TRIBHUVAN
UNIVERSITY
FACULTY
OF MANAGEMENT
Analysis
of Financial Performance of Laxmi Bank Limited
A
Project Work Report
Submitted
to:
Rastriya
Janasahayog College,
Itahari-24,
Tarahara, Sunsari
In
partial fulfillment of the requirement for the degree of Bachelor of Business
Studies (B.B.S)
Submitted
by:
Kumar
Bhandari
Exam
Roll No: 8410010
T.U.Reg.No:
7-2-841-0025-2012
2072/04
TRIBHUVAN UNIVERSITY
Faculty of Management
RECOMMENDATION
This
is to certify that the project work assignment report entitled “Analysis of financial performance of Laxmi
Bank Limited” submitted by Kumar Bhandari has been prepared under the
supervision of Mr. Bhabanath Ghimire, lecturer of this college and approved by
the head of department.
This
project work assignment report is forwarded for examination.
………………..
………………..
Bhabanath
Ghimire
Head Department
Supervisor
Date:
……………
Acknowledgement
This project work report has been
designed for the partial fulfillment of Bachelor level of Business Studies
(B.B.S) 3rd year prescribed by Tribhuvan University. Project work report is
knowledge gaining task in doing the work on project. As it is a practical
works, has to motivate to field to data and much helpful and challenging work
to the students. First of all, I am thankful to Tribhuwan University for
including the project work report activity in BBS 3rd year. I am
also thankful to aspiring team of Laxmi Bank Ltd. for providing valuable
information & data.
Initially, I am thankful to Mr. Dorna
Bdr. Neupane, campus chief of RJC. I
would like to express special thanks to Mr. Bhabanath Ghimire for his valuable
suggestion & for his guidance. I would like to extend
my sincere gratitude to all respective teachers of RJC for giving me guidelines
to prepare this project work report and thank to all my classmates for their
kind, co-operative attitude, hospitality and encouragement to prepare this
project work report.
Love
and affection of my family always encouraged and inspired me to perform any
work intensively. So, I am thankful to my family for their support and inspiration
to pave the path for successful journey in my academic pursuit.
-------------------------
Kumar
Bhandari
B.B.S.
3rd year
Reg.No:
7-2-0841-0025-2012
Exam
symbol No: 8410010
Rastriya
Janasahayog College
Itahari,
24-Sunsari
TABLE
OF CONTENTS
Recommendation
II
Acknowledgement
III
Table
of Contents
IV
List
of Table
V
List
of Figure
VI
Abbreviation
VI
CHAPTER- 1: INTRODUCTION
1.1
Background of the Study
1
1.2
Literature Survey
1
1.2.1
Meaning & Definition of the Bank 2
1.2.2 An overview of LXBL 2
1.2.3 Meaning of Financial Performance 3
1.2.4 Tools & Techniques for Financial Analysis 3
1.3
Purpose of the Study
4
1.4
Project Work Procedures 5
1.5
Method of Data Collection 5
1.6
Limitation of Study
6
CHAPTER – 2: PRESENTATION &
ANALYSIS OF DATA
2.1 Presentation
of Data
8
2.2 Analysis
of Data
11
CHAPTER – 3: SUMMARY, CONCLUSION
AND RECOMMENDATION
3.1
Summary
20
3.2
Conclusion
21
3.3
Recommendation
22
BIBLIOGRAPHY 23
APPENDICIES
24
LIST OF TABLE
1. Three years comparative
balance sheet of LXBL 9
2. Three
years comparative profit & loss A/C 10
3. Current
Ratio
12
4. Quick
Ratio 13
5. Debt
Ratio
15
6. Debt
Equity Ratio
16
7. Interest
Coverage Ratio 17
8. Return
on Assets
19
9. Return
on Equity 20
10. Return
on Capital Employed 21
11. Comparative
Chart of Findings 23
LIST OF FIGURE
1. Current Ratio
13
2. Quick Ratio
14
3. Debt Ratio
15
4. Debt Equity Ratio
17
5. Interest Coverage Ratio 18
6. Return
on Assets 19
7. Return
on Equity 20
8. Return
on Capital Employed 21
ABBREVIATION
A/C Account
B.S. Bikram
Sambat
B/S Balance Sheet
C.A. Current Assets
C.L. Current
Liabilities
EBIT Earnings Before Interest & Tax
Ltd. Limited
LXBL Laxmi Bank Limited
No. Number
NPAT Net Profit After
Tax
P/L
Profit & Loss
RJC Rastriya
Janasahayog College
% Percentage
& And
CHAPTER
- 1
INTRODUCTION
1.1
Background
of Study
Financial
performance is the detailed information about the bank. For this purpose we can
calculate different types of ratios. Financial performance analysis is an
exceptionally powerful tool for a variety of users of financial statements,
each having different objectives in learning about the financial circumstances
of the entity. It can be helpful for managers, creditors, stockholders,
potential investors, and regulatory agencies. These individuals and organizations
use financial statements for different purposes and bring varying levels of
sophistication to understanding business activities. For example, investors
range from private individuals who know little about financial statements to
large investment brokers and institutional investors capable of using complex
statistical analysis techniques. At what level of user knowledge should
financial statements be aimed? Condensing and reporting complex business
transactions at a level easily understood by nonprofessional investors is
increasingly difficult. Current reporting standards target users that have a
reasonably informed knowledge of business, though that level of sophistications
difficult to define.
Bank
is the organizations which control the financial activities works on it. This
study is prepared for financial performance analysis of LXBL.
1.2
Literature
Survey
The
focus of this section is to discuss the theory of financial performance with
the help of books by well-known authors, scholars, articles & web sites.
This chapter consist conceptual/theoretical review.
1.2.1 Meaning & Definition of the
Bank
A
bank is the financial institution licensed as a receiver of deposits or a bank
is the financial constitution mainly confined to development of the trade,
commerce & industry as well as individual investors. The main objective of
the bank is performance of service relating to leading dealing in money.
Initially the word ‘Bank’ was organized from the Italian word ‘banko’ which was
later on analyzed into bank. There are some definitions of bank.
“Bank
is an institute of keeping, leading & exchange of money.” (Chembers
twentieth century dictionary)
“A
bank is an establishment authorized by government to accept deposits, pay
interest, clear checks, make loans, acts as an intermediary in financial
transactions, and provides other financial services to its customers.”
(www.businessdictionary.com)
Finally,
a bank is a financial institution which deals with deposits and advances and
other related services. It receives money from those who want to save in the
form of deposits and it lends money to those who need it.
1.2.2 An Overview of Laxmi Bank Limited
Laxmi Bank was incorporated in
April 2002 as the 16th commercial bank in Nepal.
In 2004 Laxmi Bank merged with HISEF Finance Limited, a first generation financial company which was the first merger in the Nepali corporate history. Laxmi Bank is a Category ‘A’ Financial Institution and re-registered in 2006 under the “Banks and Financial Institutions Act” of Nepal. The Bank’s shares are listed and actively traded in the Nepal Stock Exchange (NEPSE). Laxmi Bank operates 25 branches & 21 ARMs. A wide range of services including Visa branded cards.
In 2004 Laxmi Bank merged with HISEF Finance Limited, a first generation financial company which was the first merger in the Nepali corporate history. Laxmi Bank is a Category ‘A’ Financial Institution and re-registered in 2006 under the “Banks and Financial Institutions Act” of Nepal. The Bank’s shares are listed and actively traded in the Nepal Stock Exchange (NEPSE). Laxmi Bank operates 25 branches & 21 ARMs. A wide range of services including Visa branded cards.
To know about the LXBL financial
data of 3 years programmer has been examined. From the study the researcher
comes to know that leverage position LXBL is very weak. The bank is liquid
enough and has not sufficient current assets to meet short term obligation,
quick ratio of the firm is also low which indicates the poor position of the
bank. Leverage position has also decreased in comparison to previous fiscal
year, and interest coverage ratio shows the favorable condition. The profit of
the bank is increasing year by year.
1.2.3 Meaning of Financial Performance
Financial
performance is the detailed information about the bank. For this purpose we can
calculate different types of ratios. Financial performance analysis is an
exceptionally powerful tool for a variety of users of financial statements,
each having different objectives in learning about the financial circumstances
of the entity. It can be helpful for managers, creditors, stockholders,
potential investors, and regulatory agencies. These individuals and
organizations use financial statements for different purposes and bring varying
levels of sophistication to understanding business activities. For example,
investors range from private individuals who know little about financial
statements to large investment brokers and institutional investors capable of
using complex statistical analysis techniques. At what level of user knowledge
should financial statements be aimed? Condensing and reporting complex business
transactions at a level easily understood by nonprofessional investors is
increasingly difficult. Current reporting standards target users that have a
reasonably informed knowledge of business, though that level of sophistications
difficult to define.
1.2.4 Tools & Techniques for Financial
Performance Analysis
The data taken during analysis
consist of previous three years i.e. from 2068/2069 to 2070/2071 & are
tabulated as per mathematical & accounting rules and regulations. Here are
the various factors that measure the financial performance wise found by using
different statistical procedure.
a.
Liquidity
Position
I.
Current Ratio
II.
Quick Ratio
b.
Leverage
Position
I.
Debt ratio
II.
Debt equity
III.
Interest Coverage Ratio
c.
Profitability
Position
I.
Return on Assets
II.
Return on Equity
III.
Return on Capital Employed
1.3
Purpose
of the Study
The main propose of this study is
to analyze and interpret the financial position and policy of the firm. The
study focuses whether it is backward or forward in financial position and fund
efficiency. The prime objectives of the study are to evaluate the financial
performance of Laxmi Bank Limited. The purpose of study is mentioned below.
·
To examine the liquidity, leverage,
capital adequacy turnover and profitability position of LXBL,
·
To examine the financial performance of
LXBL in terms of liquidity position,
·
To examine the financial performance of
LXBL in term of leverage &profitability analysis,
·
To provide suitable and useful
suggestion on findings of study.
1.4
Project
Work Procedures
To
complete this project work report, I have followed the following procedures:
·
Get orientation class about the project
work report from teachers.
·
Decide project work title or topic.
·
Decide the project work side.
·
Get letter from the campus to
investigate the project work.
·
Survey the bank & get the
information & data needed.
·
Analysis the data & present that in table
& chart.
·
Summarize & give study result of the
analyzed data.
·
Give conclusion & recommendation.
·
Consult to the teacher & re-write
the report in the view of lectures & included some special advices.
Using
these steps, I’ve completed this project work report.
1.5
Method
of Data Collection
Data can be collected from
different sources and using different method. Among variety of methodology for
this report researcher prepared primary data collection and secondary data
collection are follows.
I.
Primary
Data Collection
Primary data are
data collected or observed directly from first-hand experience or data that has
not been previously published. Also it can be define as a data collected by the
investigator or student himself/herself for a specific purpose. Various
techniques can be applied for primary data collection like sampling, using
search instruments (questionnaire and observation), contact method and other
statistical tools.
II.
Secondary
Data Collection
Secondary data
is the data that have been already collected by and readily available from
other sources. Such data are cheaper and also may be available when primary
data cannot be obtained at all. It can be collect from published data by firms,
organization, individuals etc such as reports, record, pamphlets, websites,
trades, newspaper article.
In this report
the investigator has chosen both primary source & secondary source data
collection. Primary data have been collected through person observation,
interviews with staff etc. For secondary data, investigator has chosen three
years profit & loss account & balance sheet of the bank (2068/069,
2069/070, 2070/071). Also some useful web address has been used to collect
additional secondary Data.
a.
Tools
& Techniques of Analysis
All
the collected data are tabulated and presented in the figures. For this
purpose, the researcher applied both financial as well as
mathematical/statistical tools. They are as follows:
·
Balance sheet
·
Profit and loss account
·
Table
·
Chart
1.6
Limitation
of Study
This study is
simply conducted for the partial fulfillment of the requirement for the degree
of the BBS. And only the secondary data is used and analyzed which could not
disclose the actual result. And being the first endeavor, the report can
comprise some mistakes which may cause to misinterpretation of the result. Main
limitation and difficulties in the process of preparation of this report are as
follows.
·
This study is based on secondary data
provided by LXBL, it is not sufficient to analysis.
·
The reliability of the study is depends
upon the data provided by the LXBL.
·
It contains the data of only 3 years
(2069/070/071).
·
This report analysis financial position
in terms of liquidity, leverage & profitability position.
·
Analysis is based on the ratio and trend
lies of the corresponding ratios only.
·
In this study some figure has changed in
rounding figure to reduce the error.
·
The study is only for fulfilling the
requirement for the degree of BBS, which can not cover all the dimension of the
all subjects matter and resource and time period is limited.
CHAPTER
– 2
PRESENTATION
& ANALYSIS OF DATA
The
main objective of this research study is to know the financial efficiency of
LXBL. In order to achieve this objective the financial statement of LXBL are
analyzed using certain accounting, financial & statistical tools.
This
chapter deals with presentation & analysis of data regarding the financial
statement of LXBL. Thus this chapter answers the research questions in order to
know the financial position of LXBL.
This
chapter is divided into two parts.
·
Presentation of data
·
Analysis of data
2.1
Presentation
of Data
The presentation
of data is the basic organization & classification of the data for
analysis. The included data are collected from various resources. Collected
data are tabulated, analyzed and interpreted.
The main objective of analyzing the financial performance &
interpretation is to highlight the strength & weakness of the business. In
this chapter three years (2068/069, 2069/070 & 2070/071) comparative
balance sheet and P/L account are presented below.
Table 1
3
years comparative balance sheet of Laxmi Bank Limited
For
the financial year 2068/069, 2069/070 & 2070/071
|
Particular
|
2068/069
|
2069/070
|
2070/071
|
|
Assets & Properties
|
|
|
|
|
Fixed Assets
|
308,172,110
|
437,739,766
|
435,358,624
|
|
Investment
|
3,758,105,909
|
5,417,569,587
|
4,700,417,784
|
|
A. Total Assets & Properties
|
4,066,278,019
|
5,855,309,353
|
5,135,776,408
|
|
Quick
Assets
|
|
|
|
|
Cash Balance
|
407,788,874
|
357,704,910
|
503,598,351
|
|
NBR Balance
|
3,845,300,276
|
2,871,238,020
|
4,339,211,500
|
|
Bank & Financial Institution Balance
|
195,585,115
|
236,198,630
|
488,386,316
|
|
Money at Short/Call Notice
|
659,487,873
|
443,329,112
|
721,875,000
|
|
Loan, Advance & Bill Purchase
|
16,476,630,201
|
19,393,819,578
|
22,723,846,799
|
|
B.
Total Quick Assets
|
21,584,792,339
|
23,302,290,250
|
28,776,917,966
|
|
C.
Other assets
|
377,457,879
|
358,337,360
|
1,006,466,807
|
|
D. Total Current Assets (B+C)
|
21,962,250,218
|
23,660,627,610
|
29,783,384,773
|
|
E.
Total Assets (A+D)
|
26,028,528,237
|
29,515,936,963
|
34,919,161,181
|
|
Capital & Liabilities
|
|
|
|
|
Deposit Liabilities
|
22,831,842,639
|
25,960,598,154
|
30,592,046,237
|
|
Bills payable
|
1,765,225
|
2,663,146
|
1,889,881
|
|
Other Liabilities
|
346,689,735
|
381,990,587
|
379,683,498
|
|
Proposed & Unpaid Dividend
|
169,408,110
|
-
|
20,508,472
|
|
Income Liabilities
|
-
|
-
|
-
|
|
F.
Total Current Liabilities
|
23,349,705,709
|
26,345,251,887
|
30,994,128,081
|
|
Long Term Debt
|
|
|
|
|
Debenture & bond
|
350,000,000
|
750,000,000
|
750,000,000
|
|
Borrowings
|
-
|
27,980,000
|
-
|
|
G.
Total Long Term Debt
|
350,000,000
|
777,980,000
|
750,000,000
|
|
H.
Total Debt (F+G)
|
23,699,705,709
|
27,123,231,887
|
31,744,128,081
|
|
Shareholders’ equity
|
|
|
|
|
Share Capital
|
1,694,081,100
|
1,948,193,265
|
2,337,965,760
|
|
Reserve & Surplus
|
606,761,398
|
772,491,811
|
837,067,333
|
|
I. Total Share Holders’ Equity
|
2,300,842,498
|
2,720,685,076
|
3,175,033,093
|
|
Total Capital Employed (G+I)
|
2,650,842,498
|
3,498,665,076
|
3,925,033,093
|
Source: Annual Report of Laxmi Bank Limited
Table
2
3
years comparative P/L Account
|
Particular
|
2068/069
|
2069/070
|
2070/071
|
|
Income
|
|
|
|
|
Interest
Income
|
2,289,359,534
|
2,376,734,733
|
2,489,315,283
|
|
Commission
& Discount
|
149,817,868
|
139,294,980
|
194,605,671
|
|
Exchange
Income
|
107,950,625
|
117,338,453
|
120,184,980
|
|
Non
Operating Income
|
5,834,022
|
12,971,950
|
25,744,242
|
|
Profit
from Extra-Ordinary Activity
|
-
|
1,200,000
|
300,000
|
|
Loan
Loss Provision Written Back
|
-
|
10,187,031
|
53,740,785
|
|
A) Total Income
|
2,609,352,829
|
2,746,364,514
|
2,987,789,870
|
|
Expenses
|
|
|
|
|
Staff
Expenses
|
178,284,804
|
207,372,944
|
239,996,839
|
|
Other
Operating Expenses
|
194,842,563
|
240,502,808
|
265,703,864
|
|
Provision For Possible losses
|
30,808,421
|
186,037,811
|
73,654,773
|
|
Provision
For Staff Bonus
|
50,881,729
|
60,050,140
|
67,400,694
|
|
B) Total Expenses
|
454,817,517
|
693,963,703
|
646,756,170
|
|
Earnings Before Interest & Tax (EBIT) (A-B)
|
2,154,535,312
|
2,052,400,811
|
2341,033,700
|
|
Less
– Interest Cost
|
1,645,718,018
|
1,451,899,411
|
1,667,026,765
|
|
Net Income Before Tax
|
508,817,294
|
600,501,400
|
674,006,935
|
|
Less
– Income Tax
|
154,626,044
|
185,477,731
|
203,566,831
|
|
Deferred
Tax Expenses
|
-2,199,092
|
-4,818,910
|
-4,416,384
|
|
Net Profit After Tax
|
356,390,342
|
419,842,579
|
474,856,488
|
Source: Annual
Report of Laxmi Bank Limited
2.2
Analysis
of Data
Analysis of data is the important part
of this project work report. The main purpose of analyzing data is to know the
bank’s performance in targeted field. The analysis of data consists organizing,
tabulating & performing financial & statistical analysis. The data is
analyzed in terms of liquidity, leverage & profitability.
I. Liquidity Analysis
Liquidity
ratios are calculated to ascertain term solvency position of the firm. It
measures the ability of the firm to meet its current obligation &
establishing a relation between of liquidity of firm. They are:
a)
Current
Ratio
Current
ratio shows the relationship between current assts & current liabilities.
The objective of this is to measure the ability of the firm to meet its short
term obligation. Current ratio is calculated by dividing current assets by
current liabilities.
Table
3
Computation of Current Ratio
|
Fiscal year
|
Current assets
|
Current liabilities
|
Current ratio
|
|
2068/069
|
21,962,250,218
|
23,349,705,709
|
0.94:1
|
|
2069/070
|
23,660,627,610
|
26,345,251,887
|
0.90:1
|
|
2070/071
|
29,783,384,773
|
30,994,128,081
|
0.96:1
|
Source: Annual Report of Laxmi Bank Limited
The above table shows the current ratios of fiscal
year 2068/069/, 2069/070, 2070/071. The standard of current ratio is 2:1 i.e.
current assets equal to dual of current liabilities. Above table shows that the
current ratio are 0.94:1, 0.90:1 & 0.96:1. It shows the current ratio of
LXBL is lower than the theoretical norm & it is fluctuating. The bank may
face difficulties to pay its current obligations in time as when they become
due.
It can be represented
graphically which is as below:
Figure 1
b)
Quick
Ratio
Quick ratio is the ratio of quick
assets & current liabilities, it measures the short term liquidity of the
firm but it emphasis on the instant debts paying capacity of the firm. Standard
of the quick ratio is 1:1 i.e. quick assets equal to current assets. Quick
assets are current assets except inventories & prepaid expenses. It can be
calculate by dividing quick assets by current liabilities.
Table 4
Computation
of Quick Ratio
|
Fiscal year
|
Quick assets
|
Current liabilities
|
Quick ratio
|
|
2068/069
|
21,584,792,339
|
23,349,705,709
|
0.92:1
|
|
2069/070
|
23,302,290,250
|
26,345,251,887
|
0.88:1
|
|
2070/071
|
28,776,917,966
|
30,994,128,081
|
0.93:1
|
Source: Annual Report of Laxmi Bank Limited
The
quick ratio is very useful in measuring the liquidity position of the bank. In
the above table quick ratio is seen below the standard which shows that the
bank’s liquidity position is not good.
It
can be present in below.
Figure 2
II.
Leverage
Analysis
Leverage ratio
analysis is the long term solvency of the firm. Solvency is the company’s
abilities to pay its long term liabilities when they become due. This ratio
also shows the manner by which the capital structure formed. Generally,
following types of ratio are used for checking long term solvency.
a.
Debt
Ratio
This
ratio shows the relationship between total debt & total assets, which
measures the percentage of the firm’s assets finance by creditors. It can be
calculate by using following formula.
Table
5
Computation
of Debt Ratio
|
Fiscal
year
|
Total
debt
|
Total
assets
|
Debt
ratio
|
|
2068/069
|
23,699,705,709
|
26,028,528,237
|
0.91:1
|
|
2069/070
|
27,123,231,887
|
29,515,936,963
|
0.92:1
|
|
2070/071
|
31,744,128,081
|
34,919,161,181
|
0.91:1
|
Source: Annual Report of Laxmi Bank Limited
Above
table shows that the LXBL has raised more than 80% from debt capital out of its
total financing during study period. It shows that burden of high interest payment
& high financial risk.
It
is presented in graph below.
Figure 3
b)
Debt Equity Ratio
Debt equity ratio shows the relationship
between debts & shareholder’s fund. The main objective of calculating this
ratio is to judge the effectiveness of the long term financial policy of the
firm. When long term debt is divided by shareholder’s fund then it is called
debt equity ratio. It can be calculate using following formula.
Table
6
Computation
of Debt Equity Ratio
|
Fiscal year
|
Total Long-term Debt
|
Total Shareholder’s fund
|
Debt Equity Ratio
|
|
2068/069
|
350,000,000
|
2,300,842,498
|
0.15:1
|
|
2069/070
|
777,980,000
|
2,720,685,076
|
0.29:1
|
|
2070/071
|
750,000,000
|
3,175,033,093
|
0.24:1
|
Source:
Annual Report of Laxmi Bank Limited
Generally, minimum debt ratio should be
0.51 or above. Here in the table debt equity ratio are 0.15, 0.29 & 0.24,
which are fluctuated. Above ratios are below the standard, so it is critical
situation. To maintain debt equity ratio, bank should decrease the debts or
increase their equity capital.
It can be present in a graph.
Figure 4
III) Interest Coverage Ratio/TIE Ratio
It is the ratio of giving the clear information
about the interest coverage capacity of any firm. This ratio measures how much
net income before interest & tax could be declined & still provided
coverage of total interest expenses. It can be calculate using following
formula.
Table
7
Computation
of Interest Coverage Ratio
|
Fiscal year
|
EBIT
|
Interest expenses
|
TIE ratio
|
|
2068/069
|
2,154,535,312
|
1,645,718,081
|
1.31
|
|
2069/070
|
2,052,400,811
|
1,451,899,411
|
1.41
|
|
2070/071
|
2341,033,700
|
1,667,026,765
|
1.40
|
Source:
Annual Report of Laxmi Bank Limited
The above table shows the LXBL has more
than 1 for 1 rupee payment of interest. There is nothing to be curried to pay
the interest obligation from the view point of debt holders & bank itself.
It presented in following chart.
Figure 5
III.
Profitability
Analysis
This
ratio shows the overall efficiency of a firm. Profitability is the major factor
to measure how effectively the firm is being operated 7 managed. The main
objective of the bank is to earn more & more profit. In order to analysis
the profitability position of the bank following ratios can e calculated.
a.
Return
on Assets (ROA)
This ratio
established the relationship between net profit & total assets. This ratio
measures the profitability if all financing resources invested in the firm’s
assets. Hence, the higher ratio implies that the available source & tools
employed efficiently.
Table 8
Computation of Return on Assets
|
Fiscal
year
|
NPAT
+ Interest
|
Total
Assets
|
ROA
|
|
2068/069
|
2,002,108,360
|
26,028,528,237
|
7.69%
|
|
2069/070
|
1,871,741,990
|
29,515,936,963
|
6.34%
|
|
2070/071
|
2,141,883,253
|
34,919,161,181
|
6.13%
|
Source: Annual Report of Laxmi Bank
Limited
The ROA of LXBL for
2068/069, 2069/070 & 2070/071 are 7.69%, 6.34% & 6.13% respectively
which is in decreasing trend. We know that higher ratio indicates the better
utilization of its assets. Decreasing
trend of this ratio indicates bad sign for the bank.
It can be
present by chart.
Figure 6
b.
Return
on Equity (ROE)
This ratio shows
the relation between the net profit after tax & shareholders fund. This
ratio indicates how well the firm has used the resources contributed by the
owners. It is good for the firm to be the higher return of the investment.
Higher ratio indicates the more efficiency of management & utilization of
shareholders fund.
Table
9
Computation of Return on Equity
|
Fiscal
year
|
NPAT
|
Shareholder’s
Equity
|
ROE
|
|
2068/069
|
356,390,342
|
2,300,842,498
|
14.49%
|
|
2069/070
|
419,842,579
|
2,720,685,076
|
15.43%
|
|
2070/071
|
474,856,488
|
3,175,033,093
|
14.96%
|
Source:
Annual Report of Laxmi Bank Limited
The above shows that the ROE is in
fluctuating trend. Bank always tries to maintain high ROE. High ROE reflects
that the bank using its owner’s capital efficiently & bank is able to
maximize the owner’s wealth in present. Here ROE is in fluctuating order so
bank should manage their ROE.
It is also presented in chart
below.
Figure
7
c.
Return
on Capital Employed (ROCE)
A
relationship between net profit & capital employed is known as return on
capital employed. It shows whether the amount of capital has been properly used
or not. The ratio shows the efficiency of the firm on the utilization of
capital employed. Hence, higher ratio is preferable for the company. A higher ROCE indicates more
efficient use of capital. ROCE should be higher than the company’s capital
cost; otherwise it indicates that the company is not employing its capital
effectively and is not generating shareholder value.
Table 10
Computation of Return on Capital
Employed
|
Fiscal
year
|
NPAT
|
Capital Employed
|
ROCE
|
|
2068/069
|
356,390,342
|
2,650,842,498
|
12.36%
|
|
2069/070
|
419,842,579
|
3,498,665,076
|
11.02%
|
|
2070/071
|
474,856,488
|
3,925,033,093
|
12.10%
|
Source: Annual Report of Laxmi
Bank Limited
It can be present in chart.
Figure
8
CHAPTER
– THREE
SUMMARY,
CONCLUSION AND RECOMMENDATION
3.1
Summary
This
report has been prepared for the partial fulfillment of the requirement for the
degree of Bachelor of Business Studies (BBS). This report is also prepared for
the analysis of financial performance of LXBL. The study of financial
efficiency includes the study of financial statement. In this report financial
statement of LXBL is analyzed using certain financial & statistical tools
in order to know the financial performance & efficiency of LXBL.
This
research report contains three chapters. They are introduction, presentation
& analysis of data & summary, conclusion & recommendation. Chapter
one deals with background of the study, organizational structure, literature
survey, objectives of the study, procedures, method of data collection &
limitations of the study. Chapter three consist summary, conclusion &
recommendation for the study.
Chapter
two is the main part of the study, which deals with presentation & analysis
of relevant data using appropriation tools. In this chapter various ratios are
calculated for the study of financial performance of LXBL, which are mentioned
below.
Table
11
Comparative
Chart of Findings
|
Particulars
|
Year
|
||
|
2068/069
|
2069/070
|
2070/071
|
|
|
Current
Ratio
|
0.94:1
|
0.90:1
|
0.96:1
|
|
Quick
Ratio
|
0.92:1
|
0.88:1
|
0.93:1
|
|
Debt
Ratio
|
0.91:1
|
0.92:1
|
0.91:1
|
|
Debt
to Equity Ratio
|
0.15:1
|
0.29:1
|
0.24:1
|
|
TIE
Ratio
|
1.31
|
1.41
|
1.40
|
|
Return
on Assets
|
7.69%
|
6.34%
|
6.13%
|
|
Return
on Equity
|
14.49%
|
15.43%
|
14.96%
|
|
Return
on Capital Employed
|
12.36%
|
11.02%
|
12.10%
|
Source: Annual
Report of Laxmi Bank Limited
3.2
Conclusion
In conclusion it
is clear visible that LXBL is beneficial joint venture bank in the country and
its financial position is satisfactory. Some other findings of the study report
are listed below.
Liquidity
position of the bank is very weak. The bank is liquid enough and has not
sufficient current assets to meet the short term obligation. Quick ratio of the
firm is also low which indicates the poor liquidity position of the bank.
Solvency is the
company’s ability to pay its long term debt when they became due. Leverage
position of LXBL is not so good because it has less debt ratio & debt to
equity ratio. It means they didn’t meet their standard.
The profit of
the bank is increasing year by year. Return on assets, return on equity &
return on capital employed all are in increasing order. It indicates return
over the assets & equity is quick satisfactory.
Finally, the
financial ratio accesses the financial performance of LXBL. The calculation
ratio shows that the bank is secured from the investor point of view &
creditor point of view. Stockholders are also in the satisfied position. The
LXBL has been able to satisfy its customer demand & the bank is profitable.
In fact we can easily say that LXBL is an important financial in situation in
the economy sector of the country and the matter believes that LXBL is able to
fulfill its objectives for which may established.
3.3
Recommendation
On
the basis of above calculation and analysis of data some recommendation were
made. Which are mentioned below.
·
The current ratio of LXBL is not
effective or it didn’t meet its standard, so LXBL should raise their current
assets.
·
Laxmi bank is utilizing much of outsider
fund, which is shown by its liquidity ratio.
·
The liquidity position is not
satisfactory so it should try to increase the liquidity position.
·
The bank should maintain quick assets to
pay the current liabilities in time.
·
Net working capital is in fluctuating
every year; LXBL should try to constant net working capital.
·
The bank needs to undertake aggressive
marketing strategies to service & perform well in the existing environment.
·
Profitability ratio for the LXBL is not
constant. Such fluctuating EPS can’t be good indication. So the LXBL should try
to find out the weakness of such problems.
BIBLIOGRAPHY
Annual Report of Laxmi Bank Limited. (2069/070/071)
Dangol, R.M. (2063). Accounting for Financial Analysis & Planning. Kathmandu: Taleju Prakashan.
Joshi, Padamraj. (2068). Fundamentals of Financial Management. Kathmandu: Asmita Books Publishers & Distributors.
Joshi, Padamraj. (2068). Principle of Management. Kathmandu: Asmita Books Publishers & Distributors.
Shrestha, K.P. and Lamichhane, L.P. (2066). Project Management. Kathmandu: Asmita Books Publishers & Distributors.
Shrestha, Manoharkrishna, Joshi, Padamraj & Bhandari, D.B. (2070). Financial Institutions & Markets. Kathmandu: Asmita Books Publishers & Distributors.
Thapa, Kiran. (2070). Fundamentals of Investment. Kathmandu: Asmita Books Publishers & Distributors.
www.businessdictionary.com
www.investopedia.com
www.laxmibank.com.np
www.readyratios.com
