INTRODUCTION

1.1 General Backgroung

Profitability means the earning power of the firm. In Other words profitability is net result of number of policies and decision. Profitability is the factor that measures how effectively the firms being operated and managed. The profitability evaluate expectations of both owners and managers in terms of profit. A company or firms should earn profit to survive and grow over a long period of time. Profit are essential but it would be wrong to assume that every action initiated by management of firms should be aimed at maximizing profits, irrespective of social consequences. It is unfortunate that the word profit is looked up as a term of abuse seems some firms always want to maximize profits at the cost of employees, customer and society. Except such infrequent causes it is a fact that sufficient profits must be earned to sustain the operations of the business to be able to obtain funds from investor for expansion and growth and to contribute towards the social overheads for the welfare of the society. Profit is the difference 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 the financial manager should continuously evaluate the efficiency of its company

in terms of profits. The profitability ratio are calculated to measure the operating efficiency of the company. Besides management of the company creditors and owner are also interested in the profitability of the firms. Creditors want to get interest and repayment of principle regularly. Owners want to get a reasonable return on their investment. This is possible only when the company earn enough profit. Generally two major types of profitability ratio are calculated. 1. On the basis of sales/Income 2. On the basis of investment.

A firm should be able to produce adequate profit on each rupee of sales. If sales dont generate sufficient profit it will be very difficult for the firms to cover operating expenses and interest charges and as a result will fail to earn any profit for owners. The profitability of the firm should also be evaluated in terms of the firm investment in assets and in terms of capital contributed by the creditors and owners. If the firms are unable to earn satisfactory return on investment its survival is threatened.

1.2 Objective of the study There must be specific objective in any work. So this field work report also has its own objective. The main objective of this study is to analyze profit. Besides of this, there are other objective which are shown below:1. To analyze the profitability of Nepal SBI Bank Ltd.

2. To identify the financial strength and weakness of the firm. 3. To find the earning tho the shareholders.

1.3 Review of literature While preparing this report I took help form newspaper different books, Organization record, thesis and old report. From this sources the writers findings are shown below. Profit is reward of uncertainty bearing, like risk of change of law, risk of competition and customer behavior. This proves if there is no change there will be uncertainty about future so no profits. Therefore there must be change to earn profit. Profit is income of management (Marshall alfraid, 1980). Generally profit is the excess money from business by deducting cost and expenses from income. (Maharjan Ashakaji and Ghimire Purnath, 1999). Normal profit is that profit which neither attaches a new firm in to the industry nor obliges the existing firms to quite the industry. (Robinson John, 1997) Profit may come to exist as a result of monopoly on monophony, as a reward for innovation as a reward for the correct estimate of uncertain factors, either particular to the industry or general to the whole economy. (B.S. Keirstead 1959)

1.4 Methodology Used In this report writing I am not using vast method of field work study. Methodologies used are as follows:1.4.1 Data Collection Technique For the profitability Analysis of Nepal SBI Bank ltd following secondary data are mainly used- Annual reports of the Bank -Official records -Magazines , bulletins

1.4.2 Method of data Presentation:The collected data mainly from secondary sources are presented by tabulation method.

1.4.3 Method of data analysis Presented data will be analyzed using following ratio. -Profitability ratio 1. Net profit margin 2. Return on assets

3. Return on capital employed 4. Return on shareholders equity

5. Operating Ratio 6. Earning per share 7. Return on common equity

1.5 Limitations This study doesnt contain each and every sector of Nepal SBI Bank Ltd. The study has been carried out with in boundaries shown as follows.-The report only analyzes the profitability of the bank. -Only three years data will be presented for the study. -The time allotted for the report is limited to one month only. - Only few ratios are used as analytical tools.

CHAPTER-II
Presentation and Analysis of Data Profit And Loss A/c

Particulars Interest Income Interest Expenses Net Interest Income Commission and discount Other operating Income Exchange fluctuation Income Total Operating Income Staff expenses other operating expenses Operating Profit before provision for possible losses Provision for possible losses Operatin Profit Non Operating income/Loss Provision for possible loss written back Profit from Regular Operation Profit loss from extra ordinary activities Net Profit after considering all activities

067/68 3,104,231,807 2,096,038,379 1,008,193,428 247,164,764 95,172,658 70,532,720 1,421,063,570 255,430,285 445,072,722 720,560,563 46,308,152 674,252,411 3,113,765 179,122,158 856,488,334 (137,672,628) 718,815,706

066/67 065/66 2,269,704,291 1,460,445,686 1,443,693,573 824,700,275 826,010,718 635,745,411 131,692,149 78,836,624 78,796,662 52,790,137 70,328,247 61,294,299 1,106,827,776 828,666,471 130,336,536 121,989,160 343,850,266 223,965,592 632,640,974 62,350,544 570,290,430 2,552,892 56,621,276 629,464,598 482,711,719 40,345,336 442,366,383 2,516,407 198,672,788 643,555,578

(37,266,000) (156,220,828) 592,198,598 487,334,750

Provision for staff bonus Provision for Income tax Net profit loss

65,346,882 188,903,825 464,564,999

53,836,236 146,620,243 391,742,119

44,303,159 126,658,096 316,373,495

Income Statement of Nepal SBI Bank Ltd.

Particulars Interest Income Total other Income Total Income Interest Expenses Total operating expenses Total Expenses Operating Profit before provision for possible losses Provision for possible losses Operating Income Non Operating income/Loss Provision for possible loss written back Profit loss from extra ordinary activities Provision for bonous Earning Before Tax Tax provision Earning after tax Number of share Earning per Share 067/68 3,104,231,807 412,870,142 3,517,101,949 2,096,038,379 700,503,007 2,796,541,386 720,560,563 46,308,152 674,252,411 3,113,765 179,122,158 (137,672,628) 65,346,882 653,468,824 188,903,825 464,564,999 18,693,033 066/67 2,269,704,291 280,817,058 2,550,521,349 1,443,693,573 474,186,802 1,917,880,375 632,640,974 62,350,544 570,290,430 2,552,892 56,621,276 065/66 1,460,445,686 192,921,060 1,653,366,746 824,700,275 345,954,752 1,170,655,027 482,711,719 40,345,336 442,366,383 2,516,407 198,672,788

(37,266,000) (156,220,828) 53,836,236 44,303,159 538,362,362 443,031,591 146,620,243 126,658,096 391,742,119 316,373,495 16,616,029 487,334,750 5

Calculation of Total Capital Particulars Share Capital Reserve fund Total

067/68

066/67

065/66

2,102,966,165 1,861,324,239 1,224,338,976 776,326,985 589,229,831 488,268,219 2,879,293,150 2,450,554,070 1,712,607,195

Calculation of Current assets Particulars Cash Balance Balance with NRB Balance with B/F Institution Money at Call and short notice Loans advances and Bills Purchase Other assets Total Current Assets Total Assets Particulars Total current assets Total fixed assets(investment+assets) Total

067/68 066/67 065/66 1,007,688,499 815,679,624 652,027,266 2,330,927,217 1,842,802,239 444,138,596 1,539,210,142 782,779,614 80,273,976

21,365,771,129 516,612,938 26,760,209,925

17,480,548,194 15,131,747,944 401,992,219 318,489,412 21,323,801,890 16,626,677,194

067/68 26,760,209,925

066/67 21,323,801,890

065/66 16,626,677,194

776,326,985 589,229,831.00 488,268,219 27,536,536,910 21,913,031,721 17,114,945,413

2.2Analysis of Data
On the basis of three fiscal year i.e, 2065/66, 2066/67, 2067/068 with the help of Profit and loss a/c, Income statement, Balance sheet data are analyzed using following techniques.

1. On the basis of Sales/Income 2. On the basis of investment

1 On the basis of Sales/ Income

Nepal SBI Bank Ltd is not a product oriented organization, it is service orientd. So there is given priority to Income. Following ratio are calculated on the basis of income. A- Net profit margin Net profit margin is calculated with help of Net profit and total income i.e, Net profit margin = NET Profit/Total Income For the year 2065/66 =316373495/1653366746 =0.1914 =19.14% For the year 2066/67

=391742119/2550521349 =0.1536 =15.36%

For the year 2067/68 =464564999/3517101949 =0.1321 =13.21%

If net profit margin is high then firm is consider in good position but if this ratio is low then we have to know that the firm income is weak or unnecessary expenses are increasing. Here for Nepal SBI Bank ltd we can say that the firm condition is in good but it is decreasing year by year.Net profit margin for fiscal year 2065/66 ,2066/67, 2067/68 is respectively 19.14%, 15.36%, 13.21%. B-Operating Ratio

=Total operating expenses/Total Income

For the year 2065/66 =345954752/1653366746 =0.2092 =20.92%

For the year 2066/67 =474186802/2550521349 =0.1859 =18.59% For the year 2067/68 =700503007/3517101949 =0.1992 =19.92% Firms position will be well in its less operating ratio. Increment of this ratio is known as increases of its expenses and decreases of its business ability. The firm operating ratio in the year 2065/66 is 20.92% , in 2066/67 18.59% and in 2067/68 19.92%. Here, it is proved that the operating expenses is decreasing in the year 2066 but currently it is slightly increasing.

2- On the basis of Investment

The profitability of the firm can also be measured with the investment. On the basis of investment, the different types of ratios are ascertained they are as follows-

A-Return on assets =Net Profit/Total Assets

For the year 2065/66

=316373495/17114945413 =0.0185 =1.85% For the year 2066/67 =391742119/21913031721 =0.0179 =1.79%

For the year 2067/68 =464564999/27536536910 =0.01687 =1.69% This ratio determines the return on total financial resources. Therefore profit return must be high in total assets. The firm return on assets in the year 2065/66 is 1.85% , in 2066/67 1.59% and in 2067/68 1.69%. Here, we know that return on assets is decreasing year by year .

B-Return on capital employed

=Net Profit/Capital employed

For the year 2065/66 =316373495/1712607195 =0.1847 =18.47% For the year 2066/67 =391742119/2450554070 =0.1599 =15.99%

For the year 2067/68 =464564999/2879293150 =0.1613 =16.13% If this ratio increases we know that capital is properly utilizing and if ratio decreases we know that capital is not properly utilized. Here in the year 2065/66 return on capital employed is 18.47%, it proves that the firm is properly utilizing its capital. It is slightly decreasing in the year 2066/67 that is 15.99% and in 2067/68 it is increases to 16.13%.

C-Return on shareholders equity

=Net Profit/Shareholders equity

For the year 2065/66 =316373495/1712607195 =0.1847 =18.47% For the year 2066/67 =391742119/2450554070 =0.1599 =15.99%

For the year 2067/68 =464564999/2879293150 =0.1613 =16.13%

The increasing ratio or high ratio is well to shareholder. Here in the year 2065/66 return on shareholders equity is 18.47%, it proves that the firm is properly utilizing its capital. It is slightly decreasing in the year 2066/67 that is 15.99% and in 2067/68 it is increases to 16.13%.

Findings On the basis of Profit and loss a/c, balance sheet, Income statement of fiscal year 065/66, 066/67, 067/68 findings of Nepal SBI Bank Ltd is presented below On the Basis of Sales/Income Particulars Net Profit Margin Operating Ratio 2065/66 19.14 20.92 2066/67 15.36 18.59 2067/68 13.21 19.92

On the basis of Investment Particulars Return on assets Return on capital employed Return on shareholders equity 2065/66 1.85 18.47 18.47 2066/67 1.79 15.99 15.99 2067/68 1.69 16.13 16.13

CHAPTER-III
3.Summary, Conclusion and Recommendation 3.1 Summary
Profit refers as the difference between the income of the firm and production cost of the firm. Profit is reward of dynamic changes in society. Profit can be defined as the management of income. In static economy where nothing changes there can be no profit. Profit is reward of uncertainty bearing and it is always uncertain in future. Here different sources of data are collected to prepare this report. From the analysis of data different profitability ratios are calculated. In the year 065/66, 066/67, 067/68 Net profit margin is 19.14%, 15.36% 13.21% respectively. In fiscal year 065/66 operating ratio is 20.92%, in year 066/67 ratio is 18.59% and in 067/68 is 19.92%. Return on assets of the firm during fiscal year 065/66 shows a position of 1.85% which decreases year by year that is in year066/67 is 1.79% and in year 067/68 is 1.69%. Return on common equity and return on shareholders equity are same in the fiscal year 065/66, 066/67, 067/68 which are 18.47%,15.99% and 16.13% respectively.

3.2 Conclusion
In the course of preparing report we analyze different ratios such as Net profit margin, operating ratio, return on assets, return on capital employed, return on shareholders equity. This report is based on profitability by analyzing the mentioned ratios we came to the following conclusion. a-Net profit margin of the firm is good but its profit margin is slowly decreasing . Operating expenses of the firm is decreasing in the fiscal year 066/67 but it increases to the next year. b-Return on assets of the organization is good. Its shows the bank utilizes the available sources and tools efficiently but It is slightly decreasing year by year. c- Organization return on share holders equity, return on capital employed are in good position. In three years data it was decreases in second year but the ratio increases in last year.

The result of profitability over 3 fiscal year period is found to be in good position.

3.3 Recommendation
This study is mainly focused on the profit of the firm. On the basis of this study I would like to give some suggestions. a-The firm should reduce its operating expenses to maximize profit b-There is a big gap between deposit and lending, organization should increase its lending to increase profit. c-The organization should utilize its reserve fund. d- Organization should take regular suggestions recommendation and should take effective advertising policy to increase profit.

BIBLIOGRAPHY
Rana, Surya (2000), Financial Management, Kathmandu ; Ratna Pustak Bhandar. Rana, Surya (2068), Financial Management, Kathmandu ; Ratna Pustak Bhandar. Weston, JF and Birgham EF (1996), Essential of Managerial Finance, Chicogo, The Dryden Press. Dangol, Ratnaman (2066), Accounting for financial analysis and Planning, Kathmandu; Taleju Prakashan. MC, Shukla, T C, Grewal and S C, Gupta (1999), Advance Account, New Delhi Nepal SBI Bank Ltd(2066,067,068), Annual Report