A CASE STUDY ON

PROFITABILITY ANALYSIS OF

MUKTINATH BIAKSH BANK

A Project work Report

Submitted by: Samjhana Upadhyay

TU Registration No: 7-2-920-348-2019
Symbol No: 709200191
Group: Finance
Danfe College, Kathmandu

Submitted to:

Office of Controller of Examination

Faculty of Management
Tribhuvan University

In partial fulfillment of the requirements for the degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Putalisadak, Kathmandu
July, 2024
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DECLARATION

I, hereby, declare that the project work entitled PROFITABILITY ANALYSIS OF

MUKTINATH BIAKS BANK submitted to the Faculty of Management, Tribhuvan
University, Kathmandu is an original piece of work under the supervision of MR. GANESH
KHADKA, faculty member, DANFE COLLEGE, PUTALISADAK 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.

Signature:

July, 2024
 iii

SUPERVISOR’S RECOMMENDATION

The project work report entitled A REPORT ON PROFITABILTY ANALYSIS OF

MUKTINATH BANK submitted by Samjhana Upadhayay of Danfe College, Kathmandu is
prepared under my supervision as per the procedure and format requirement laid by the Faculty
of Management, Tribhuvan University, as partial fulfillment of the requirements for the degree
of Bachelor of Business Studies (BBS). I therefore, recommend the project work report for
evaluation.

Signature:

Name of Supervisor: Ganesh Khadka

July, 2024
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ENDORSEMENT

We hereby endorse the project work report entitled “PROFITABILTY ANALYSIS OF

MUKTINATH BIKAS BANK” submitted by Samjhana Upadhyay of DANFE COLLEGE,
PUTALISADAK KATHMANDU, in partial fulfillment of the requirements for award of the
Bachelor of Business Studies (BBS) for external evaluation.

Signature: Signature:

Mr. Bishnu Sharma Mr. Krishna Prasad Poudel

(Head of Research Department) (Campus Chief)

Danfe College Danfe College

Date: July 2024 Date: July 2024

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ACKNOWLEGEMENTS

It is the matter of pride for me to present this fieldwork report, which is prepared according to
the Tribhuvan University syllabus for 4 years course in the partial fulfillment of the degree of
Bachelor of Business Studies. It is my pleasure to present this report which is based on the
“Profitability Analysis of Muktinath Bikas Bank”. The completion of this report would not
have possible without the close cooperation of various people to whom I feel greatly indebted.
I would like to thank to all people who have supported this report.

Firstly, I would like to express my deep gratitude to Mr. Ganesh Khadka, my research
supervisor, and Mr. Krishna Prasad Poudel, Campus Chief for his valuable suggestion, patience
guidance, encouragement and useful critiques of this research work. Also I express my
indebtedness to all the lecturers of the Danfe College for their academic support. This work
would never have appeared in its present form without their kind and valuable guidance.

I would also like to thank to my friends and my family members who have helped me with
collection of information and data regarding my subject.

My grateful thanks are extended to the Muktinath Bikas Bank. For providing me with the data
and to those writers whose material and methods have been used as reference.

Finally, I would like to offer special thanks to all the people who directly and indirectly helped
me in this report during my research.

Regards,

Samjhana Upadhyay
Danfe College
Putalisadak, Kathmandu
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TABLE OF CONTENTS

Titles Page No.

Title page i
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 1: INTRODUCTION
1.1 Background of the Study 1
1.2 Profile of Organization 2
1.3 Statement of Problem 2
1.4 Objective of the Study 3
1.5 Rationale of the Study 3
1.6 Review of literature 3
1.7 Research and methodology 6
1.8 Organization Study 8
1.9 Limitation of Study 8
CHAPTER 2: RESULTS AND ANALYSIS
2.1 Data Analysis 9
2.2 Ratio Analysis 9
2.3 Findings 13

CHAPTER 3: SUMMARY AND CONCLUSION

3.1 Summary 14
3.2 Conclusion 14

BIBLIOGRAPHY
APPENDICES
 vii

LIST OF TABLES

Titles Page No.

Table 2.1: Net profit Margin 9

Table 2.2: Return on Assets 11

Table 2.3: Return on Equity 12

 viii

LIST OF FIGURES

Titles Page No.

Figure 2.1: Net Profit Margin 10

Figure 2.2: Return on Assets 11

Figure 2.3: Return on Equity 12

 ix

ABBREVIATIONS

BBS Bachelor of Business Studies

BS Balance Sheet
CR Current Ratios
EPS Earnings Per Share
FY Fiscal Year
Ltd. Limited
MPPS Market Price Per Share
PE Price Earnings Ratio
P/L Profit & Loss
ROE Return on Equity
SWOT Strength, Weakness, Opportunity and Threats
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CHAPTER 1
INTRODUCTION
1.1 Background of the Study
Every firm is most concerned with its profitability. One of the most frequently used tools of
financial ratio analysis is profitability ratio, which are used to determine company’s bottom line
and its investors. Profitability measures are important to company managers and owners alike. If
a small business has outside investors who have put their own money
into the company, the primary owner certainly has to show profitability to those equity investors.
Profitability ratios show a company's overall efficiency and performance.
Bank is an institution which deals with money. A bank is financial institution that accepts deposits
from public and creates a demand deposit while simultaneously making loans. Lending activities
can be performed directly through capital market. The term Bank is derived from the Italian word
‘Banco’ and French word ‘Banque’ all of the term mean ‘Bench’. At ancient times there used to
be some money lenders who sat in a bench for keeping, sending and exchanging money in the
market. Thus, bank is financial intermediary accepting deposit, granting loans. In modern days’
bank perform various other function which is difficult to write in one definition.
According to CR Crowther. "A bank collects money from those who have it to spare or who are
saving it out of their incomes, and it lends this money to those who require it."
According to Prof. Kinley. "A bank is an establishment which makes to individuals such advance
of money as may be required and safely made, and to which individuals entrust when not require
by them for use."
Bank plays important role in proper functioning of money among individuals, business entities,
government organization, etc. Banking institutions are inevitable for the resources mobilization
and all around development of economy. It is the resources of economic development and
maintains economic confidence of various segments and extents credits to people. Due to their
importance in financial stability of a country, banks are highly regulated in most of the countries.
Similarly, there are many commercial banks established in our country. Nepal Rastra Bank is the
first commercial bank in Nepal established in 15 November 1937. In 1957A.D Industrial
Development Bank was established to promote the industrialization in Nepal, which was later
converted into Nepal Industrial Development Corporation (NIDC) in1959 A.D. Rastriya Banijya
Bank was established in 1965 A.D. as second commercial bank in Nepal. As agriculture is the
basic occupation in Nepal, the development of this sector plays important role in economy. So,
separate agriculture bank was established in 1968 A.D. There are various types of bank working
in modern banking system in Nepal. It includes central, development, commercial, financial,
cooperative and micro-credit (Grameen) development banks. The NRB will classify the
institutions into "A", "B", "C" and "D" groups on the basis of the minimum paid-up capital and
provide suitable license to the bank or financial institution Group "A" is for commercial bank. "B"
is for the development banks, "C" for the financial institutions and "D" for the micro-finance
development banks.
Financial statement (or financial reports) are formal records of the financial activities and position
of business. It is basically final steps in accounting which shows the performance of entity in form
 2

of profit & loss account, and reflects assets, liabilities and capital at end of the period through
balance sheet. It presents the result of operations and the financial position of the company. Four
statement are commonly prepared by public traded companies: balance sheet. Income statement,
cash flow statement and statement of change in equity.
Profitability refers to the profits or gains a business makes in relation to its expenses. Therefore,
profitability analysis refers to the process of calculating or analyzing the profits of a business. It
helps businesses identify their revenue streams and where they can reduce their expenses to
generate maximum gains.
Profitability analysis is part of enterprise resource planning (ERP) and helps business leaders to
identify ways to optimize profitability as it relates to various projects, plans, or products. It is the
process of systematically analyzing profits derived from the various revenue streams of the
business.

1.2 Profile of Organization

Muktinath Bikas Bank Limited (MNBBL) was established on 19th Poush 2063 B.S. (i.e. 3rd
January 2007 A.D.), The Bank is licensed by the Central Bank of Nepal to operate as a “B” Class
National Level financial institution with its Central Office at Kamaladi, Kathmandu. It is promoted
by eminent personalities, business and industrial houses and reputed individuals having high social
standing and has been managed by a team of experienced bankers and professionals. The Bank has
been headed by 6 Board of Directors, led by non-executive Chairman Bharat Raj Dhakal and the
management team led by Mr. Pradyuman Pokharel as Chief Executive Officer. The Bank has
employed 1547 staffs including 966 male employee and 581female staffs working with various
Departments and Branches across the country.

1.3 Statement of the Problem

A statement of problem is a brief description of an issue to be addressed or a condition to be
improved upon. It aims to identify and explain the problem.
In present context of Nepal, commercial banks have good performance. On the basis of
profitability and productivity of commercial banks, the public have confidence in their
performance. However, various environmental factors, state of economy, structure of capital and
money market, government and taxation policies and various internal factors have influence upon
financial performance and position of the banks. In these circumstances, it is highly useful to do
the study on profitability analysis of Muktinath Bikas Bank Limited.
Profitability position and stock prices are the general factors considered for evaluating the financial
performance of Muktinath Bikas Bank Ltd. However, one can raise a question, “Are these the only
factors to reflect the performance of the bank?” Thus, the main problem of the study is to inquire
into the Profitability Position of Muktinath Bikas Bank Ltd.
This study is targeted to find out answers to the following questions:

 What is the Profitability Position of Muktinath Bikas Bank Ltd?

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 Does the overall financial statement depict the financial position indicating any special
strength and weakness of the bank?
 Is Citizen Bank International Ltd utilizing its assets efficiently?
 Citizen Bank International Ltd is considered to be operationally efficient. But how far it is
efficient?
 What is the profitability of Muktinath Bikas Bank?
In this context, the main purpose of the study is analysis the financial performance of the Muktinath
Bikas Bank Ltd in terms of turnover, profitability, liquidity and efficiency in operation.

1.4 Objectives of the Study

A study is conducted and report is prepared with certain objectives keeping in mind. In the absence
of specific objective, the study loss its value, the general purpose of the study is to discuss, examine
and evaluate the profitability position of Muktinath Bikas Bank Limited. Thus, this study has been
conducted to achieve the following objectives:

 .To analyze the profitability of the Muktinath Bikas Bank Limited.

 To analyze profitability ratios of the Muktinath Bikas Bank Limited.

1.5 Rationale of the Study

This report will be useful to know overall picture of Muktinath Bikas Bank. However, it is mainly
concentrated to the Profitability and performance of the Muktinath Bikas Bank .So anyone who
wants information regarding the position of profitability and Solvency position of the Muktinath
Bikas Bank Ltd they will be facilitated from this research to obtain the valuable information. The
knowledge about the bank’s Profitability position will helps the shareholders as well as investors
and also it supports to the creditors of the bank. .The study helps the public to have information
about the profitability performance of the bank. The study helps in analyzing the efficiency of the
banks in terms of their profitability. The study assists future researchers to know how bank manage
their profitability. Also the student in coming years will as a reference.

1.6 Review of the Literature

The study is concerned with the Profitability position of Muktinath Bikas Bank limited.
Profitability ratios aims to provide more important information about the profitability of the
company. Where the debt holders are interested in liquidity ratios which show the company’s
ability to meet its obligations, while investors and shareholders interested in profit rates. Ratio
analysis is one of the important financial tools through which the performance of the financial
institution can be analyzed. It measures the relationship between any two variables. As the study
is concerned with Profitability analysis, different profitability ratios are considered to be calculated
in order to find the relationship between them. Therefore, management, creditors and owner of the
company are also interested in the profitability ratio of the firm. It is also a control measure of the
earning power of a firm as well as operating efficiency.
Almumani (2014) the purpose of his study is to analyze and compare the performance of Saudi
banks that listed in stocks market for the period 2007-2011. The study is an evaluator in nature,
drawing sources of information from secondary data. The financial performance of banks is
 4

studied on the basis of financial ratios and variables. Financial performance was measured by two
approaches; trend analysis and inter-firm analysis. It was found that increasing of assets, operating
expenses, and cost to income causes a decrease in Saudi bank’s profitability, while increasing of
operating income causes an increase in the profitability of Saudi Banks. Analysis shows that all
the variables of study have a positive mean value and all banks are generating income. Saudi joint
venture banks proved to be more proficient in generating profits, absorbing loan losses and
dominating in ROE, while, Saudi established banks have more capacity of absorbing asset losses
and dominating in ROA.

Mr. Bhandari on 2015 had studied about the" profitability position of Everest bank limited “.
Where he had suggested the following;

 It should increase in equity portion and reduce the debt capital far the stander.
 The bank should extend more facilities to its customers to increase its customers to increase
its transactions.
 Although it is a profit-oriented bank, it should not forget the social responsibility. So, the
bank should render its services in rural area to promote and mobilize small investors.

1.7 Research Methodology

Research methodology refers to the various sequential steps to be adopted by are searcher in
studying a problem with certain objective in view. It is the research method used to test the
hypothesis. It describes the method and process applied in the entire subject of the study
This stay focused on analysis of profitability of Muktinath Bikas Bank Limited. It helps to know
the Guile performance of bank by using ratio analysis, trend analysis, line graph, growth analysis,
Analysis is focused on facts & finding, outlining problems and suggesting corrective measures .It
is the systematic way of solving problems that occurs path of research The method which is using
in the research to plan how data is collected which source the study use for getting data is under
the research methodology. It includes:

1.7.1 Research design:

Research design is a task of defining the research problems. Keeping in mind the objectives of the
study descriptive cum analytical research design has been followed. The study is based on the wide
range of variables and factors influencing financial performance and position of bank. To achieve
the objective of the study, analytical and descriptive research designs have been used. Some
financial and statistical tools have been used to examine facts and descriptive techniques have been
adopted to evaluate profitability analysis of Muktinath Bikas Bank.

1.7.2. Population and Sample:

Population refers to the entire collection of all observation of interest i.e. people, objects or events
as defined by the researcher. A researcher must specifically define the target population or the
entire group on which they want to make the judgment. Among different financial institution of
Nepal, 28 'A' class banks are the population of this study. The population for this study comprises
of 21 commercials currently operating banks in the country. All the banks perform the functions
 5

of commercial banks under the rules, regulation, and directive of Nepal Rastra Bank. And as a
sample only 1 bank i.e. Muktinath Bikas Bank Limited.

1.7.3. Source of data:

Although present study is on secondary data. However, necessary suggestions are also taken from
various experts both inside the bank whenever required the necessary data is obtained from various
source such as website of the bank such as, published balance sheet, profit and loss account and
other related statement of accounts as well as the annual reports of the respective banks. Likewise,
other related arid necessary information’s are also obtained from the publication of security
exchange center, Nepal Rasta Bank and other publications used for the purpose are book &
booklets magazine journals, newspaper school of thought etc.

1.7.4. Data collection procedure:

The study has been ducted to examine and evaluate the Profitability analysis of Muktinath Bikas
Bank Limited. This study is also intended to find the weaknesses and strengths so that appropriate
suggestion can be provided to enhance the performance of the banks in coming days. For the
purpose, various data are required. With the view of obtaining the data, researcher made several
visits of the sampled banks, in first visit, the researcher consulted the concerned authority of the
bank and explained about the above stated problems and objectives of the study. The researcher
got the information through direct interview with the designated staffs by the bank. Similarly, rese-
archer obtained economic surveys, annual and periodic reports and banking directive from Nepal
Rastra Bank.

1.7.5. Data Processing:

Data obtained from the, various sources cannot be directly used in their original form further they
need to be verified and simplified for the purpose of analysis. Data information, figure and facts
so obtained need to be checked, rechecked edited and tabulated for computation. According to the
nature of data, they have been inserted in meaningful tables, which have been shown in annexes.
Homogenous data have been sorted in one table and similarly various tables have been prepared
in understandable manner odd data excluded from the table. Using financial and statistical tools
data have been analyzed and interpreted.

1.7.6. Methods of Data Analysis:

Various statistical and financial tools are used in this study. Wide varieties of methodology have
been applied according to the reliability and consistency of data. Before using the analytical tools
to compare the results, the data containing in the financial statement have been grouped re-ranged
so as to make the comparison easy. Data are collected from the various sources for the purpose of
research and they are then presented and analyzed which is the core part of the research work. The
collected data are first presented in a systematic manner and are then analyzed by different
financial and statistical tools to achieve the research objectives. Besides, some graph, charts and
tables have been presented to analyze and interpreted the finding of the study. The applied tools
are:
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1.7.6.1 Financial tools

A financial tool helps to analyze the financial strength and weakness of the firm. Financial ratio is
the mathematical relationship between two accounting figures. Ratio analysis is one of the
important financial tools that have been used in the study. A ratio is simply one number expressed
in terms of another and such it express the quantitative relationship between any two numbers.
Ratio can be expressed in terms of percent and proportion. Ratio analysis is a part of the whole
process of analysis of financial statements of any business or industrial concern especially to take
output and credit decision. Even though, there are many ratios to analyze and interpret the financial
statement, only those ratio are calculated and interpreted that are related to this study. The
following types of ratio have been used in this study:

Profitability Ratio
Profitability ratios are a class of financial metrics that are used to assess a business’s ability to
generate earning relative to its revenue, operation costs, balance sheet assets, and shareholders'
equity over time, using data from a specific point in time. The following ratios are developed under
the profitability ratio to identity the profitability position
𝑛𝑒𝑡𝑝𝑟𝑜𝑓𝑖𝑡
1. Net Profit Margin Net Profit Margin =
𝑟𝑒𝑣𝑒𝑛𝑢𝑒

𝑛𝑒𝑡𝑝𝑟𝑜𝑓𝑖𝑡
2. Return on Equity Return on Equity (ROE) = 𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟 ′𝑠 𝑒𝑞𝑢𝑖𝑡𝑦

𝑛𝑒𝑡𝑝𝑟𝑜𝑓𝑖𝑡
3. Return on Assets Return on assets (ROA) =
𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑠𝑡𝑠

1.7.6.2 Statistical Tools

For supporting the study, statistical tool such as Arithmetic Mean, Standard Deviation, Coefficient
of variable (C.V.) and Trend Analysis are used in the study.

a. Arithmetic Mean
Arithmetic Mean (Average) is the sum of collection of numbers divided by the count of numbers
in the collection. The collection is often a set of result of an experiment or an observation study,
or frequently a set result from a survey. It is an important measure of central tendency. It is
calculated as:
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Arithmetic Mean (X) = ∑X/N

Where,
X = Arithmetic Mean
N = Number of observation
∑X = Sum of observation
X = Data

b. Standard Deviation
Standard deviation is a measure that is used to quantify the amount of variation or dispersion of a
set of data values. It is an important measurement of dispersion. A low standard deviation
indicate that the data points tend to be close to the mean (also called the expected value) of the
set, while a high standard deviation indicates that the data points are spread out over a wider range of
values. It is denoted by a Greek letter "" Sigma and is calculated as

Standard Deviation (S.D.) = √ ∑𝑋 − 𝑋2/ 𝑁

Where;

X = Arithmetic Mean

N = Number of observation

X = Data

c. Coefficient of Variation
Coefficient of Variation (C.V) is a standardize measurement of dispersion of a profitability distribution or
frequency distribution. It is defined as the ratio of the standard deviation to the mean. It is calculated by
dividing standard deviation by the mean which is shown below:

Coefficient of Variation (C.V.) =S.D/Arithmetic Mean

Where;
X = Arithmetic Mean
S.D = Standard deviation
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1.8 Organization of the Study

This proposal is maintained in sequential orders as much as possible. The study has been broadly
divided into three chapters which are as follow:

Chapter 1: Introduction
This chapter includes background of the study, problems of the statements, objectives of the
study, organizations of the study, literature review, research methods and procedures and
limitations of the study.
Chapter 2: Data presentation and analysis
In this chapter collected and possessed data are presented analyzed and interpreted by using
profitability ratios. For analyzing data, it is presented in tabular and graphical form.
Chapter-3: Summary and conclusion
In this chapter, discussion for summary of the whole study and conclusion will be incorporated
according to finding of data analyzed in previous chapter.
At the end of report, bibliography, and appendices for detailed calculation table are presented to
verify the analysis of information to complete the research report.

1.9 Limitation of the Study

There are some limitations of the study because this study is done only for the partial fulfillment of
Bachelor of Business Studies (BBS). The limitations of the study are concerned with inadequate coverage
of the industry, reliability of the data and some other variables. The study is based on the secondary
data. Therefore, the data collected may not be as reliable as the primary data. The specific limitations of
this study are as follow:

 The study has collected the information of the banks through website of the bank only.
 The information collected is based on the data of past 5 years only.
 The study is not able to collect information from top-level staffs.
 The study does not consider the other areas such as liquidity, debt management, capital
budgeting, dividend policy etc.
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CHAPTER 2
RESULT AND ANALYSIS
2.1 Data Presentation and Analysis
The fundamental objective of this chapter is to systematically analyze and evaluate the collected
information or data and converted into an understandable form. This chapter helps to see the relationship
between variables and take essential decision. In this section, raw and unprocessed data are collected from
various sources and are presented in a systematic and understandable form using various financial and
statistical tools as mentioned in the previous chapter i.e. methodology of the study .The analysis of data
consists of organization, tabulation and graphical representation of profitability condition of the bank.

2.2 Analysis of Results

Profitability Analysis is a form that is used to obtain a quick indication of a firm's financial performance
in several key areas. This section of the report contains some fundamental ratios relevant to Muktinath
Bikas bank limited.
Profitability Analysis
It measures the efficiency and searches the degree of success in achieving desired profit. Any firm
should earn satisfactory profit for survive and grow over a long period in the competitive
environment. Moreover, through this ratio the investor can decide whether to invest or not. It is
done through the use of calculation of following calculations. Every entity is poised with the
objective of maximization of profit. Profitability is the primary goal of all business ventures.
Without profitability the business will not survive in the long run. So measuring current and past
profitability and projecting future profitability is very important. Profitability is measured with
income and expenses. The ability to earn a profit. Infect, efficiency of business is measured in
terms of profits. Profitability ratios are calculated to measure the efficiency of a business.

2.2.1 Net Profit Margin Ratio

The net profit margin is equal to how much net income or profit is generated as a percentage of
revenue. Net profit margin is the ratio of net profits to revenues for a company or business segment.
Net profit margin is typically expressed as percentage but can also be represented in decimal form. This
ratio is calculated by: 𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 = 𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 / 𝑅𝑒𝑣𝑒𝑛𝑢𝑒

Table No.2.1: Net Profit/Revenue

Fiscal year Net Profit(a) Revenue (b) Net Profit Margin a/b
2078/2079 1341805287 3832644373 35
2077/2078 1156256498 3789853140 30.51
2076/2077 707405117 2788167391 25.4
2075/2076 856166479 2518031091 34
2074/2075 624033456 1727369011 36.1
TOTAL 161.01
Source: Annual Report of Muktinath Bikas Bank
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NET PROFIT

2074/76

2075/76

2076/77

2077/78

2078/79

0 200 400 600 800 1000 1200 1400 1600

NET PROFIT YEAR

Figure 2.1: Graphical presentation of Net profit to Revenue

Source: Annual Report of Muktinath Bikas Bank

Net profit to total assets ratio:

This ratio measures the firm's ability to earn return on total assets invested. It measures the return
on assets. The higher rate of return is considered good and vice-versa. Return on assets gives an
indication of the capital intensity of the company, which will depend on the industry. Capital-
intensive industries (such as railroads and thermal power plant) will yield a low return on assets,
since they must possess such valuable assets to do business. Shoestring operations (such as
software companies and personal services firms) will have a high ROA: their required assets are
minimal. The number will vary widely across different industries. This is why, when using ROA
as a comparative measure, it is best to compare it against a company's previous ROA figures or
the ROA of a similar company.

Net profit ratio = Net profit / total assets

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Table no. 2.2: Net Profit to Total Assets Ratio

Fiscal Year Net Profit Total Assets Ratio (%)

2078/79 11341805287 121083468422 9.37
2077/78 1156256498 101126816422 1.14
2076/77 707405117 66348092711 1.06
2075/76 856166479 51991396287 1.65
2074/75 624033456 34766238826 1.8
TOTAL 15.02

Source: Annual financial statement of Muktinath Bikas Bank limited

Chart Title
10
9
8
7
6
5
4
3
2
1
0
78/79 77/78 76/77 75/76 74/75

return on assets

Figure 2.2: Graphical presentation of Net profit to total asset ratio

Return on shareholders’ equity

This ratio is very important tool to judge whether the concern has earned satisfactory returns to
it’s over or not. Here return refers to the profit after tax. It is the amount of net income returned as
a percentage of shareholder’s equity. It reveals how much profit a company earned in comparison
to the total amount of shareholder equity found on the balance sheet. Expresses the percentage of
net income relative to stockholders’ equity, or the rate of return on the money that equity investors
have put into the business. The ROE ratio is one that is particularly watched by stock analysts and
 12

investors. A favorably high ROE ratio is often cited as a reason to purchase a company’s stock.
Companies with a high. This ratio is calculated as follows:

Return on shareholders’ equity = Net profit/Shareholders’ equity

Table no. 2.3: Return on shareholders’ equity

Fiscal Year Net Profit Shareholders’ equity Ratio (%)

2078/79 1341805287 5647180857 23.76
2077/78 1156256498 4811550803 24.03
2076/77 707405117 4324989486 16.36
2075/76 856166479 3064760123 27.94
2074/75 624033456 2591763317 24.07
TOTAL 116.16
Source: Annual financial statement of Muktinath Bikas Bank limited

Return on Equity
30

25

20

15

10

0
78/79 77/78 76/77 75/76 74/75

return on equity

Figure 2.3: Graphical representation of Return on shareholders’ equity

The figure and the table shows the initial increasing trend (2077/78) on the return on shareholders’
equity this is due to increase in shareholder’s fund but not increase on proportion of earning on
that proportion. The company has been able to use its fund properly and able to generate the
sizeable incomes but while comparing and going into the hands of investment the ratio seems to
be increased in current year.
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2.3 Findings:
The project work report has been prepared as per the format prescribed by the Tribhuvan
University and entitled with the profitability analysis and study of Muktinath Bikas Bank Limited.
This report has been divided into three parts as introduction, result and analysis, summary and
conclusion. For the data analysis tools to study about the profitability analysis of the various ratios
have been used. The major finding of the study are as follows:

a. Analysis of Net profit margin shows that the average Net profit margin of Muktinath
Bikas Bank is 32.202 %.It shows the net profit margin for the past 5 years in fluctuating
situation.

b. Analysis of the return on total assets shows the average ROA for five years period is
3.004 %. It shows the return on total assets for the past 5 years in fluctuating situation.

c. Analysis of the return on equity shows the average ROE for the five year period of bank
is 23.232%. It shows the return on equity for the past years in fluctuating situation
 14

CHAPTER 3
SUMMARY AND CONCLUSION
3.1 Summary:
This field work report has been prepared for the partial fulfillment for the degree of BBS program.
From this purpose, here we have analyzed the financial position of Muktinath Bikas Bank Limited.
To analyze the profitability position of the bank, we have divided the whole report to different
chapters. In every chapter, there are several sub-chapters. The first Introduction chapter gives
background information about the project work, introduction of Muktinath Bikas Bank Limited,
Review related studies etc. The second chapter called Presentation and Analysis of Data, we tried
to analyze various Ratio Analysis. By using this tool, we computed different ratios related to
profitability and performance.

Ratio analysis is a very significant tool to financial performance analysis. It is one of the
means by which financial stability, wealth, viability and performance of a firm can be judged. The
profitability position of the bank is much satisfactory. The increasing trend on the net profit to total
assets ratio indicates that the increase in assets favors the overall financial performance of the
bank, on the other hand the total deposit ratio is increased and such increase in deposit also been
favored by net profit as the net profit to total deposit ratio is increasing. The bank has increased its
capital by nearly 1 billion rupees such increased on capital is favored by constant earning per share
which show the bank is in slightly good profitable condition. And the management is also effective.
Overall we conclude that the investment bank is able to meet its shareholders demand over the
counter of years although earning per share and dividend per share doesn’t increase on current year
this is due to the big capital investment but bank is in nice profitable condition. Overly the
profitability position of the bank is appreciable.

3.2 Conclusion:
Here we have drawn the conclusion on the profitability analysis of Muktinath Bikas bank Limited.
While analyzing we have taken 3 various ratios indicating about the performance and profitability
of the bank. Establishment of commercial banks have continued in response to the economic
liberalization policies of the government. Nowadays under new momentary policy banks have to
increase their paid up capital so that many banks are going to merger and acquisition. So now in
Nepal there are 21 commercial banks competing with each other's in their business. These
commercial banks are mainly concentrated themselves on deposit collection and mobilization,
provide banking service for customer satisfaction, financial foreign in different project and areas.
With increasing number of commercial banks competition is also increasing. To maintain its
position on competitive market Muktinath Bikas Bank also should concentrate on their weakness
and increase their strength. It should fulfill it lacking aspects before it creates bigger problems in
near future.

On the basis of the study, the following conclusion can be made:

Overall results are satisfactory. But, in some case the Muktinath Bikas Bank Limited should take
certain steps to improve the issues creating obstacles in path of achieving goals. Therefore, some
 15

the recommendations are being put forwards for the improvement along with its development of
economy of country.
 Return on assets seems to be lower, so systematic management system should be developed
for managing assets of company. Different types of plan should be made to fully the utilize
available assets so that we can get maximum profit from assets.
 Muktinath Bikas Bank is maintaining its return on equity shareholder’s ratio quite well and
it recommended to keep up.
 Bank shouldn't invest too much in the fixed assets because it yields only a nominal portion,
almost no yield.
 The bank has successful in winning the trust of the customer, as volume of expenses is no
more difference and its growing. There is general rise and fall in expenses level during
different years. It should give basic priority to the customers and personnel first and then
organization objectives, which will help to develop effective value chain in the
organization.
 Branches existing in some limited areas will not enable a bank to boost up its campaign of
deposits mobilization and credit disbursement as desired. Therefore, Muktinath Bikas Bank
is recommended to open many other branches.
 Besides these, all the other functions of the company are satisfactory, no comments upon
it.
 BIBLIOGRAPHY
Bhandari & Rai, (2016). Business Research Methods, Kathmandu: Sukunda Pustak Bhawan.
Poudyal, S.R. Pradhan, G.M. Parajuli, D. (2015). Business studies –I, Kathmandu: Asmita
Publication.
Shrestha, P. (2017). Entrepreneurship and enterprise development, Kathmandu: Samjhana
publication.
Almumani (2014). “Profitability analysis of Muktinath Bikas Bank- A Case Study of Erbil Bank
for Investment and Finance “, European Journal of Accounting Auditing and Finance Research,
Volume 2, pp162-177
Bhandari Subash (2015) “Profitability Position of Everest Bank Limited”
Haque, I. (2011). “Comparative Study between Public Sector Banks & Private Sector Banks”,
International Journal of Management & Innovation.
Samad, A. (2004). Bahrain Development Bank’s Performance during 1994-2001. Credit and
Financial Management Review 10(1) pp. 33-40.
Other References:
Annual Report of Muktinath Bikas Bank (for the year 2077/788 to 2078/79)
Website:
www.investopedia.com
www.nrb.org.np
www.muktinathbikasbank.com
 APPENDICES
Statement of Financial Position
Particulars 2078/78 2077/78 2076/77 2075/76 2074/75
Assets
Cash And Cash
Equivalent 8101009812 6269721484 8199382567 8526257061 6885774249
Due From Nepal
Rastra Bank 2865440399 2564748592 2,019027022 1718104528 1439801278
Placement With
Bank And Financial
Institutions - - - - -
Derivative Financial
Instruments - - - - -
Other Trading
Assets - - - - -
Loans And
Advances To B/FIs 2726799773 3483613365 603900000 - -
Loans And
Advances To
Customers 86811948415 3483613365 47660604611 38144321489 25168874096
Investment
Securities 17936381659 14513402926 65928085 2516853930 667986568
Current Tax Assets 16472447 44298467 69150969 - 24841982
Investment In
Subsidiaries 117500000 117500000 117500000 117500000 -
Investment In
Associates 1000,00,000 100000000 54728006 53220757 -
Investment Property 51050852 - - - -
Property And
Equipment 1895061498 813780409 764783154 720323253 473550427
Goodwill And
Intangible Assets 19937610 8348600 9771744 7717794 7119002
Deferred Tax Assets 92450588 55018004 45300643 39066937 -
Other Assets 349415369 237135084 210835451 148030538 98291224
Total Assets 121083468422 10112616804 66348092711 51991396287 34766238826
Liabilities
Due To Bank And
Financial
Institutions 3750284110 5419586925 2322270747 5305848132 3576161109
Due To Nepal
Rastra Bank 1032979556 832446418 - - -
Derivative Financial
Instruments - - - - -
Deposits From
Customers 104675072263 86902914373 5731086270 41470704753 27092752663
Borrowing 25016438 - - - -
Current Tax
Liabilities - - - 30319060 -
Provisions 3506030 3732070 3732070 6917913 -
Deferred Tax
Liabilities - - - - 6917913
Other Liabilities 2273529660 114179877 892768503 728103009 1,9285581
Debt Securities
Issued 1246489292 - - - 445541907
Subordinated
Liabilities - - - - -
Total Liabilities 113006877348 94300159662 60529634022 47541892867 31140659173
Equity
Share Capital 5657180857 4811550803 4324989486 3064760123 2591763317
Share Premium - - 6401214257 - 65036203
Retained Earnings 8705522228 896315651 613779161 70561064 569234764
Reserves 1613887989 1118790688 815677900 679112233 399545430
Total Equity
Attributable To
Equity Holders 8076591074 6826657142 5818458689 4449503420 3625579654
Non-Controlling
Interest - - - - -

Total Equity 8076591074 6826657142 5818458689 4449503420 3625579654

Total Liabilities
And Equity 12083468422 101126816804 66348092711 51991396287 34766238826