NEPAL STOCK MARKET

Nepal Stock Exchange is a market where we can purchase others & sell ours
shares through brokers. Simply, it is a place where shares are purchase & sell.
Before we go to Nepal Stock Exchange, we have to go through Brokers. They
are the people who have license and authority to sell & purchase shares to
common public or companies.

Nepal Stock Exchange is a non-profit organization, operating under Securities

Exchange Act, 1983. In short it is termed as NEPSE.

The basic objective of NEPSE is to impart free marketability & liquidity to the
government & corporate securities by facilitating transaction in its trading
through member, market intermediaries, such as broker, market markers etc.

Government of Nepal, Nepal Rastra Bank, Nepal Industrial Development

Corporation is members & Shareholders of NEPSE.

Before I invest my millions of rupees in shares of different companies, banks

etc, I have gone through NEPSE & many brokers. NEPSE helped me to know
the current situation of all the financial markets & where to invest my money.

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Financial analysis of the best three Banks, finance company &

For the investment decision, in any alternatives we have to consider the

financial statement of the alternatives. For which we have to use some financial
analysis techniques and that are:-

1. Horizontal Analysis:

Horizontal analysis of the financial statement compares the financial

statement items over a period of time. Or the analysis of the statement over
a series of years is often called horizontal analysis.

2. Vertical Analysis:

In vertical analysis all of the items of the financial statement are stated as a
percentage of specific items on that statement, such as sales on the income
statement or total assets on the balance sheet. So it uses common size
financial statements to compare various financial statement items.

3. Trend Analysis

Trend analysis involves calculation of percentage changes in financial

statement items for a number of successive years.

4. Ratio Analysis

An arithmetical relationship between two figures is known as ratio. It is

computed by dividing one item of relationship with the other.

Ratio analysis is a technique of analysis and interpretation of financial

statement through mathematical expression. It may be defined as the
mathematical expression of the relationship between two accounting figures.

To evaluate the different performances of an organization by creating the

ratios from the figures of different accounts is termed as Ratio Analysis.

Ratio analysis is an important technique of financial analysis. The data

given in financial statements are meaningless and they are unable to
communicate anything from the analytic viewpoint. One has to work very
hard in digging out the required information. Ratio analysis thus helps the

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 different interested parties in studying the heaps of figures given in the
financial statements.

The financial health of the selected three banks Nabil, Siddhartha Bank Ltd and
Everest Bank Ltd. can be found out for the investments are as follow:

1. Return on assets: - It measures the profitability from a given level of

investment.

ROA= Net profit after tax/ total assets

Profit after tax Total assets ROA

Nabil bank 746470000 37132760000 2.01
Siddhartha Bank 157110000 12005690000 1.31
Ltd.
Everest Bank Ltd. 450120000 27805490000 1.62

2. Return on equity:- It measures the profitability on shareholders funds

ROE= Net profit after tax/total equity

Profit after tax Total equity ROE

Nabil bank 746470000 2437200000 30.62
Siddhartha Bank 157110000 1088820000 14.43
Ltd.
Everest Bank Ltd. 450120000 2025050000 22.23

3. Earning per share:- It measures the earnings per equity share.

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 EPS= Net profit after tax/ no. of equity shares

Profit after tax Total no of equity shares Roe

Nabil bank 746470000 6892200 108.30
Siddhartha Bank 157110000 8000000 19.63
Ltd.
Everest Bank Ltd. 450120000 9314000 48.32

4. Debt to equity:- It measures the relationship between borrowed capital to

own capital.

=\Total liabilities / shareholder’s equity

Total liabilities Total equity Debt to equity ratio

Nabil bank 37132760000 2437200000 15.23
Siddhartha Bank 12005690000 1088820000 11.02
Ltd.
Everest Bank Ltd. 27805490000 2025050000 13.73

5. Interest coverage ratio:- It measure of protection to creditors for payment

of interest.

=Profit before interest and tax/ Interest expenses

Profit before Interest expenses Interest coverage

interest and tax ratio
Nabil Bank 1088990000 758440000 1.43
Siddhartha Bank 229360000 407620000 0.56
Ltd.
Everest Bank 657110000 632630000 1.03
Ltd.

6. Price earning ratio:- Price earning ratio measures of the amount investors
are willing to play for a rupee of earnings.
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 =Market price per share/ Earning per share

Market price per Earning per share P/E Ratio

share
Nabil Bank 5275 108.31 48.7
Siddhartha Bank 1180 18.97 62.2
Ltd.
Everest Bank 3132 54.14 57.85
Ltd.

7. Dividend yield: - It measures of the current return to investors.

=Dividend per share/ Market price per share

Dividend per Market price per Dividend yield

share share
Nabil Bank
Siddhartha Bank
Ltd.
Everest Bank
Ltd.

8. Investment to total deposits:-It measure that the company is capable in

mobilizing deposit into investment.

= Investment/ total deposit

Investment Total deposits Ratio

Nabil Bank 12222380000 31915050000 0.38
Siddhartha Bank 1734830000 10253430000 0.17
Ltd.
Everest Bank 5407160000 23976300000 0.22
Ltd.

9. Loans and advances to total deposits: - It measure the lending ability of

the bank.
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 =Loans and advances/ total deposits

Loans and Total deposits Ratio

advances
Nabil Bank 21365050000 31915050000 0.67
Siddhartha Bank 9480690000 10253430000 0.92
Ltd.
Everest Bank 18336430000 23976300000 0.76
Ltd.

10. Net profit to total deposit:- It measures that the bank is how much
efficiency to mobilize and utilize deposits in generating profit.

= Net profit/ total deposits

Net profit Total deposits Ratio

Nabil Bank 746470000 31915050000 2.3%
Siddhartha Bank 157110000 10253430000 1.5%
Ltd.
Everest Bank 450120000 23976300000 1.8%
Ltd.

11. Return on investment:- It measures the return made by bank with respect
to its investment.

= Net profit/ Investment

Net profit Investment Ratio

Nabil Bank 746470000 12222380000 6.1%
Siddhartha Bank 157110000 1734830000 9.1%
Ltd.
Everest Bank 450120000 5407160000 8.3%
Ltd.

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Decision:-

I will invest my fund which is one third (1/3) of Rs.10 million in Nabil Bank
because when I go through the analysis stage of the financial statement of all
three banks, I found that Nabil bank is more efficient to mobilize it funds in
different sectors as well as it provides security to the creditors. Because of its
interest coverage ratio which is higher than remaining other two banks. Its
Return on Equity & Debt to equity is also higher than other two banks. It has
more market value than other bank at current market. It is more capable to
mobilize its investment fund than the other banks. The other things to be
consider for the investment is the earning per share of Nabil is incredibly high
in comparison to the other banks. So, I will prefer to invest money on Nabil
Bank Ltd.

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