study about NIC Asia Bank Ltd. in different
aspects
such as liquidity position, profitability position on the basis of financial
statement. After
conducting the working capital management of NIC Asia Bank Ltd. covering the study
period 2071/72 to 2075/76, the following we are concluded. First thing is the mean
value of
current assets to total assets of NIC Asia Bank Ltd. is high which means it is less
risky to
invest in bank. Second thing is the mean value of Current ratio of NIC Asia Bank
Ltd. is
moderate and profitability ratio is also moderate. And last is in identifying all
aggregate
components using different

24
 BIBLIOGRAPHY

Bhandari, D. R. (2003). Banking and Insurance. Kathmandu: Aayush Publication.

James C., Van Horne, (1998). Financial Management and Policy. New Delhi: Prentice
Hall
of
India.

Lama S., (2015). A Study on Working Capital Management of Guheswori Merchant

Banking

& Finance Ltd (unpublished master's thesis). Tribhuvan University,

Kathmandu,

Nepal.

Lamsal S., (2007). A comparative study of working capital management of NABIL and

Standard Chartered Bank Nepal Limited (unpublished master's thesis).

Tribhuvan

University, Kathmandu, Nepal.

Singh S., (2013). A Study on Working Capital Management of MuktinathBikas Bank,

(unpublished master's thesis). Tribhuvan University, Kathmandu, Nepal.

Shrestha, M. K., (1982). Working Capital Management in Public Enterprises, A Study

on

Financial Results and Constraints, A Quarterly ISDOC Bulletin 8(1-4).

Kathmandu.

Smith, K (1987). Trade Credit and Informational Asymmetry. Journal of Finance. 42,
863-
872.

Weston, J. F. and Brigham E. F., (1984). Managerial Finance. Chicago: The Dryden
Press

25
 APPENDICES

Appendix 1: Calculation of mean and standard deviation of current ratio of

NIC Asia Bank Ltd.
Fiscal Year Current Ratio (X-X)
(X-X)2

2071/072 1.11 0.002

0.0000040
2072/073 1.1 -0.008
0.0000640
2073/074 1.1 -0.008
0.0000640
2074/075 1.11 0.002
0.0000040
2075/076 1.12 0.012
0.0001440
Total

∑(X-𝑿̅ )²=
∑X = 5.54 ∑(X-𝑿̅ )= 0
0.0002800
∑𝑿
= 1.108
Mean (𝑿̅ )
𝒏
∑(𝑿−𝑿̅ )² �.�������
√ =√
=0.00748
SD (𝝈)
𝒏 �

(Source: Annual reports of NIC Asia Bank Ltd. of 2071/72 to 2075/76)

Appendix 2: Calculation of mean and standard deviation of NRB Balance

to Total Deposit Ratio of NIC Asia Bank Ltd.
Fiscal Year NRB Balance to Total
Deposit Ratio (X)
(X- 𝑿̅ )
(X- 𝑿̅ )2
2071/072 11.53 1.54
2.37
2072/073 8.91 -1.08
1.17
2073/074 6.33 -3.66
13.40
2074/075 11.84 1.85
3.42
2075/076 11.33 1.34
1.80
Total
∑X = 49.93 ∑(X- 𝑿̅ )=0
∑(X- 𝑿̅ )2=22.15
��.��
∑�
Mean( 𝑿̅ ) = =9.99
� �
∑(𝑿−𝑿̅ )² ��.��
 √ =√ =2.105
SD (𝝈)
𝒏 �

(Source: Annual reports of NIC Asia Bank Ltd. of 2071/72 to 2075/76)

26
Appendix 3: Calculation of mean and standard deviation of Total Liquid
Funds to Total Deposit Ratio of NIC Asia Bank Ltd.
Fiscal Year Total Liquid Funds to Total
Deposit Ratio (X)
(X- 𝑿̅ )
(X- 𝑿̅ )2
2071/072 15.97 1.57
2.46
2072/073 12.48 -1.92
3.69
2073/074 11.27 -3.13
9.80
2074/075 15.86 1.46
2.13
2075/076 16.41 2.01
4.04
Total
∑X = 71.98 ∑(X- 𝑿̅ )=0
∑(X- 𝑿̅ )²=22.12

Mean(𝑿̅ ) ∑𝑿 ��.��

= =14.396
𝒏 �
∑(𝑿−𝑿̅ )² ��.��
√
SD (𝝈)
= � =2.103
𝒏
(Source: Annual reports of NIC Asia Bank Ltd
. of 2071/72 to 2075/76)

Appendix 4: Calculation of mean and standard deviation of Net Profit to

Total Assets Ratio of NIC Asia Bank Ltd.
Fiscal Year Net Profit to Total Assets
Ratio X- 𝑿̅
(X- 𝑿̅)²
2071/072 1.61% 0.15%
0.0225%
2072/073 1.11% -0.35%
0.1225%
2073/074 1.3% -0.16%
0.0256%
2074/075 1.5% 0.04%
0.0016%
2075/076 1.78% 0.32%
0.1024%
Total
∑(X- 𝑿̅)²=
∑X = 7.3% ∑𝑿 ∑(X-
�.� 𝑿̅ )=0
0.2746%
= =1.46%
Mean( 𝑿̅ ) 𝒏 �

∑(𝑿−𝑿̅ )² �.����
√ =√
=0.2343
SD (𝝈)
𝒏 �

(Source: Annual reports of NIC Asia Bank Ltd. of 2071/72 to 2075/76)

27
 Appendix 5: Calculation of mean and standard deviation of Return on
Equity Ratio of NIC Asia Bank Ltd.
Fiscal Year Return on Equity Ratio (X)
(X- 𝑿̅ )
(X- 𝑿̅ )²
2071/072 13.96 -1.01
1.02
2072/073 19.41 4.44
19.71
2073/074 14.45 -0.52
0.27
2074/075 14.56 -0.41
0.17
2075/076 12.44 -2.53
6.40
Total
∑X = 78.43 ∑(X- 𝑿̅ ) = 0
∑(X- 𝑿̅ )² =27.57
∑𝑿 ��.��
= =14.97
Mean( 𝑿̅ )
𝒏 �

∑(𝑿−𝑿 )² ��.��
√ =√ =2.348
SD (𝝈)
𝒏 𝒏

(Source: Annual reports of NIC Asia Bank Ltd. of 2071/72 to 2075/76)

Appendix 6: Calculation of Net working capital NIC Asia Bank Ltd.

( Rs. in Millions )
Years 207172 2072/73 2073/74
2074/745 2075/76

Total current assets 509,772.00 599,525.00 799,192.00

981,994.00 1,618,759.00

Total current liabilities 461,275.00 545,206.00 725,739.00

886,472.00 1,450,991.00

Net Working Capital 48,497.00 54,319.00 73,453.00

95,522.00 167,768.00
(Source: Final report of NIC Asia Bank Ltd. of 2071/72 to 2075/76)

28
 Appendix 7: Calculation of mean and standard deviation of Net Profit to
Net Working Capital Ratio of NIC Asia Bank Ltd.
Fiscal Year Net profit to Net Working (X-𝑿̅ )
Capital Ratio (X)
(X-X )²

2071/072 14.03 -0.29

0.08
2072/073 19.65 5.33
28.41
2073/074 14.53 0.21
0.04
2074/075 15.43 1.11
1.23
2075/076 7.96 -6.36
40.45
Total
∑X = 71.58 ∑(X-𝑿̅ ) = 0 ∑(X-𝑿̅
)² = 70.22
∑𝑿 �� .��
Mean ( 𝑿̅ ) = = 14.32
𝒏 �
∑(𝑿−𝑿̅ )² ��.��
√ =√ =3.747
SD (𝝈)
𝒏 �
(Source: Annual reports of NIC Asia Bank Ltd. of 2071/72 to 2075/76)

29