CHAPTER 1

INTRODUCTION

1.1 Background of the Study

Financial analysis is detailed study or examination of financial statement of any
financial institution to analysis its comparative strengths and weakness. Financial analysis
involves analyzing financial statement proposed in accordance with generally accepted
principles to ascertain information concerning to the magnitude, timing and risking of
future cash flow and reports what happened to the firm in terms of sales, assets, liabilities,
earnings, dividends and so on over the specific time period i.e., at the end of each fiscal
year thus financial statement is the most accurate source to recognize and analysis the
performance of company as it represent the records of former financial performance and
the achievement made over the years.
Similarly it shows the firm/institution’s past growth in sales and the level of
development that it is going to undertake in coming years. So a careful analysis of
financial statements enables a manager and concern people to evaluate relative strength
and weakness of the firm in relation to various aspect of firm’s financial performance.
At present financial analysis has proven itself so as to assist any financial
institution to set better plan for future. So one must appreciate the model of financial
analysis to analyze one’s findings in behalf of any financial institution in order to uplift or
track the overall financial condition of any financial institution. Present study focus on the
study of financial analysis of KIST, Manigram Branch for the year 2062/63 to 2066/67.

1.2 Significance of the study

All the above contents explain here the importance of financial analysis. The uses
of financial ratios and their significant. The importance of this analysis is equally even
from every aspect. Shareholders analyze these statements to have information about the
earning of the company; similarly stakeholder shows great concern about the overall
strength and weakness of the firm. Thus the whole study will be a systematic analysis of
these questions:
What is the income of the bank through out the sample period?
What is liquidity ratio of KIST?
What is profitability ratio of KIST?
What is debt management ratio of KIST?
What is the position of deposits and lending of KIST?

1.3 Literature Survey

Ratio is the expression of one figure in terms of another. It is the expression of the
relationship between the mutually independent figures. It is simple mathematical
expression of the relationship of one item to another. Absolute figures alone convey no
meaning unless they are compared with past research. Accounting ratios how the
interrelationship existed among various accounting data.

According to I.M. Pandey, “A ratio is defined as the indicated quotient of two

mathematical expressions and as the relationship between two or more things.” So, Ratio
Analysis is taken as a widely used tool for Financial analysis, It is a study of ratio &
between various items or groups of items in financial statements.
Therefore, ratios refer to the numerical or quantitative relationship between two
items or variables. In simple language ratio is one number expressed in terms of another
and can be worked out by dividing the number to another.

1.4 Objectives of the Study

Effective planning and control are central to enhancing enterprise value. Financial
plan may take many firm but any good plan must be must be related to the firm’s existing
strength and weakness. This strength must be understood if they are to be used to proper
advantage and weakness must be recognized if a corrective action is to be taken. The
basic purpose of this report will be to analyze the financial statement of KIST, Manigram
Branch finding out various ratios so as to determine its historical performances and
current financial conditions. Other specific objectives will be as follows:-
a. To analyze the income of the bank in different years.
b. To analyze the ratio about liquidity of KIST.
c. To analyze the ratio about profitability of KIST.
d. To analyze the ratio about debt management of KIST.
e. To identify the position of deposit and lending of KIST.
1.5. Field Work Procedures (Methodology Used)
1.5.1 Population and sample
As there are several branches of KIST throughout the country, this study will be
based only on the financial performance of KIST, Manigram Branch. The project work
explores the financial review of KIST and describes the systematic collection and
presentation of the data to form a clear image of specific event i.e. the Financial Analysis
of KIST, Manigram.

1.5.2 Sources of data and collection procedure

The major data used in this project report will be derived from the secondary
source and some analyses will be based on the primary source in order to meet the
requirement of this project work report. The detailed data sources will be as follows:-
A) Primary data
Under this method various types of data will be used to evaluate the bank’s
financial performance. Staffs of KIST were enquired directly and related data will be
collected from KIST, Manigram.
B) Secondary data
As it is already mentioned that mass coverage of this project work report will be
based on secondary source of data collection. Without which the financial analysis of
KIST, Manigram Branch was impossible to abstract. Secondary data sources will be as
follows:-
a. Annual report of KIST foe each sample period.
b. Different books, newspaper and report published in behalf of KIST.
1.5.3 Method of presentation and analysis
Merely the data collection is not a full featured project work the way of
representing it must be adopted in such a way that they can be easily understood. Method
of analysis is the modes or tools on which the conclusion is based. Also it facilitates very
easy comparison of data and information. The different tools brought up to prepare final
report will be as follows:-
a. Tables
b. Bar diagrams
c. Trend line
b. Average
c. Percentage
d. Financial ratios

1.6 Limitations of the Study

Limitation of any study refers to the extent to which the study is made
concentrated thus it is a boundary line which narrows the area of study into a specific
circumstance. Thus if we do not specify or limit our study it becomes vague and
incomplete able. Below mentioned are the limitation which is applied during the project
work report prepared on financial analysis of KIST, Manigram Branch.
a. The study will be based on only one financial institution i.e. KIST, Manigram Branch.
b. The study will be covered the period of five financial years starting from 2062/63 to
2066/067.
c. To present and analyze the data, limited tools and techniques will be used.
d. This study will based on secondary data and some information is assisted as primary
data.
e. This study simply could not be evaluated the overall position of KIST.
 CHAPTER II
DATA PRESENTATION AND ANALYSIS

2.1. Data Presentation and Analysis

2.1.1 Interest Income of KIST in Different Years
The objective of the study has been mentioned in the previous chapter. To fulfill
the objective relevant data and information of the ratio analysis of KIST, Manigram are
presented, compared and analyzed. The trend analysis is not the tool of that is perfect in
itself but merely one of the important tools of financial statement analyze. Though the
comparison of the trend gives some indication to the analyst to form an opinion as to
whether favorable or unfavorable tendencies are reflected by data.
The main objective of the commercial bank is to generate profit by providing
service to the customer. The existence of the commercial banks seems to be impossible
without profit. The best way to earn profit is by lending it’s capital to the customers for
that bank charges certain percentage on lending, which is called interest and is the
income for the bank.
Income through credit is the strong source of profit earned by the bank. Most of
the bank fully depend on the interest earned from loan and utilizes this fund for various
purpose i.e. to operate bank, provide salary to the staffs, to fulfill the day to day operation
of the bank, to provide bonus, to the employees, to distribute dividend to the shareholders,
etc.
We know that bank generates profit through lending but banks doesn’t provide
credit without making research that may be analysis of the project or the individual who
are in need of loan. The high level of officers and the experts appointed by the bank make
this researches. This research and inspection are done only to reduce the bad debt or to
minimize the risk of lending loan and make the appropriate decision. So, the bank as well
as the whole nation will be benefited.
 Table 1: Net return from interest in different years

Fiscal Interest Interest Net interest Ratio of net

Year income expenditure income interest income
2062/63 473297122 285005602 188291520 39.78%
2063/64 496808827 276705159 220103668 44.30%
2064/65 567096226 286297050 280799176 49.52%
2065/66 607095662 241639164 365456498 60.20%
2066/67 718121378 308155647 40996573 57.09%

Fig 1: Net Return from interest in different years

800000000
700000000
600000000
500000000
400000000 Interest
300000000 Interest
Net interest income
200000000
100000000
0
2062/63 2063/64 2064/645 2065/66 2066/67
Fiscal Years

The above table reveals net interest income which is collected from the lending to
its customers. The income received from its client without making any expenditure to
collect the debt is called gross income from interest. The total expenditure made by bank
to collect the debt is termed as interest expenditure. Deducting interest expenditure from
interest income net income from interest is obtained. (Net Interest income = Interest
income – Interest expenditure)
In the fiscal year 2062/63 KIST generate a interest income of 44.30%. It reveals
that the bank spend more funds in collecting debtors thus its income ratio is creeping.
Again in the fiscal year 2063/64 and 2064/65 KIST has become successful in reducing the
interest expenditure and increased the net income which leads to increase the interest ratio
to 49.52% & 60.20% respectively. But in the fiscal year 2066/67 the interest ratio has
declined to 57.09% this may be because of political situation of the nation.
 From above diagram it is found that the income from interest is increasing rapidly
every year. But the interest expenditure of the bank is little fluctuating this is although
they are providing quality service to customer and appropriate investment in different
sectors. The main reason to increase the interest earned by bank is also due to rise in the
number of customer whom KIST provide loan as per their investments.

2.1.2 Liquidity Ratios of KIST

Liquidity ratio measure the firm’s ability to met current obligation. These rations
focus on current assets and liabilities and are used to ascertain the short term solvency
position of a firm. A firm should ensure that it dose not suffer from lack of liquidity and
also that it does not have excess liquidity. The failure of company to meet it’s obligation
due lack of sufficient liquidity will result in a poor credit worthiness’, loss of creditors
confidence or even in legal triangle resulting in the closure of the company. A very high
degree of liquidity is also bad idle assets earns nothing the firm’s funds will be
unnecessarily tied up in current assets. Again very little amount of liquidity is not good
for the firm. Therefore proper balance between the tow contradictory require marks that is
liquidity and profitability. The most common ratios which indicates the extent of liquidity
are

A) Current ratio
Current ration (CR) is the quantitative relationship between current assets (CA)
and current liabilities (CL), current assets are those , which can m\normally be converted
into cash within a year. On the other hand, current liabilities refer to those obligation,
which must be paid within an accounting cycle. The CR shows banks ability to pay
liability, it is accurate and quick measure of the firms ability to meet current obligations.
It is calculated by dividing CA by CL.
Current Assets
Current ratio (CR) =
Current Liabilities

Table 2: Current ratio of KIST

Fiscal Year Current assets Current liability Current ratio

 2062/63 6262427115 95836461244 1.073
2063/64 7351175168 8685683716 1.071
2064/65 9412719665 8845599442 1.064
2065/66 9761899522 9136392648 1.068
2066/67 11818288400 11238595410 1.052

Fig 2: Trend line for current ratio of KIST

Current ratios

1.075
1.07
1.065
1.06
1.055
Current ratio
1.05
1.045
1.04
2062/63 2063/64 2064/65 2065/66 2066/67

Fiscal Years

The current ratio thus calculated measures the ability of the bank to meet
obligations due within one year. This assumes a regular cash flow and that both account
receivable and inventory can be readily converted into cash As a conventional rule the
ration2:1 is employed as a standard of comparison , CR is less then 2:1 are typically
considered very low and indicate financial difficulties for KIST the CR for the fiscal year
2062/63 to 2066/67 are 1.073 times, 1.064 times. 1.068 times and 1.052 times
respectively which seems to be poor however, CR is the quantitative test of a firm’s
liquidity. It does not consider the quality of current assets, therefore the ratio equals to or
greater than 2:1 may not be doing good due to slow paying debtors or less convertible
inventory. But a poor ratio less then 2:1 may be performing well if it has highly liquid
stock of quality account receivable.
B) Quick ratio
Quick ratio also termed as acid test ratio or liquid ratio is another measure of
short-term solvency of a firm. It defines the firm’s ability to pay its short-term obligation
without relaying on the sale of inventories. it establishes quantitative relationship between
quick assets and current liabilities. It is calculated as follows.
 Current Assets - Inventories - Prepaid expenses
Quick ratio (QR) =
Current Liabilities

Table 3: Quick ratio of KIST

Fiscal Years Quick assets Current liabilities Quick ratio
2062/63 5578781016 5836461244 0.96
2063/64 6658463058 6865683713 0.97
2064/65 862936724 8845599442 0.10
2065/66 9021379040 9136392648 0.99
2066/67 1143887010 11238595410 1.02

As a conventional rule, the ratio 1:1 is employed as a standard of comparison.

Hence, again the ratio below 1:! Is supposed to be the indicator of alarming short term
solvency, that the ratio 1:1 or more must be performing well. It depends on the quality of
the debtor By looking the above table of KIST, it is trying to maintain the QR in the
standard is successful in the fiscal year 2064/65. even though the banks poor ratio may do
well if the bank has high quality receivables and inventories.

2.1.3 Profitability Ratios of KIST

Profitability is the end results of a number of corporate policy and decision. It is
the differences between revenue and expenses over a period of time. Profit is the ultimate
output of the company and it will have no future if it fails to make sufficient profit.
Therefore financial manager should continuously evaluate the efficiency of the firm in
term of profit. The profitability ratio are calculated to measure the operating efficiency of
the firm. Beside owner and manager are also interested to know the financial soundness
of the firm. Owner are eager to know their return whereas manager are interested in
operating efficiency. So they calculate profitability ratio because expectation of both
owner and manager are evaluated in term of profit earned by the firm. This is possible
only when company earns enough profit.
A) Return on assets
Which is often called the companies return on total assets, measure the overall
effectiveness of management in generating profit with it’s available assets. The higher the
companies return on assets the better it is doing in operation and vice-versa. The ratio of
return on assets measure the success or failure of the firm to utilize its total assets. In
order to judge the management effectiveness, it is necessary to measure the profitability
of all financial resources invested in the firm’s asset. For this purpose a formula derived
as.
Net Profit
Return on assets (ROA) =
Total Assets

Table 4: Return on assets of KIST

Fiscal Year Net profit Total assets ROA
2062/63 9274782 6356645864 1.46%
2063/64 82127662 7444816989 1.10%
2064/65 127473189 9496344672 1.34%
2065/66 139529721 9888533138 1.41%
2066/67 202440627 12278329302 1.65%

Total assets of the KIST shows the increasing trend and profit of the bank is also.
In the increasing trend except the fiscal year 2063/64, the return on the assets (ROA) are
1.46%, 1.10%, 1.34% and 1.65% respectively for the year 2062/63, 2063/64, 2064/65,
2064/65 and 2065/66 respectively. The ROA shows the fluctuation which indicates that
there in necessary of proper management to utilize available assets effectively and
efficiently.
B) Return on equity
Return on equity (ROE) is percentage of net profit (Income) on total equity of
the firm. It also shows how effectively the bank is utilizing is net income worth for profit
generation. The efficiency can be analyzed from the table below. This ratio can be used of
return on equity is better for owner’s. it is calculated as follows.
Net Profit
Return on equity (ROE) = Shareholders Equities

Table 5: Return on equity of KIST

Fiscal Year Net profit Shareholder equity ROE
2062/63 9274782 520184620 1.78%
2063/64 83127662 579133236 14.18%
2064/65 127473189 650745230 19.50%
2065/66 139529721 320737816 43.50%
2066/67 202440627 839733881 2.11%

Fig 3: Trend line for ROE of KIST

 ROE on Percentage 50.00%
45.00%
40.00%
35.00%
30.00%
25.00% ROE
20.00%
15.00%
10.00%
5.00%
0.00%
2062/63 2063/64 2064/65 2065/66 2066/67

Fiscal Years

According to table and diagram, the return on equity is quite fluctuating and it is
decreasing trend in the fiscal year 2066/67. This result of ROE prove the way to
deteriorate the enthusiasm of present and potential investors of equity. Also it directly
affect the market value of shares and goodwill of bank.
C) Earning per share
Earning per share (EPS) is one of the strong tools of measuring the profitability of
the common shareholder’s investment. It is constantly being used to measure whether the
firm’s earning power per share has been changed over the given period or not EPS is the
result of net profit after tax loss preference dividend divided by the total number of
common share outstanding, Actually it reveals, the amount of earning attributable to each
common share outstanding.
Net Profit - Prefered Dividend
Earning per share (EPS) = No. of common Stock Outstanding

Since KIST has no preference share capital and no banks share issued. Therefore,
KIST has not required to give preference dividend but must adjust EPS by applying
adjustment factor.
Shareholders Equiyies 4635980900
No. of outstanding shares = 
Par Value Per Share 100
= 4635809 Shares
Table 6: Earning per share of KIST
 Fiscal Year Net profit No. of outstanding shares EPS
2062/63 9274782 4635809 Rs. 2.00
2063/64 82127662 4635809 Rs. 17.72
2064/65 127473189 4635809 Rs. 30.10
2065/66 139529721 4635809 Rs. 30.10
2066/67 202440627 4635809 Rs. 43.67
The EPS of KIST has been increasing continuously as a result of the effective and
efficient management of the firm. This has resulted the growth in the market has resulted
the growth in the market price per share in the fiscal year 2062/63 Rs.254.00 to Rs.850.00
in the fiscal year 2066/67 The management is able to maximize the value share which is
goods sign for the common shareholders, bank and the potential inventors.
Fig 4: Trend line for EPS of KIST
EPS in Rupees

50
45
40
35
30
25 EPS
20
15
10
5
0
2062/63 2063/64 2064/65 2065/66 2066/67
Fiscal Year

In the above diagram, the X-axis and Y-axis represent the fiscal year and the
earning per share. The curve represent the increasing trend of EPS in 2062/63 to 2064/65
fiscal year. EPS of KIST for the year 2061/62 i.e. Rs.2.00 and EPS for the year 2063/64,
2064/65, 2065/66, 2066/67 respectively as Rs. 17.72, Rs.27.30, Rs.30.10, Rs.30.10, Rs.
43.67. This clears that the banks EPS for several years. In 2062/63 KIST EPS was
minimum but in 2066/67 it’s EPS has increase to Rs. 43.67 As a result of the effective
management of the bank. The market price has increased this has resulted in continuous
growth in the EPS.

2.1.4 Debt Management Ratios of KIST

The debt management ratios, also knows as leverage ratio shows that proportions
of debt and equity in financing the firm’s assets. So long term creditors and more
concerned. With firm’s long term financial strength. In order to judge the long term
financial position of the firms, financial leverage or capital structure ratio are calculated.
 The manner in which asset are financed has a number of implication first between
debt and equity, debt is more risky from the firm’s point of view the firm has legal
obligation to pay interest to debt holders, irrespective of the profiles made or losses
incurred by the firm. If the firm fails to pay to debt holders in time, they can take legal
action against it to get payments and in extreme eases it can force the firm into
liquidation. Second, use of debt is advantageous fore shareholders in two ways.
Retaining control of the firm with a limited stake and their earning will be
magnified when the firm earned a ratio of return on the total capital employed higher the
interest rate on the borrowed funds. Leverage ratios are either calculated from the balance
sheet items to determine the pre position of the debt in total financing of from the profit
and loss a/c by determining the extent to which operating profit are sufficient to cover the
financial charge.
A) Debt equity ratio
Debt equity ratio is used to evaluate the long term solvency position of the firm. It
express the relationship between debt capital and equity capital and reflect the relative
claim of them on the assets. It is calculated by dividing total debt by total equity.
Total Debt
Debt equity ratio = Shareholders Equities

Table 7: Debt equity ratio of KIST

Fiscal Year Total Debt Total Equity DE ratio
2062/63 5836461244 520184620 11.22%
2063/64 6865683713 579133236 11.86%
2064/65 8845599422 650745230 13.59%
2065/66 9136392648 320737816 28.49%
2066/67 11238595410 839733881 13.38%

Fig 5: Total debt and equity capital of KIST

 12000000000

10000000000

8000000000
Amount in
6000000000
Rupees Total Debt
4000000000 Total Equity
2000000000

0
2062/63 2063/64 2064/65 2065/66 2066/67
Fiscal Years

From the debt holder point of view the firm with high DE ratio is unable to
provide the margin of safety to them. However the shareholder may consider it to be
significant because they enjoy trading equity and also use of high debt is tax deductive
source to them and use of high debt may be dangerous to the bank in the sense that
inability or may lead the bank to bankruptcy.
B) Debt assets ratio
The debt assets ratio (DA) simply known as debt ratio, shows the proportion of
total debt used in financing total assets of the firm. It is calculated by dividing total debt
by total assets. This ratio is calculated in order to assess proportion of total fund short and
long term provided by outsider to finance total assets.
Total Debt
Debt assets ratio =
Total Assets

Table 8: Debt assets ratios of KIST

Fiscal Year Total Debt Total Assets DA ratio
2062/63 5836461244 6356645864 91.82%
2063/64 6865683713 7444816989 92.22%
2064/65 8845599442 9496344672 93.15%
2065/66 9136392648 9888533138 92.39%
2066/67 11238595410 12278329302 91.53%

Fig 6: Total debt and assets of KIST

 14000000000
12000000000
10000000000
Amount in 8000000000
Rupees 6000000000 Total Debt
4000000000 Total Assets

2000000000
0
2062/63 2063/64 2064/65 2065/66 2066/67
Fiscal Years

High DA ratio from the shareholder point of view is considered to be significant

because they are enjoying trading on equity. However from lender’s point of view the
firm with higher DA is unable to provide a large margin of safety for them.
C) Interest coverage ratio (ICR)
It shows the ability of interest paying capacity of the bank. Higher the ICR higher
will be the interest and other fixed charges paying capacity. This ratio is useful to the
investor of the bank so that they will know how much their investment to the bank is
secured. If there exists higher ratio creditor and the depositor are more encouraged
investing in bank.
EBIT
Interest coverage ratio =
Interest

Table 9: Interest coverage ratio of KIST

Fiscal Net Add: EBT Add: EBIT ICR
Year Income Tax Interest
2062/63 9274782 17593606 26868388 285005602 311873990 1.09
2063/64 82127662 40014391 122142053 276705159 398847212 1.44
2064/65 127473189 57172203 184645392 286297050 470942442 1.64
2065/66 139529721 64763233 204292954 241639164 445932118 1.85
2066/67 202440627 98767743 301208370 308155647 609364017 1.98

Fig 7: Trend line for ICR of KIST

 Interest Coverage Ratio 2.5

1.5
ICR
1

0.5

0
Year 2062/63 2063/64 2064/65 2065/66 2066/67

Fiscal Years

As the ICR is higher the greater will be the interest payment capacity of the firm.
But the above ICR in values proves that the bank’s deposit and debt serving capacity is
low. The interest coverage ratio of 1.094 for the year 2062/63 refers that the bank would
maintain its interest payment capacity even if interest expenses increases to 1.094 times
of its present level and so on. Due to the low interest coverage ratio it is more risky from
depositor’s and creditor’s point of view to deposit money in bank.

2.1.5 Total Deposit and Total Lending of KIST

Deposit refers to the collection of money from various sectors like personal
institutions organization, company, industries, whether they are profit seeking or non
profit-seeking, deposit is very important for the successful and smooth operation of
banking system. It is compared to the circulation of blood in the human body. The growth
and development of bank depends primarily upon the source of existence of a commercial
bank. Accepting deposit is the main function of commercial bank. Again, giving loan to
the general public, institution, organization etc is also an important functions of the
commercial banks. Lunching loans is main the source of generation income for the bank.
The volume of funds that management will use for generating income through loans and
investment are determined largely by deposit policy, the deposit and lending of funds are
both equally important for the bank. The ratio of total deposit to total lending is calculated
as.
Total Deposit
Total deposit to total lending ratio = Total Lending
 The total deposit is the accumulation of fixed deposit, current deposit, current
deposit, and other deposit collected from the customer of bank. And this deposit is
utilized to give loan to other third party. The KIST’s deposit to lending ration is
increasing every year. It indicates that the bank is effectively utilizing the funds deposit
by the public and is investing on profit earning sectors. Hence the bank is playing the role
of investment company.
Table 10: Total deposit and lending of KIST

Fiscal Year Total deposit Total lending DL ratio

2062/63 5723289650 4613697307 1.2405
2063/64 6170711570 4542700202 1.3584
2064/65 7741645424 5646698444 1.3710
2065/66 8942748998 5912579472 1.5125
2066/67 10485359239 7259082579 1.4444

Fig 8: Total deposit and lending of KIST

12000000000
10000000000
8000000000
Amount in
6000000000
Rupees Total deposit
4000000000
Total lending
2000000000
0
2062/63 2063/64 2064/65 2065/66 2066/67
Fiscal Years

In the above diagram, it can be seen that the demand for deposit in the bank is
increasing means the customers are largely attracted by this bank. But the bank has not
landed all the deposited amount in loan, the loan offered by KIST is following the deposit
trend. The more the ban received deposits, the more it will investor.

2.2. Major Findings of the Study

Finding is an important part of the repost writing and presentation, during the time
of field of activities in the KIST. It was found that,
a. The percentage of net interest income has decreased from 60.20% in 2061/62 to
57.09% in 2066/67.
b. The current ratio of KIST is found to be 1.052 times in 2066/67 where as in 2065/66
is 1.068 times.
c. The debts to equity ratio is found to be 13.38 times and that of debt to total assets
ratio is 91.53 times
d. The interest coverage ratio of bank is 1.98 times in 2066/67.
e. The ROA increased from 1.41% in 2064/65 To 1.65% in 2066/67.
f. The ROE decreased from 43.50% in 2064/65 to 24.11% in 2066/67.
g. The EPS of the bank has increased to Rs. 43.67 in the fiscal year 2066/67

CHAPTER III
SUMMARY, CONCLUSION AND RECOMMENDATIONS

3.1 Summary
The main objective of the study is to fulfill the assessment required for practical
study of BBS (III) year of T.U. KIST is one of the successful banks operating the territory
of Nepal, Providing fair banking service to it’s customers namely remittance letter of
credit, loan, credit., locker, guarantees etc are major and one of the indirect investment for
the nation by KIST. So, this company is selected for the purpose of study, it started
operation in March 1995 with the objectives to fuel the Nepalese economy and take it to
hover height as well as to facilitate the nation economy to competitive globally.
All the data presented here are of secondary nature. The five fiscal year’s
published data of KIST are used in this study. Different methods are used in this study to
make the report precious. In this study different financial statement are applied whenever
necessary. In the sample of data of last five year the KIST is found to earned maximum
profit. By this analysis the position of KIST as well as its importance for the banking
sector and the nation is clearly understood.

3.2 Conclusion
During the visit to KIST branch office at Manigram for the purpose of collecting
data’s and information it was notice that the staff were highly efficient and hard working.
They were very concerned about the customer’s service. The number of customer are
increasing each year. The KIST’s head office and branch offices as well are providing
credit facility by which lost of customers have been benefiting. The list of the fiscal work
report of the KIST is presented as below:-

a. KIST has been mobilizing it’s fund in most of the sector of economy as per the need
of country.
b. The bank is able to pay it’s short term obligation in time out of it’s earnings.
c. The share holders, creditors of KIST and employee of the bank are found satisfied
from the return they receives from the bank.
d. The KIST’s interest coverage ratio is low.
e. The return on equity is quiet fluctuating over the year.
f. The EPS of the KIST’s is in increasing trend.

3.3 Recommendations
KIST is well experienced and successful to expand it’s business in different part of
nation. The financial statement of the company are presented in accordance with
generally accepted accounting practices as per guidelines issued by Nepal Rastra Bank
still if the bank takes care about the following things it will be more beneficial for the
banks.
a. The bank should try to mobilize it’s fixed assets as much as possible so that the return
on assets can be increased.
b. Liquidity position of the bank is through satisfactory, it should be taken in to
consideration.
c. The bank’s return of equity must be maintained.
d. It should improve the interest paying capacity because it’s interest coverage is low.
e. They should increase the rate on deposit, so that more customer can be attracted.
f. They should at least open their branches in different headquarter of the rural district.
Finally it may be concluded that KIST seems to have know the fact that only a
large quantity of natural resources, skilled manpower, Unless there is well establishment
of financial institution to mobilize capital. The present study only consider the financial
ratios as a variable for comparison. So, it is recommended to include other variables too
in further study of the same topic.

FINANCIAL ANALYSIS OF KIST LIMITED,

MANIGRAM BRANCH

Submitted by:
Archana Rayamajhi
P.U Regd. No: 2007-2-03-0005
Exam Roll No: 831579

An Internship Report
 Submitted to:
Pokhara University
Tilottama Campus

In partial fulfillment of the requirements for the degree of

Bachelor of Business Administration (BBA)

2011

FACULTY OF MANAGEMENT
POKHARA UNIVERSITY

RECOMMENDATION

This is to certify that the internship report

Submitted by
Archana Rayamajhi
P.U. Regd. No2007-2-03-0005
Exam Roll No: 831579
 Entitled
Financial Analysis of KIST Bank Limited,
Manigram Branch

has been prepared as approved by this department.

This internhsip report is forwarded for examination.

------------------------------------------------------------------ --------------------------------
Mr. Rajendra Chhetri Mr. Tulsi Prasad Sapkota Dr. Ramchandra Achaya
(Supervisor) (Co-ordinator) ( Campus Chief)

ACKNOWLEDGEMENT

I am very obliged to Pokhara University for offering such an opportitunity and

challenging intellectual task of report writing as a part of course of Bachelor in Business
Administration in Internship Report. It has helped me in acquiring practical knowledge
with field visit work. I have concern my study on financial analysis of KIST Bank
Limited, Manigram.
First, I would like to extend my gratitude to all those who helped me directly or
indirectly to prepare this report. I would like to gratitude especially to Mr. Rajendra
Chhetri; Supervisor of this report and Lecturer of Tilottama Campus for his admirable
guidelines and precious suggestions. I would like to thank Dr. Ramchandra Archarya;
Campus Chief of Tilottama Campus. I am equally thankful to the all respected teachers
who had taken orientation class and generated ideas for field work study.
At the end, all the staffs of Tilottama Campus are also thanked for their great
help. All the staffs of KIST Bank Limited, Manigram Branch, who provided me the
valuable information of the company to prepare this report, and my friends who are
helped me in this report writing are hearty thanked.
 Lastly, I would like to thank Sagarmatha Bibidh Sewa for computer typing and
setting of this fieldwork report. I express my gratitude to all my friends as well as others
who accompanied this field work.

Archana Rayamajhi
Tilottama Campus
 TABLE OF CONTENTS

Recommendation
Acknowledgement
List of Abbreviations
List of Tables
List of Figures
Table of Contents

CHAPTER Page No.

1. INTRODUCTION 1
1.1 Background of Study 1
1.2 Significance of the Study 1
1.3 Literature Review 2
1.4 Purposes of the Study 2
1.5 Methodology of the Study 3
1.6 Limitations of the Study 4

2. DATA PRESENTATION AND ANALYSIS

2.1 Data Presentation and analysis 5
2.1.1 Interest Income of KIST in Different Years 5
2.1.2 Liquidity Ratios of KIST 7
2.1.3 Profitability Ratios of KIST 9
2.1.4 Debt Management Ratios of KIST 13
2.1.5 Total Deposit and Total Lending of KIST 16
2.2 Major Findings of the Study 18

3. SUMMARY, CONCLUSION AND RECOMMENDATIONS 19

3.1 Summary 19
3.2 Conclusion 19
3.3 Recommendations 20

BIBLIOGRAPHY
APPENDIX
 LIST OF TABLES

Table No. Titles Page No.

1 Net return from interest in different years 6
2 Current ratio of KIST 8
3 Quick ratio of KIST 9
4 Return on assets of KIST 10
5 Return on equity of KIST 11
6 Earning per share of KIST 12
7 Debt equity ratio of KIST 14
8 Debt assets ratios of KIST 15
9 Interest coverage ratio of KIST 16
10 Total deposit and lending of KIST 17

LIST OF FIGURES

Figure No. Titles Page No.

1 Net return from interest in different years 6
2 Trend line for current ratio of KIST 8
 3 Trend line for ROE of KIST 11
4 Trend line for EPS of KIST 12
5 Total debt and equity capital of KIST 14
6 Total debt and assets of KIST 15
7 Trend line for ICR of KIST 16
8 Total deposit and lending of KIST 17

LIST OF ABBREVIATIONS

% Percentage
CA Current Assets
CL Current Liabilities
DA Debt Assets
DE Debt Equity
DL Debt to Lending
EPS Earning Per Share
Fig Figure
ICR Interest Coverage Ratio
i.e. That is
No. Number
NRB Nepal Rastrya Bank
QA Quick Assets
QR Quick Ratio
Regd. Registration
ROA Return on Assets
ROE Return on Equity
Rs. Rupees
TD Total Debt
PU Pokhara University
 BIBLIOGRAPHY

Agrawal, G.R. (2003), Project Management in Nepal; Kathmandu, MK Publisher &

Distributors.

Annual Report (2062/063 to 2066/67), KIST Limited.

Bajracharya, Bhanu Chandra (2060), Business Statistics & Business Mathematics;

Kathmandu, M.K.Publisher and Distributors.

Dangol, Ratna Man & Prajapati Keshab (2003), Financial Analysis & Planning
Accounting; Kathmandu, Taleju Publication.

Munankarmi, Shiva Prasad (2004), Text Book of Accountancy & Auditing; Kathmandu,
Educational Enterprises (P) Ltd.

Pant, P. R. (2003), Fieldwork Assignment & Report Writing; Kathmandu, Buddha

Academic Enterprises Pvt. Ltd.

Rana, Surya (2005), Financial Management; Kathmandu, Ratna Pustak Bhandar.

Thapa, Sher Jung & Singh Hridaya Bir (2060), Banking, Principles & Legislation
Practice; Kathmandu, Nabin Prakashan.

Website of KIST; www.KISTltd.com

Website of NRB; www.nrb.org.np

 Appendix – I

A Proposal on Financial Analysis of KIST Bank Limited,

Manigram Branch
1.1 Background of the Study
Financial analysis is detailed study or examination of financial statement of any
financial institution to analysis its comparative strengths and weakness. Financial analysis
involves analyzing financial statement proposed in accordance with generally accepted
principles to ascertain information concerning to the magnitude, timing and risking of
future cash flow and reports what happened to the firm in terms of sales, assets, liabilities,
earnings, dividends and so on over the specific time period i.e., at the end of each fiscal
year thus financial statement is the most accurate source to recognize and analysis the
performance of company as it represent the records of former financial performance and
the achievement made over the years.
Similarly it shows the firm/institution’s past growth in sales and the level of
development that it is going to undertake in coming years. So a careful analysis of
financial statements enables a manager and concern people to evaluate relative strength
and weakness of the firm in relation to various aspect of firm’s financial performance.
At present financial analysis has proven itself so as to assist any financial
institution to set better plan for future. So one must appreciate the model of financial
analysis to analyze one’s findings in behalf of any financial institution in order to uplift or
track the overall financial condition of any financial institution. Present study focus on the
study of financial analysis of KIST, Manigram Branch for the year 2063/64 to 2065/66.

1.2 Significance of the study

All the above contents explain here the importance of financial analysis. The uses
of financial ratios and their significant. The importance of this analysis is equally even
from every aspect. Shareholders analyze these statements to have information about the
earning of the company; similarly stakeholder shows great concern about the overall
strength and weakness of the firm. Thus the whole study will be a systematic analysis of
these questions:
What is the income of the bank through out the sample period?
What is liquidity ratio of KIST?
What is profitability ratio of KIST?
What is debt management ratio of KIST?
What is the position of deposits and lending of KIST?

1.3 Literature Survey

Ratio is the expression of one figure in terms of another. It is the expression of the
relationship between the mutually independent figures. It is simple mathematical
expression of the relationship of one item to another. Absolute figures alone convey no
meaning unless they are compared with past research. Accounting ratios how the
interrelationship existed among various accounting data.

According to I.M. Pandey, “A ratio is defined as the indicated quotient of two

mathematical expressions and as the relationship between two or more things.” So, Ratio
Analysis is taken as a widely used tool for Financial analysis, It is a study of ratio &
between various items or groups of items in financial statements.
Therefore, ratios refer to the numerical or quantitative relationship between two
items or variables. In simple language ratio is one number expressed in terms of another
and can be worked out by dividing the number to another.

1.4 Purpose of the Study

Effective planning and control are central to enhancing enterprise value. Financial
plan may take many firm but any good plan must be must be related to the firm’s existing
strength and weakness. This strength must be understood if they are to be used to proper
advantage and weakness must be recognized if a corrective action is to be taken. The
basic purpose of this report will be to analyze the financial statement of KIST, Manigram
Branch finding out various ratios so as to determine its historical performances and
current financial conditions. Other specific objectives will be as follows:-
a. To analyze the income of the bank in different years.
b. To analyze the ratio about liquidity of KIST.
c. To analyze the ratio about profitability of KIST.
d. To analyze the ratio about debt management of KIST.
e. To identify the position of deposit and lending of KIST.
1.5. Field Work Procedures (Methodology Used)
1.5.1 Population and sample
As there are several branches of KIST throughout the country, this study will be
based only on the financial performance of KIST, Manigram Branch. The project work
explores the financial review of KIST and describes the systematic collection and
presentation of the data to form a clear image of specific event i.e. the Financial Analysis
of KIST, Manigram.

1.5.2 Sources of data and collection procedure

The major data used in this project report will be derived from the secondary
source and some analyses will be based on the primary source in order to meet the
requirement of this project work report. The detailed data sources will be as follows:-

A) Primary data
Under this method various types of data will be used to evaluate the bank’s
financial performance. Staffs of KIST were enquired directly and related data will be
collected from KIST, Manigram.

B) Secondary data
As it is already mentioned that mass coverage of this project work report will be
based on secondary source of data collection. Without which the financial analysis of
KIST, Manigram Branch was impossible to abstract. Secondary data sources will be as
follows:-
c. Annual report of KIST foe each sample period.
d. Different books, newspaper and report published in behalf of KIST.

1.5.4 Method of presentation and analysis

Merely the data collection is not a full featured project work the way of
representing it must be adopted in such a way that they can be easily understood. Method
of analysis is the modes or tools on which the conclusion is based. Also it facilitates very
easy comparison of data and information. The different tools brought up to prepare final
report will be as follows:-
a. Tables
b. Bar diagrams
c. Trend line
e. Average
f. Percentage
g. Financial ratios
1.6 Limitations of the Study
Limitation of any study refers to the extent to which the study is made
concentrated thus it is a boundary line which narrows the area of study into a specific
circumstance. Thus if we do not specify or limit our study it becomes vague and
incomplete able. Below mentioned are the limitation which is applied during the project
work report prepared on financial analysis of KIST, Manigram Branch.
a. The study will be based on only one financial institution i.e. KIST, Manigram
Branch.
b. The study will be covered the period of five financial years starting from 2061/62
to 2063/064.
c. To present and analyze the data, limited tools and techniques will be used.
d. This study will based on secondary data and some information is assisted as
primary data.
e. This study simply could not be evaluated the overall position of KIST.
1.7 Time Allotment
The time allotment for writing this report will be as follows:-

Topic selection 2 days

Proposal writing 3 days
Data collection 7 days
Data presentation and analysis 5 days
Preparation of report 8 days
Proof reading 2 days
Setting and printing 3 days
Total 30 days
Archana Rayamajhi
Tilottama Campus
 Appendix II: Organizational Structure of KIST, Manigram Branch

Branch Manager

Assistant Branch Manager

Cash Accountant General Credit System

Department Department Banking Department Department

Employee Employee Employee Employee Employee

Guard, Driver and Messenger