A study on Liquidity ratio analysis

Of
Everest Bank Limited
Chapter- 1

INTRODUCTION

1.1 Background of the Study

A Bank is the financial institution where financial services are broadly offered and performed.
So, bank can be said as financial supermarket. In general case, bank is a kind of business,
which deals in money by accepting deposits, advancing loans and rendering other financial
services. Bank can be defined as the financial intermediary between depositors and
entrepreneurs. Manage thereof. Banks as managers control and manage the flow of money in
the economy. Banks collect the scattered saving of the public and provide then to those who
needs funds and would utilize them. This way, the rate of national development, direction of
economy, and habit of people is being affected by the banking systems. There are several
definitions regarding the bank which are given by many writers, authors and act of different
countries.

The word ‘bank’ has been derived from the Italian word ‘Banco’ which means a bench. The
banking system was originated from money ending business, it is rightly argued that word
‘bank ‘has’ been originated from banco. Definition of bank in Oxford dictionary is “an
organization that provides various financial services, for example keeping ad leading money.”

Many authors and scholars have been defined bank in different ways.

According to Kent bank can be defined as ‘bank is an organization where principle operations
are concerned with the accumulation of temporary idle money of the general public for the
purpose other of advancing it to other expenditure’

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According to US law ‘any institution offering deposit subject to withdraw on demand and
making loans of commercial or business nature is bank.’

Introduction 0f Everest Bank Limited

Siddhartha bank limited (SBL), established in 2002 and promoted by prominent personalities
of Nepal, today stand as one of the consistently since the beginning of its operation. Siddhartha
Bank runs with a vision to be financially sound operationally efficient and keep abreast with
technological developments. Siddhartha bank limited is one of the largest private I commercial
bank in Nepal. Slogan of Siddhartha bank limited is “Siddhartha swornim Bachat”.

SBL bank has 22 branches inside valley and 50 branches have outside the valley. SBL be one
of the leading banks of the industry in terms of profitability, productivity and innovation.
Aim at total customer satisfaction by rendering efficient and diversified financial service
through improved technology.

Siddhartha bank limited has been in operation in Nepal since 2002. It was registered as private
sector promoted public limited company. Operation with share capital of NRS 1,571,798,300
(as on fiscal year (2068-69). The main promoter of the bank has 51% shares and 49% shares
owned by Nepalese general public. The bank enjoys the status of Nepalese private sector
promoted bank currently operating in Nepal. Its stock symbol in NEPSE is “SBL” SBL has
been conducted various corporate social responsibility activities at both corporate and
regionals level. Siddhartha bank limited, Illam Branch, had supported Mai valley football
club, SBL has provided sponsorship worth RS 1,07,500 to Nepal eye hospital.

Siddhartha bank stands for customer convenience and support. Bank is driven by efficiency in
operation, integrity, and a strong focus on clearing the need of every customer by offering
high quality and service which cover business, banking, Intuitional Banking, small and
medium enterprises Banking, micro financing, transactional banking. The banking has also
providing cards, Remittance, Interest banking, mobile banking etc. The bank has 365-day
banking and provides evening banking service from all branches. Deposits and with the draw
service available from all branches professional management team is always looking forwards

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to service which are equipped with the state of are technology and information technology
infrastructure.

The main purpose of the research study is to examine the performance of Siddhartha bank
limited. The main objectives of Siddhartha bank limited are as follows:

 Siddhartha bank runs with a vision to be a financially sound, operationally effect and
keep abreast with technological development.
 SBL strive to be in a leading position amongst the bank of its age in terms of
profitability, productivity and innovation.
 Aim at total customer satisfaction by rendering and its specified financial services
through improved technology.
 Build a highly motivated and committed team of staff by nurturing a good work
culture to achieve superior individual performance aiming to enhance organizational
effectiveness.

Corporate social responsibility (CSR) is a business approach that contributes to sustainable

development by delivering economic, social and environmental benefits for all stakeholders.
CSR is a very broad concept that addresses many and various topics such as human rights,
corporate governance, health and safety, environmental effects and contribution to economic
development.

Some of the social responsibilities are as follows: -

 Siddhartha bank limited, Ilam Branch, had supported Mai valley football club, Ilam for
Mai valley Gold cup – 2021
 SBL has provided sponsorship worth RS 1,07,500 to Nepal Eye hospital, on September
2022.
 Siddhartha Bank, chipledhunga branch provide financial support worth RS 1,00,000 to
Pokhara university’s two days’ workshop on “Research Methodology and Scientific
Proposal Development “on January 2020.

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  Siddhartha Bank, Tandy Branch had conducted a financial Awareness class at New
Capital College, Tandy on October 3, 2019.

Liquidity position of bank can be defined as the difference between the sum of liquid assets
and incoming cash flows on one sides and outing cash flows resulting from commitments of
other side, measured over a definite a period, being the measures of the liquidity risk. It also
enhances effectiveness and minimize the errors and it is one of the best way of arranging data
and information in systematic and scientific way. Similarly, Siddhartha bank, due to its
popularity in the national as well as international field, has become the best option to be
worked on. Be one of the leading banks of the industry in terms of profitability, productivity
and innovation. Moreover, the data and financial transaction are easily accessible from
different sources which can help to find out the present ratios in the accounting period.

1.2 Objectives of the Study

Objectives are the concrete statement that describes the things that a project is trying to
achieve. The prime objective of the research study is to analyze the liquidity position of
Siddhartha bank. This is of field report writing mainly deal with the student. Hence, in this
report, liquidity position of bank is analyzed with the help of relevant financial ratios and
statistical tools.

However, specific objectives are as follows:

 To calculate the liquidity position of Siddhartha Bank limited.

 To determine the condition of the Bank to suggest on the findings.
 To find the percentage change in different ratios of bank.
 To find out different strengths and weaknesses of Siddhartha Bank limited.

1.3 Scope of the Study

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Scope refers to the extent of the area or subject matter that something deals with or to which it
is relevant. It covers the upper and lower limit of the area that has been studied. The scope of
the study is that it covers the liquidity analysis of Siddhartha bank and suggests the necessary
some measures for the improvement of the financial performance of the company. It revolves
around the liquidity position and related ratios calculation of Siddhartha bank. The data and
information are gathered through secondary sources and are based on five years data.

1.4 Limitations of the Study

Limitation is the restriction in our study. It could be a lack of an important variables, missing
information. Numerous limitation has been faced while preparing this fieldwork report. They
are listed below: -

 It cannot be compared with the liquidity of other banks.

 Only five year’s observation covering from fiscal year from 2018/2019 to 2022/2023.
 For the forecast of the liquidity requirement, daily and monthly data are needed. But,
here only the annual data are used for the analysis.
 The conclusion of this report is not applied for another bank except Siddhartha Bank.

1.5 Importance of the Study

It helps to develop and enhance the conceptual as well as analytical capability of the students.
The study helps to gain experience and practical knowledge about different banking sectors. It
helps to get the trace information of selected field regarding its financial position and get some
suggestion from survey or for weakness of the field visit. This study will be useable and
valuable for the various parties, which can be mention as follows:

 This project work helps to develop and enhance the conceptual as well as analytical
capability of the researcher.
 Since, this report comprises the date from 2019 to 2023 this would help the bank to
observe the trend of the liquidity position hold in those periods.

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  The study will be equally useful to the other reference students of related subjects for
this project.
 The final report also be used as a book hence, it helps to enrich the library assets.

1.6 Organization of the Study

Organization of the study includes the formation of the chapters. In the first chapter of the
report highlights about background information, Objectives, Importance and scope of the
study. Meaning and objectives of Literature Review along with review of related studies of
four different persons are included in the second chapter. In the third chapter Research
Methodology and the way of Data collection are mentioned. The fourth chapter shows the
Data presentation, Analysis and Findings. At last the Fifth chapter includes summary and
conclusions of the project

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 Chapter-2

LITERATURE REVIEW

2.1 Meaning of Literature Review

A literature review is “a systematic, explicit and reproducible method for identifying,

evaluating and synthesizing the existing body of completed and recorded work produced by
researchers, scholars and practitioners.” In other words, going through the previous studies and
books with the purpose of knowing the research issue in detail and find out appropriate
methodology is known as literature review. A literature review is to see what has and what has
not been investigated so far. A literature review is desirable before starting a research to
identify data sources that other researchers have used. We used to do literature review to
understand our research problem better and know the methodology that is to be used in
research. A critical summary of the research and a topic of interest, generally, prepared to put a
research problem in a context or to identify gaps or weakness in prior studies.

Some definition of different scholars is given below: -

According to Walliman (2015), “A literature review is a summary and analysis of current

knowledge about a particular topic or areas of enquiry.”

According to Cardesco and Gatner (2015), “A literature review is a self-contained unit in a

study which analysis critically a segment of published body of knowledge through summary,
classification and comparison of prior research studies and theoretical articles.”

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According to P. Haywood and E.C. Wragg (1996), “A literature review is the process of
locating, obtaining, reading and evaluating the research literature in the area of your interest.”

2.2 Objectives of Literature Review

The main purpose of Literature review is to develop general explanation for observed
variations in a behavior or phenomena. Some objectives of Literature review are given below:
-

 To identify the gap.

 To identify potential relationship between variables that helps to formulate
researchable hypothesis.
 To develop theoretical framework.
 To know the method of data analysis.
 To summarize the scheduling problems in manufacturing system and the advanced
scheduling approaches that deal with these problems.
 To identify issues that were left in the previous studies.
 To identify the methodology that was used by other researchers.

2.3 Review of Related Studies

For this study, journals, books and some research reports related with this topic have been
reviewed. Some of the prior previous reports have also been reviewed:

A study on “Liquidity position of Nabil Bank Limited” (Roshan Raj Basnet 2017) had
following objectives and findings:

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  Objectives
 To examine the liquidity position of Nabil Bank Limited.
 To analyze the financial performance.
 To suggest and recommended some measure on liquidity position.
 To examining the operation strategy of Nepal SBI Bank.

 Findings
 The bank was able to pay its short-term obligation in time.
 The bank has ability to convert its current assets quickly into cash in order to meet its
current liabilities.
 The bank has positive working capital in seven years of study. It means that the current
assets are more than current liabilities.
 It is found that Nabil Bank is using advance technology to motivate its employees
providing better customer service giving more.

An another study “Liquidity position on Bank of Kathmandu” (Ajay Man Singh 2019) had
following objectives and findings:

 Objectives
 To find if the bank can meet the demand of the depositors.
 To find if the bank can meet the loan demand.
 To analyze the maintenance of cash reserve ratio.
 To know the past trend of liquidity of Bank of Kathmandu.

 Findings
 Bank has been successful in maintaining its liquidity position has been able to increase
investment.
 Bank can be taken as an example of successful bank operating country wide.

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  Bank is successfully able to provide a complete range of personals, corporate and
commercial banking.

The next study on “Liquidity position of Nepal SBI Bank LTD” (Laxmi Kumar Yadav
2018) had following objectives and findings:

 Objectives
 To examine the liquidity position of Nepal SBI Bank LTD.
 To analyze the profitability position of Nepal SBI Bank LTD.
 To examining the operating strategy of Nepal SBI Bank.
 To suggest ad recommended some measures on liquidity position.

 Findings
 Nepal SBI Bank is able to increase deposit each year.
 Loan and advances are in increasing trend.
 It has good policy performance to attract its customer.
 It has expanded many branches throughout the country. Profitability position is
good .so, it is running smoothly.

The fourth study on “Liquidity position on Nepal Investment Bank limited (Pushpa Thapa,
2018) had following objectives and findings:

 Objectives
 To measure the ability of bank to generate fund quickly when needed.
 To examining the operation strategy of Nepal Investment Bank ltd.
 To measure the ability of bank to meet uncertain demand on deposits.
 To observe the trend of the Liquidity position.

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  Findings
 The ratio of investment of maturing in one year or less than one year.
 Cash reserve ratio and cash and bank balance to current deposit ratio was found to be in
increasing trend.
 Loans occupied more than 50% of the total assets in each fiscal year.
 High degree of positive correlation between total credit and total deposit of the bank

Chapter-3
RESEARCH METHODOLOGY

3.1 Meaning of Research Methodology

Research methodology is the process of arriving at a solution of the problem through planned
and systematic dealing with the collection, analysis and interpretation of fact figure. Research
Methodology deals with problems related to developing the research questions recognizing
and analyzing relevant data and interpreting the results. It includes a logical sequence from the
study of data to its conclusion. Therefore, research methodology is very important as it
represent the method of entire research.

The research design deals with problem related to developing the research question
recognizing and analyzing relevant data and interpreting the results. It includes a logical
sequence from the study of data to its conclusion.

According to Clarke and Clifford Woody (1978),” Research Methodology is a careful,

systematic and objective investigation conducted to obtain valid facts, draw conclusion and
established principles regarding an identifiable problem in some field of knowledge.”

According to Mouley (1994), “Research Methodology is the process of arriving at dependable

solution to the problems through the planned and systematic collection, analysis and
interpretation of data.”

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According to F.N. Kerlinger (1970), “Research methodology is a systematic, controlled,
empirical and critical investigation of hypothetical proposition about the presumed relations
among natural phenomena,”

3.2 Research Design

Research design is the plan, structure and strategy and strategy of the investigation conceived
so as to obtain answer of research question and to control variance. It is a framework of
research which helps to collection, measurement and analysis of data. Research design helps to
select research method considering to limited resources. It is a road map to start process and
conclude the research work. Research design expresses both the structure of the research
problem, the framework, organization or configuration of the relationship among variables of a
study.

According to C.R. Kothari (1903),” Research Design is the conceptual structure with in
which research is done to obtain answer of research questions.”

According to Burns and Grove (2003), “Research Design as a blueprint for conducting a
study with maximum control over factors that may interfere with the validity of the findings.”

The different research design is used to search the answers of the different research questions.
Thus, entire research designs are classified in the following categories:
1. Explanatory Research Design
2. Descriptive Research Design
3. Correlational study
4. Causal Comparative Research Design
5. Experimental Research design

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Among all of them this research mostly followed explorative research design and Descriptive
Research Design. A research design that is used to identify problem and find new idea in the
area where is less knowledge is known as explanatory research design. Exploratory research
develops concepts more clearly, establishes priorities, develops operational definitions and
improve the final research design.

A research design that is developed with the aim of studying the subject of research in details
and explains the facts and characteristics related to research problem is known as descriptive
research design. It collects and present the facts and figures in a certain situation. The goal of
descriptive study is to describe study is to describe relevant aspects of the factors of interest to
the researcher from an individual, organization or other perspective. It classifies the variables
related to the research problem and analysis and establishes their relationship.

3.3 Nature and Sources of Data

Data collection is an important work of research. Data helps to find out accurate results. The
information or facts collected through record, observation and measurement is known as Data.
The nature of data depends upon the nature of subject matter. Whereas, the sources of data
depends upon the nature of data. Mainly, data are classified as secondary data qualitative and
quantitative data.

1. Secondary Data

Secondary data are those data which have already been collected by someone else and
which have already been passed through the statistical process. Secondary data can be
obtained from published and unpublished sources. Those data which are published by other
organization in the form of reports and publications like government reports and
publication reports of NGOs and INGOs, reports of private organizations such as reports of
FNCCI, chamber of commerce etc. are published sources of secondary data. Unpublished
sources refer to the report of various research conducted by individuals and organizations

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 but not published by the researcher like dissertation (thesis) of students and research
reports of freelancer researchers.

The analysis of this study is based on the nature of mostly secondary data. Under this study
secondary data are collected through statistical tools and financial tools. For this research
study, the main sources of secondary are as follows:

 Prior information of organization has been taken.

 Follow up is done.
 Required data is taken from organization.
 Site visit and download required data related to topic is done.

3.4 Decision of Sample

Sampling is the process of selecting observation to provide an adequate description of the

population. There are various methods of sampling like simple random sampling, cluster
sampling, systematic sampling, stratified sampling, convenience sampling, self-selecting
sampling, quota sampling etc. This report is based on convenience sampling which is one of
the types of non- probability sampling. Here the researcher has selects the units as sample on
the basis of his convenience. Generally, this method is used when there is high limitation of
time and resources.

The various method of sampling are: -

1) Probability sampling 2) Non-probability Sampling

a) Sample random sampling a) Judgmental sampling

b) Systematic Sampling b) Quota sampling
c) Stratified Sampling c) Convenience sampling
d) Cluster Sampling d) Self-selecting sample
e) Snow ball sampling
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This report is based on convenience sampling which is one of the types of non- probability
sampling. Here, a researcher selects the units as sample on the basis of his/her convenience.
Generally, this method is used when there is high limitation of time and resources. This
research selects those units that are available, nearby and willing to participate or have
relationship. A researcher can collect data quickly and time using convenience sampling
method.

3.5 Data collection Procedure

Data collection procedure is the way of collecting data from surveys or from independent or
network locations via data capture, data entry. Data collection is the process of gathering
information on variables of interests, in an established systematic fashion that enable one to
answer stated research questions, test hypothesis and evaluate outcomes. It depends upon the
sources of data such as self-administrated questionnaire, observation, interviewer procedures,
to follow when data are primary. But, journals, articles, internet etc. are sources to collect
secondary data. Data is collected through various methods by considering research objective,
nature of research and size of population. There are various method of collecting of data and
they are websites, financial data, internet etc.

3.6 Data Processing

A data processing system is a combination of machines, people and processes that for a set of
inputs produces define set of outputs. Data processing is the collection and manipulation of
items of data to produce meaningful information. Data processing is the series of operation
that carried out on data, especially by computers, in order to present, interpret and obtain
information. Data processing include sorting, grouping and tabulating.

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Sorting: Sorting is the process of segregating relevant and irrelevant data from the whole
obtained data. Several concepts are provided to the respondent and asked to arrange them in
order on the basis of their priority/value.

Grouping: It is the process of accumulating similar items into various classes. Grouping is a
structured methodology for organizing the ideas of a group on any topic of interest and
representing those ideas in a visually in a series of interrelated maps. Grouping of data can be
made under following bases:

 Similar data base

 Differential data base
While grouping is concerned, this report followed the similar data base. All the similar items
and data have been grouped for convenient. All the ratios calculated has been grouped yearly.

Tabulation: Tabulation is the process of arranging data in a systematic manner into rows and
columns. Rows are horizontal arrangement and column are vertical arrangement. It is the final
step in collection and complication of data. It is made to simplify the presentation of data.
Generally tabulating is done:

 To make presentation of data simple and easy to understand.

 Helps in facilitating comparison.
 Assist in saving time and energy.
 Avoid repetition and confusion.

3.7Data Analysis Tools

Data analysis tools is the process of gathering, arranging, classifying, modeling and analyzing
the data with the process of generating useful information. Data analysis has multiple facts and
approaches, encompassing divers techniques under a variety of names, in different business
and social science domains. Data analysis tools means which tools the research used for
present and analyzed the data. After the collection of data, they are edited, classified &
presented in standard format.

 Statistical tools
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 Statistical methods involved in a carrying out a study include designing, collecting
data, analyzing, drawing meaningful interpretation and reporting of the research
findings. The statistical tools which are given below:
 Mean
 Median
 Mode
 Coefficient of Variance
 Correlation of coefficient
 Regression

After the calculation and analysis, the results and findings need to be presented. For this,
following statistical tools has been used:

a) Bar graphs
b) Pie chart
c) Trend analysis
d) Tabulation

 Financial tools
Financial tools are one of the most efficient ways that can be used for ensuring good
profit from investment. In this study, as a financial tool, liquidity ratio has been
calculated. An arithmetic relationship between two figures is called ratio. Thus, the
financial tool includes the following ratios:
a) Current Ratio
b) Cash Ratio
c) Working Capital

 Mathematical tools
For the calculation of ratios, mathematical tools were used. Summation of current
assets, liabilities, cash were done through mathematical tools i.e. calculator. In
mathematical tools includes:
a) Percentage
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For this research, mainly statistical tools, mathematical tools, financial tools and techniques
have been used to present and analyzed the collected data.

3.8 Data Interpretation Techniques

Data interpretation is the process of making sense of numerical data that has been collected,
analyzed and presented. The interpretation is done in different way:

 What the data show?

 What actually financial report shows regarding liquidity position?
 What might be suggestion on result?

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 Chapter-4
DATA PRESENTATION, ANALYSIS AND FINDINGS

4.1 Data Presentation, Analysis and Interpretation

Data analysis is the process of gathering, arranging, classifying, modeling and analyzing the
data with the purpose of gathering useful information. Data analysis is the process developing
answers to questions through the examination and interpretation of data. Data analysis is
essential for understanding results from surveys, administration sources and for planning new
statistical activities. Data analysis has multiple facts and approaches, encompassing diverse
techniques under a variety of names, in different business, sciences and social domain. Data
analysis is a process of inspecting, conclusion, and supporting decision making.

Data presentation means the presentation of the collected data through table, figure etc.
Presentation is the process of understanding the study or the report and calculating the opinion.
Data presentation is the method by which people summarize, organize and communicate
information through using a variety of tools, such as diagram, distribution charts, histogram
and graphs. Data presentation and analysis forms an important part of all academic’s studies. It
is necessary to make use of collected which is consider to be raw data which must be
processed to put for any use.

Presenting the data includes the pictorial representation of the data by using graphs, charts,
Maps and other methods. These methods help is adding visual aspects to data which makes it
much easier and quick to understand. During a study with an aim and multiple objectives, data
analysis will be required to complete the required objectives and compiling or presenting the
analyzed data will help in overall analysis and concluding the study.

In this chapter, the results of the data analysis are presented. The data were collected and then
processed in responses to the problems posed of the dissertation.

Particularly, this chapter includes the following:

 Current ratio
 Cash ratio
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  Working capital

4.1.1 Current Ratio (CR)

The current ratio is a liquidity ratio that measures a company’s ability to pay short term and
long-term obligations. A current ratio is the quantitative relation relationship between assets
and current liabilities. It measures the ability of the firm to meet the obligation within one year
and include cash, inventories, account receivable and marketable securities and so on. On the
other hand, current labilities refer to those obligation, which must be paid within a year and
includes accounts payable, Bank overdraft, Notes Payable and so on.

It is calculated by dividing the total current assets by total current liabilities.

Current Assets
Current ratio =
Current Liabikities

Current ratio of Siddhartha bank during different fiscal year is shown in following the table:

Table 4.1.1: Current Ratio Analysis (Rs. In millions)

Fiscal year Current Assets Current Current Ratio

Liabilities

2019 25,196 27,446 0.9180

2020 27,968 31,191 0.8960

2021 35,598 37,328 0.9536

2022 42,583 46,963 0.9067

2023 42,583 44,457 0.9580

(source: annual report of SBL 2023)

From the above table generally, we have seen an increasingly trend in the current ratio. The
current ratio was 0.9180 in the fiscal year 2019, which is decreased to 0.8960 in the fiscal year
2020, and the current ratio to 0.9536 in the fiscal year 2021 and again the current ratio
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decreased to 0.9067 in the fiscal year 2022 and the current ratio increased to 0.9578 in the
fiscal year 2023. Hence, the current ratio of the bank is generally increasing which indicates
the liquidity position of the bank is improving with time and maintaining good position.

The above table can also be seen in the bar diagram which are given below:

Figure 4.1.1: Current ratio Percentage (Rs. In millions)

Chart Title
50,000

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0
2019 2020 2021 2022
2023 current assets current liabilities Series 3
(source: Annual report of SBL 2016)

In the above bar diagram, we can see the fluctuation. The percentage change as per the above
table indicates that there were negative changes during 2019, taking 2018 as the base year. The
current ratio was 0.9180 in the fiscal year 2019, which is decreased to 0.8960 in the fiscal year
2020, and the current ratio to 0.9536 in the fiscal year 2021 and again the current ratio
decreased to 0.9067 in the fiscal year 2022 and the current ratio increased to 0.9578 in the
fiscal year 2023.

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4.1.2 Cash Ratio

The cash ratio most commonly used as a measure of company’s liquidity. The metric
calculates a company’s ability to pay current liabilities using only cash and cash equivalents on
hand. The cash assets ratio is a much more accurate measure of a firm’s liquidity. The cash
ratio is generally a more conservative look at a company’s ability to cover its ability to cover
its liabilities than many other liquidity ratios because other assets, including account
receivable, are left out of the equation. The cash ratio is more useful when it is compared to
industry average and competitors average. If a company’s cash ratio is less than 1, there are
more current liabilities than cash and cash equivalents. It can be calculated by using following
formula:

Total Cash Assets

Numerically, Cash Ratio =
Total Current Liabilities

The five years data for the calculation of cash ratio are listed and tabulated below:

Table 4.1.2: Cash Ratio (Rs. In millions)

Fiscal year Cash assets Current Cash ratio

liabilities

2019 4,978 27,446 0.1813

2020 4,881 32,191 0.1516

2021 8,411 37,328 0.2253

2022 6,243 46,963 0.1329

2023 6,243 44,457 0.1404

(source: Annual report of SBL 2023)

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In the above table, we can see the cash ratio of five fiscal years. The cash ratio of fiscal year
2019, 2020, 2021, 2022, and 2023 are 0.1813, 0.1516, 0.2253, 0.1329, and 0.1404
respectively. Among all these 0.1329 is the lowest one in the fiscal year 2022 and increasing in
the fiscal year 2021. During the five years we can see that in the figure above the cash ratio is
in fluctuating trend.

The above table can also be seen in the pie charts which are given below:

Figure 4.1.2: Cash Ratio (Rs. In millions)

cash ratio

201 2020 2021 2022 2023

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(source: Annual report of SBL 2023)

The cash ratio is seldom used in financial reporting or by analysis in the fundamental analysis
in the fundamental analysis of a company. The cash ratio of fiscal year 2019, 2020, 2021,

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2022, and 2023 are 0.1813, 0.1516, 0.2253, 0.1329, and 0.1404 respectively. Among all these
13.29% is the lowest one in the fiscal year 2022 and increasing in the fiscal year 2021.

4.1.3 Working Capital

Working capital is a measure of both company’s efficiency and its short term financial health.
The working capital ratio (current assets/current liabilities) indicates whether a company a
company has enough short-term assets to cover its short-term debt. Anything below 1 indicates
negative working capital. While anything over 2 means that the company is not investing
excess assets. Most believe that the ratio between 1, 2 and 2.0 is sufficient and also known as
“net working capital”. Working capital is calculated by subtracting current liabilities from
current assets. Current assets include cash, marketable securities and other short-term assets to
be used within the year. Current liabilities include account payable and the current position of
the long-term debt.

Working Capital = Total Current Assets – Total current liabilities

The table below shows the working capital of SBL during different fiscal year.

Table 4.1.3: Working Capital (Rs. In millions)

Fiscal year Current liabilities Current assets Working capital

2019 27,446 25,196 2,250

2020 31,191 27,968 3,223

2021 37,328 35,598 1,730

2022 46,963 42,583 4,380

2023 44,457 42,583 1,874

(source: Annual report of SBL 2023)

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The above table shows the working capital of Siddhartha bank during different years. Working
capital of the bank was 2,250 million during the year 2019. It increased to 3,223 million during
the year 2020. Similarly, the working capital of SBL was decreasing 1,730 million during the
year 2021. It increased to 4,380 million during the year 2022. And again, its working capital of
Siddhartha bank decreased to 1,874 million during the year 2023.

The above table can also be seen in the bar diagram which are given below:

Figure 4.1.3 : Total current assets, total current liabilities and working capital of SBL.

(Rs. In millions)

Chart Title
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
2019 2020 2021 2022
2023
current liabilities current assets working capital

(source: Annual report of SBL 2023)

The above graph shows working capital of the bank was 2,250 million during the year 2019. It
increased to 3,223 million during the year 2020. Similarly, the working capital of SBL was
decreasing 1,730 million during the year 2021. It increased to 4,380 million during the year
2022. And again, its working capital of Siddhartha bank decreased to 1,874 million during the
year 2023.

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4.2 Findings of the Study

After collecting different source of data (annual report of the bank), they were grouped and
analyzed and the following findings were extracted and discussed:

 From the above table and bar diagram, the ratio is fluctuating slightly. Siddhartha bank
has the highest current ratio is in the fiscal year 2022/2023 i.e. 95.78%. Similarly, the
lowest in fiscal year 2018/2019 i.e. 89.60%.
 After the analysis of cash ratio, it was found among all these 13.29% is the lowest one
in the fiscal year 2022 and increasing 22.53% in the fiscal year 2021.
 Working capital of the bank was 2,250 million during the year 2019. It increased to
3,223 million during the year 2020. Similarly, the working capital of SBL was
decreasing 1,730 million during the year 2021. It increased to 4,380 million during the
year 2022. And again, its working capital of Siddhartha bank decreased to 1,874
million during the year 2023.

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 Chapter -5

SUMMARY AND CONCLUSION

5.1 Summary of the Study

The title of the study is “liquidity position of Siddhartha bank limited” which consists of five
chapter- introduction, literature review, research methodology, data presentation, analysis and
findings and summary and conclusion. In chapter one it includes the meaning and origin of
banking system. It also consists of the introduction of concerned bank SBL, its purpose,
function and services. It also includes objectives of the study, needs and scope, limitation,
importance and organization of the study. In chapter two, it includes meaning and objectives of
literature review and review of related studies. In chapter three, it includes the research
methodology. In chapter four, it includes data presentation, analysis and findings. And in
chapter five, it includes summary and conclusion of study.

This report is prepared to accomplish some objectives of studying the liquidity position of
SBL, analyzing the strength and weakness of the bank and measuring the ability of bank to
meet uncertain demand and deposits. Current ratio, cash ratio and working capital for each
year are calculated using respective formula. Through analysis trend (increasing and
decreasing) of liquidity position and strength and weakness are found out.

5.2 Conclusion

After above processes of data collection and their processing, finally the conclusion is drawn
on the basis of findings. The bank current asset is lower than the current liability which is not
good sign for the company. Thus, the bank should think to increase the current assets and cash
in coming year so as to meet the immediate obligation. The current ratio 2:1 is considered as a
standard for comparison whereas the current ratio of SBL lied below standard ratio every year
which are considered low and indicates financial difficulties. So, the SBL bank should manage

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to increase the current assets to get rid of financial difficulties. SBL has low cash ratio but it
may not be a problem for the bank if it can borrow at very short notice.

However, the bank should increase the cash and equivalent assets. It would help the bank to
get out of debt or any financial difficulties. The bank should consider it to increase the ratio for
the improvement of liquidity. Anything below 1 indicates negative working capital. While
anything over 2 means that the company is not investing excess assets. The net working capital
is positive every year which shows potentially of SBL bank to maintain reservation of cash to
satisfy short-term obligation.

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 BIBLOGRAPHY

Agarwal, R.G. (2010). Project Management in Nepal. Kathmandu: M.K. publishers.

Cardesco, C and Gatner, R. (1903). Research Methodology, Methods and Techniques. New
Delhi: New age International Publishers.

Dahal, B.S. (2005). A Hand Book to banking. Kathmandu: Asmita Publication.

Haywod, p. and Wragg E.C. (1982). Evaluating the literature. Nottingham: Oxford: TRC-
Rediguides.

Kerlinger, F.N. (1978). Foundation of Behaviour Research. New Delhi: Surjeet Publication.

Mouley, V.P. (2000). Research Methodology in Management. Mumbai: Himalayan Publishing

House.

Thapa, K. (2006). Fundamental of Investment. Kathmandu: Asmita Publication, pvt. Ltd.

Walliman, D.R. Research Methodology. Delhi: Surjeet Publication.

Journals

JBR, D.S. (2011). Banking in Nepal. Kathmandu: The Himalayan Times, 2011/01/02, page 6.

Websites

www.google.com

www.siddharthabank.com

Annual reports

Annual reports of Siddhartha bank from 2018/2019 to 2022/2023

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