ANALYSIS OF WORKING CAPITAL MANAGEMENT OF

NIC ASIA BANK LTD

A Project Work Report

Submitted by:

Name : Sweta Thapa

Shwoyambhu International College

Symbol No.:

T.U Redg. No : 7-2-927-303-2017

Group: Finance

Submitted to:

The Faculty of Management

Tribhuvan University

Kathmandu

In Partial Fulfillment of the Requirement for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

New Baneshwor, Kathmandu

February 2022

i
 DECLARATION

I hereby declare that the project work entitled "ANALYSIS OF WORKING

CAPITALMANAGEMENT OF NIC ASIA BANK LIMITED" submitted to the faculty of
management, Tribhuvan University, Kathmandu is an original piece of work under the supervision
of Mr Raju Raut faculty member, Shwoyambhu international collage, New Baneshwor,
Kathmandu, and is submitted in partial fulfilment of the requirement for the award of the degree
of Bachelors in Business Studies (BBS). This project work report has not been submitted to any
other university of the institution for the award of any degree or diploma.

Signature :

Name of Student: Sweta Thapa

Date: February 2022

ii
Ref. No. ……………. Date: …………………

SUPERVISOR’S RECOMMENDATION

The project work report entitled "WORKING CAPITAL ANALYSIS OF NIC ASIA BANK
LIMITED” submitted by Sweta Thapa of Shwoyambhu International college, New
Baneshwor, Kathmandu is prepared under my supervision as per the procedure requirements laid
by the Faculty of Management, Tribhuvan University, as partial fulfillment of the requirements
for the award of the degree of Bachelor of Business Studies (BBS). I, therefore, recommend the
project work report for evaluation.

Signature

…………………….

Name of Supervisor : Mr Raju Raut

Date : February, 2022

iii
Ref. No. ……….. Date: ………….

ENDORSEMENT

We hereby endore the project work report entitled “WORKING CAPITAL ANALYSIS OF NIC
ASIA BANK LTD.” submitted by Sweta Thapa of Shwoyambhu International College, New
Baneshwor, Kathmandu, in partial fulfillment of the requirements for award of the Bachelor of
Business Studies (BBS) for external evaluation.

Signature: Signature:

………………………………. ………………………….

Mr. Hari Sharan Chakhun Mr. Suman Chaudhary

Chairman Campus Chief/Principal

Management Research Committee Date: February, 2022

Date: February, 2022

iv
 ACKNOWLEDGEMENTS

This study would not have been possible without the help and support of several people – family,
friends, teachers, colleagues, and faculty members. I am grateful to all of them. First of all, I would
like to express my gratitude to all those people who help me preparing this report. Mr. Raju Raut
has been most supportive in providing valuable and critical comments regarding the study. I would
like to express my gratitude to him for being a dedicated pedagogue in guiding me through the
rough road that I travelled in writing this report. I am especially grateful to him for his compassion,
persistence, and immediate response in every step of my writing. His expertise in the use of
qualitative methods and his constructive and luminous comments were a great source of
inspiration. I was touched by his gentle and gracious way in which he led me through to the report
to this stage.

Sweta Thapa

BBS 4th Year

Shwoyambhu International College

v
 TABLE OF CONTENT
DECLARATION ...................................................................................................................................... ii

SUPERVISOR’S RECOMMENDATION ............................................................................................... iii

ENDORSEMENT ...................................................................................................................................... iv

ACKNOWLEDGEMENTS ....................................................................................................................... v

CHAPTER ONE ......................................................................................................................................... 1

INTRODUCTION....................................................................................................................................... 1

1.1 Background of the study ...................................................................................................................... 1

1.1.1 Profile of the NIC ASIA BANK LTD. .......................................................................................... 3

1.2 Statement of the problem ..................................................................................................................... 4

1.3 Objectives of the study .......................................................................................................................... 4

1.4 Significance of the study ....................................................................................................................... 5

1.5 Statement of hypothesis ........................................................................................................................ 5

1.6 Literature review .................................................................................................................................. 6

1.6.1 Review of previous works.......................................................................................................... 6

1.7 Methods of study ................................................................................................................................. 13

1.7.1 Research Methodology ................................................................................................................ 13

1.7.2 Research design ............................................................................................................................ 13

1.7.3 Population and sample ................................................................................................................ 13

1.7.4 Sources of data ............................................................................................................................. 14

1.7.5 Data Analysis Tools...................................................................................................................... 15

1.8 Limitations of the study:..................................................................................................................... 18

CHAPTER TWO ...................................................................................................................................... 19

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RESULTS AND ANALYSIS ................................................................................................................... 19

2.1 Introduction ......................................................................................................................................... 19

2.1.1 Analysis of secondary data .......................................................................................................... 19

2.2 Financial Analysis ............................................................................................................................... 19

2.2.1 Position of Gross Working Capital in NIC Asia ........................................................... 20

2.2.2 Position of Net Working Capital in NIC Asia ........................................................................... 21

2.2.3 Current Ratio ............................................................................................................................... 23

2.2.4 Liquidity Ratio ........................................................................................................................... 25

2.2.5 Sales to Working Capital Ratio ................................................................................................ 27

2.3 Statistical Analysis .............................................................................................................................. 29

2.4 Respondent’s Profile ........................................................................................................................... 35

CHAPTER THREE .................................................................................................................................. 37

SUMMARY AND CONCLUSION.......................................................................................................... 37

3.1. Summary......................................................................................................................................... 37

3.2. Conclusion ...................................................................................................................................... 38

BIBLIOGRAPHY ..................................................................................................................................... 40

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 List of Tables:

Table 1: Board Directors ................................................................................................................. 3

Table 2:Calculation of gross working capital ............................................................................... 20
Table 3: Calculation of Net Working Capital ............................................................................... 22
Table 4: Calculation Of current ratio ............................................................................................ 24
Table 5: Calculation of Quick Asset ............................................................................................. 26
Table 6: Calculation of quick Ratio .............................................................................................. 26
Table 7:Calculation of working capital turnover .......................................................................... 28
Table 8(a): Calculation of mean and standard deviation .............................................................. 30
Table 9(b): Calculation of mean and standard deviation .............................................................. 31
Table 10(c): Calculation of mean and standard deviation ............................................................ 32
Table 11(d): Calculation of mean and standard deviation ............................................................ 33
Table 12(e): Calculation of mean and standard deviation ............................................................ 34
Table 13: Respondent Profile........................................................................................................ 35

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 List of Figures:

Figure 1: Gross working Capital ................................................................................................................. 21

Figure 2: Net Working Capital.................................................................................................................... 23
Figure 3: Current ratio ................................................................................................................................ 25
Figure 4: Quick ratio ................................................................................................................................... 27
Figure 5:Working Capital turnover ............................................................................................................. 28
Figure 6: Respondent profile ...................................................................................................................... 36

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 Abbreviations

Short Forms Full Forms

% Percentage

& And

C.V. Coefficient of Variance

CA Current Assets
CL Current Liabilities

GWC Gross Working Capital

i.e. That is

LR Liquidity Ratio

Ltd. Limited

NRB Nepal Rastra Bank

NWC Net Working Capital

SWC Sales to Working Capital

x
 1

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Working capital is defined as the difference between current assets and current liabilities. The
main current assets are debtors, stock, and cash whereas current liabilities are creditors and accrued
expenses. According to Weston & Brigham – “Working capital refers to a firm’s investment in
short term assets, such as cash amounts receivables, inventories etc.” Working capital is the
amount of money that a company has tied up in funding its day-to-day operations. A company has
to tie up money to fund its stocks, credit sales and other current assets, but this is offset by its
ability to fund this from current liabilities liabilities such as purchases on credit. The term working
capital is often referred to “circulating capital” which is frequently used to denote those assets
which are changed with relative speed from one form to another i.e., starting from cash, changing
to raw materials, converting into work-in-progress and finished products, sale of finished products
and ending with realization of cash from debtors.

It is a business tool that helps companies effectively make use of current assets and maintain
sufficient cash flow to meet short-term goals and obligations (mbaknol, 2021).

In the Annual Survey of Industries (1961), working capital is defined to include “Stocks of
materials, fuels, semi-finished goods including work-in-progress and finished goods and by-
products; cash in hand and bank and the algebraic sum of sundry creditors as represented by (a)
outstanding factory payments e.g. rent, wages, interest and dividend; b) purchase of goods and
services; c) short-term loans and advances and sundry debtors comprising amounts due to the
factory on account of sale of goods and services and advances towards tax payments”.
 2

Working capital management commonly involves monitoring cash flow, current assets, and
current liabilities through ratio analysis of the key elements of working capital, including the
working capital ratio. It is the functional area of finance that covers all the current accounts of the
firm. It is concerned with the adequacy of current assets as well as the level of risk posed by current
liabilities. The management of current assets and current liabilities is necessary for daily operations
of any organizations. Thus, it plays the vital role in the success and failure of the organizations.
By effectively managing working capital, companies can free up cash that would otherwise be
trapped on their balance sheets. As a result, they may be able to reduce the need for external
borrowing, expand their business, fund mergers or acquisitions, or invest in research and
developments.

Working capital is an indicator of the liquidity of the company. It is basically the ability of the
company to meet up with the short-term (typically less than one year) obligations. However,
quality of current assets should also be taken into account while checking the liquidity. Uncertain
receivables and high inventory can often limit the capacity of working capital to judge liquidity.
Also, too high an amount of working capital is a sign of inefficiency in the company. Working
capital can be managed by managing the current assets such as inventories, receivables and cash
and current liabilities such as accounts payable. Also the working capital requirement depends on
the industry and modus operandi of the company.

Proper management of working capital is essential to a company’s fundamental financial health

and operational success as a business. A hallmark of good business management is the ability to
utilize working capital management to maintain a solid balance between growth, profitability, and
liquidity.
 3

1.1.1 Profile of the NIC ASIA BANK LTD.

NIC Bank was established on 21st July 1998. The Bank was renamed as NIC ASIA BANK after
the merger of NIC BANK with Bank of Asia on 30th June 2013. The merger was the first of its
kind merger between two successful commercial banks in the country.

NIC ASIA BANK is now, one of the largest private-sector commercial banks in the country in
terms of capital base, balance-sheet size, number of branches, ATM network and customer base.
The Bank has 270 branches, 37 extension counters, 22 branchless banking, and 289 ATMs across
Nepal with a network covering all major financial centers of the country.

NIC ASIA was recognized as “Bank of the Year-Nepal” by the Banker, financial Times, the UK
in 2007 & 2013. The Bank strongly believes Meritocracy, Transparency, Professionalism, Team
spirit and Service Excellence. These core values are internalized by all functions within the bank
and are reflected in all actions the bank takes during the course of its business (Investopaper, 2019).

Board of Directors

The Directors of the Bank are eminent personalities with vast experience in business and the
financial sector. The Board of Directors is fully committed to a high standard of corporate
governance, which among others encompasses the principles of full disclosure and transparency,
social responsibility and accountability, "zero tolerance" compliance culture, business and
customer confidentiality, intolerance of conflict of interests, and an independent management.

Table 1: Board Directors

S.N. Board of Directors Position

1 Mr. Tulsi Ram Agrawal Chairman
2 Mr. Trilok Chand Agrawal Director
3 Mr. Ram Chandra Sanghai Director
4 Mr. Nikunj Agrawal Director
5 Mr. Rajendra Prasad Aryal Director
6 Mr. Binod Kumar Pyakurel Director
7 Mrs. Bijaya Swar Director
 4

The above table represents the current Board of Directors of NIC ASIA BANK.

1.2 Statement of the problem

Working capital management becomes difficult in many organizations. This study attempt to deal
with the problems of working capital management in an organization. The efficient management
of working capital is useful for every organization over investment whereas mismanagement of
current liabilities will have a negative impact that might affect the overall profitability of the firm.
This study deals with following issues:

a) What is the status of current assets and current liabilities of NIC ASIA BANK?

b) What sort of working capital policy does NIC ASIA BANK follow?

c)What is the net working capital position in NIC ASIA BANK?

1.3 Objectives of the study

The primary purpose of working capital management is to enable the company to maintain
sufficient cash flow to meet its short-term operating costs and short-term debt obligations. In
addition to this, other specific objectives are:

a) To analyze the management of current assets and current liabilities.

b) To check the working capital position of NIC ASIA BANK.

c)To analyze the net working capital position of NIC ASIA BANK.
 5

1.4 Significance of the study

Efficient management of working capital is an important prerequisite for successful working of a
business concern. An effective working capital management system helps businesses not only
cover their financial obligations but also boost their earnings.

Management of working capital includes inventory management and management of accounts

receivables and accounts payables. The main significance of this study are as follows:

a) This study will help in the analysis of working capital management of NIC ASIA BANK LTD.

b) This study will help in the comparison of working capital of NIC ASIA BANK LTD with
other commercial banks.

c)This study will provide information about the performance of the bank to the interested part

1.5 Statement of hypothesis

Research hypothesis are assumptions about the tentative solution of the research. These
assumptions are derived on personal experience, review of the related literature,
consultations/focused interviews with the experts/professionals or combination of all.

Null Hypothesis (H0):

I)Working capital does not help the business concern in maintaining the goodwill.

ii)Working capital does not create an environment of security, confidence, and overall efficiency
in a business.

Alternate Hypothesis (H1):

i)Working capital helps the business concern in maintaining the goodwill.

 6

ii)Working capital creates an environment of security, confidence, and overall efficiency in a

business.

1.6 Literature review

This section deals with the literature relevant to the study. A literature review is an overview of
the previously published works on a specific topic. The research is the outcome of ideas,
notations and suggestion provided by different people who have idea and knowledge
about the topic working capital analysis the previous report on this topic have been a
tremendous help and provides the necessary guidelines to prepare this report. As
conducted with this report, the annual report, brochure, people and other related books
published by bank has been helping tools for the accomplishment of this work. NIC Asia
Bank Ltd. is well known "A" Class Financial Institution of Nepal. The bank undertake
significant monetary transaction carried throughout the country. Such as they received from
costumers, provide loans to different individual and commercial enterprises. The bank
provides the facilities of remittance and other credit activities like taking guarantee
on behalf of traders, opening letters of credit and so on. So it requires large amount of time
and energy, as well as it will be tough to know ever all function and activities performed
by the bank. Consequently, this report tries to show the clear picture of analysis of
working capital management of NIC Asia Bank Ltd.

1.6.1 Review of previous works

Working capital management is the key area of financial management and plays an important role
in any industry. A number of researchers have conducted research on the subject and its various
components.
 7

Smith Keith V. (1973) believes that Research which concerns shorter range or working capital
decision making would appear to have been less productive. The inability of financial managers
to plan and control properly the current assets and current liabilities of their respective firms has
been the probable cause of business failure in recent years. Current assets collectively represent
the single largest investment for many firms, while current liabilities account for a major part of
total financing in many instances. This paper covers eight distinct approaches to working capital
management. The first three – aggregate guidelines, constraints set and cost balancing are partial
models; two other approaches - probability models and portfolio theory, emphasize future
uncertainty and interdepencies while the remaining three approaches -mathematical programming,
multiple goals and financial simulation have a wider systematic focus.

Natarajan Sundar (1980) is of the opinion that working capital is important at both, the national
and the corporate level. Control on working capital at the national level is exercised primarily
through credit controls. The Tandon Study Group has provided a comprehensive operational
framework for the same. In operational terms, efficient working capital consists of determining the
optimum level of working capital, financing it imaginatively and exercising control overit. He
concludes that at the corporate level investment in working capital is as important as investment
in fixed assets. And especially for a company which is not growing, survival will be possible only
so long as it can match increase in operational cost with improved operational efficiency, one of
the most important aspects of which is management of working capital.

Bhattacharyya Hrishikes (1987) tries to develop a comprehensive theory and tool of working
capital management from the system’s point of view. According to this study, capital is often used
to refer to capital goods consisting of a great variety of things, namely, machines of various kinds,
plants, houses, tools, raw materials and goods-in-process. A finance manager of a firm looks for
these things on the assets side of the balance sheet. For capital he turns his attention to the other
side of the balance sheet and never commits a mistake. His purpose is to balance the two sides in
such a way that net worth of the firm increases without increasing the riskiness of the business.
 8

This balancing is financing, i.e. financing the assets of the firm by generating streams of liabilities
continuously to match with the dynamism of the former. The study is an improvement of the
concept of Park and Gladson who were not able to capture the entire techno-financial operating
structure of a firm.

Rao K.V. and Rao Chinta (1991) observe the strong and weak points of conventional techniques
of working capital analysis. The result has been obviously mixed while some of the conventional
techniques which could comprehend the working capital behavior well; others failed in doing the
job properly. The authors have attempted to evaluate the efficiency of working capital management
with the help of conventional techniques i.e., ratio analysis. The article concludes prodding future
scholars to search for a comprehensive and decisive yardstick in evaluating the working capital
efficiency.

Fazzari Steven M. and Petersen Bruce C. (1993) throws light on new tests for finance constraints
on investment by emphasizing the often neglected role of working capital as both a use and a
source of funds. The authors believe that working capital is also a source of liquidity that should
be used to smooth fixed investment relative to cash-flow shocks if firms face finance constraints.
They have found that working capital investment is “excessively sensitive” to cash-flow
fluctuations. Besides, when working capital investment is included in a fixed-investment
regression as a use or source of funds, it has a negative coefficient. They conclude that controlling
for the smoothing role of working capital results in a much larger estimate of the long-run impact
of finance constraints than reported in other studies.

Hossain, Syed Zabid (1999) throws light on the various aspects of working capital position. He
has evaluated working capital and its components through the use of ratio analysis. For each aspect
of analysis certain ratios are computed and then results are compared with the standard ratio or
industry average.

Singaravel, P. (1999) focuses on the interdependency among working capital, liquidity and
profitability, of which sufficiency of liquidity comes in the first preference followed by sufficiency
 9

of working capital and profitability. The article is an in-depth analysis of liquidity and its
interrelationship with working capital and profitability. As the working capital, liquidity and
profitability are in triangular position, none is dispensable at the satisfaction of the other. Excess
of stock-in-trade over bank over-draft and excess of liquid assets over current liabilities other than

Jain P. K. and Yadav Surendra S. (2001) study the corporate practices related to management of
working capital in India, Singapore and Thailand. In this paper the authors have tried to understand
the working capital management and current assets and current liabilities, and their inter-
relationship. Further the authors have shown an aggregative analysis of current assets and current
liabilities in terms of major liquidity ratios. It also states working capital position in terms of these
ratios pertaining to various industries. From the paper one can infer that the available data in
respect of the sample companies from the three countries confirm the wide inter-industry variations
in liquidity ratios. Towards the end, the authors suggest that serious consideration needs to begiven
by the respective governments as well as industry groups in these three countries in order to take
corrective measures to take care of and rectify the areas of concern.

Deloof Marc. (2003) presents a picture of how working capital management affects the
profitability of Belgium firms. The writer has made use of empirical analysis for the sample firms.
It was observed that most of the firms have a large amount of cash invested in working capital. It
can, therefore, be deduced that the way in which working capital is managed will have a significant
impact on the profitability of the firms.

Meszek Wieslaw and Polewski Marcin (2006) examine the profiles of selected construction
companies from the viewpoint of working capital formation and their management strategies
applied to working capital. The analysis is based on the financial ratios. The authors conclude with
the observation that complex working capital management requires controlling methodology to be
developed. A specific character of the construction industry, including operational factors and
market requirements make working capital management a task exceeding the financial sphere, as
 10

it embraces the issues of organization of investment processes, the organization of production

processes and logistics.

Chowdhury Anup and Amin Md. Muntasir (2007) examine the working capital management
practice in pharmaceutical companies listed in Dhaka Stock Exchange. Among all the problems of
financial management, the problems of working capital management have been recognized as the
most crucial one. It is because of the fact that working capital always helps a business concern to
gain vitality and life strength. The objective of the study is to critically evaluate the working capital
management practices in the selected firms of the pharmaceutical industry. To achieve this goal,
the study also examines the policies and practices of cash management and evaluates the
principles, procedures and techniques of inventory management, receivables management and
payable management. From the analysis, the authors conclude that the pharmaceutical firms
operated in Bangladesh efficiently deal with their liquidity preferences and investment criteria.
And this is due to the competitive nature of this industry.

Thappa Sankar (2007) focuses on the importance of proper working capital management of Sun
Pharmaceutical Company. The paper throws light on the concepts of working capital, working
capital policy, components of working capital and factors affecting working capital in the Sun
Pharma Industries Ltd during the last five years, and identifies certain factors which are responsible
for the improvement of working capital of the company. The article concludes with a warning to
the Company that if satisfactory level of working capital is not maintained, the company would
become bankrupt.

Ramudu Janaki P. and Rao Durga S. (2008) attempt to analyze both concept and research based
studies. Working capital may be regarded as the lifeblood of any business unit. Its effective
management can do much more to the success of the business while its ineffective management
will undoubtedly lead to failure of the business. It is in this context that the management of working
capital assumes paramount importance. In the present scenario of competition, the business does
not have any other option than reducing the cost of its operations in order to survive and continue
 11

to be financially healthy. It is in this connection effective management of working capital forms

an absolute part of cost reduction. As it is quite vivid and evident in many researches in any
manufacturing unit, barring knowledge industry, the proportion of raw material in total cost of the
product will be the highest and hence, if the organization wants to minimize the cost of production
it has to tackle the cost of raw material first. So the authors have tried to analyze both the concept
and research based studies on working capital management in a business unit.

Dinesh M. (2008) explicates the concepts of working capital, the different challenges being faced
by the business firms in managing working capital and the strategies to be adopted for its prudent
management. The author concludes with the view that most of the businesses failed not for want
of profit but for lack of cash. The fast growth in production and sales may cause the business to
utilize all of the financial resources seeking growth and making assets such as inventories, accounts
receivable and other assets as more illiquid.

Dr.Khatik S. K. and Jain Rashmi (2009) state that the management of working capital is one of
the most important and key resources of an organization for its day-to-day operations. Working
capital can be taken as funding resources for routine activities of business. It is the most vital and
important part of fund management and profitability for business. The writer has analyzed the
working capital position of MPSEB (Madhya Pradesh State Electricity Board) by ratio analysis
technique and it was found that the position of current ratio, quick ratio, acid-test ratio, working
capital ratio, inventory turnover ratio are not up to the standard benchmark.

Gill Amarjit, Biger Nahum and Mathur Neil (2010) examine the relationship between working
capital management and profitability. For the study, 88American firms listed on New York Stock
Exchange for a period of three years from 2005 to 2007 were selected as a sample. They found
statistically significant relationship between the cash conversion cycle and profitability, measured
through gross operating profits. It also showed that managers could create profits for their
companies by handling correctly the cash conversion cycle and by keeping accounts receivable at
 12

an optimal level. The study concludes with the observation that profitability can be enhanced if
firms manage their working capital in a more efficient way.

Rahman Mohammad M. (2011) focuses on the co-relation between working capital and
profitability. An effective working capital management has a positive impact on profitability of
firms. From the study it is seen that in the textile industry profitability and working capital
management position are found to be up to the mark

Sunday Kehinde James (2011) focuses on effective working capital management within small and
medium scale enterprises (SMEs). Most of the SMEs have little regard for their working capital
position and they don’t even have standard credit policy. They have very weak financial position,
and rely on credit facility to finance their operations. This credit facility is available from accounts
payable most of the time. In conclusion the authors recommend that for SMEs to survive within
the Nigeria economy they must design a standard credit policy and ensure good financial report
and control system. Besides, they must give adequate cognizance to the management of working
capital. All this requires systematic planning for the management of working capital to ensure
continuity, growth and solvency.

Chandra H. and Selvaraj A. (2012) analyses the working capital management of selected Steel
Companies in India for the period from 2000-01 to 2009-10. To measure the effective utilization
of working capital, operating cycle and cash conversion cycle were used. Besides, to measure the
determinants of cash conversion cycle, the Kieschnick model was used. The study concludes with
the observation that the size of a company plays a vital role in determining the efficiency of its
working capital management. The working capital ratios across the small, medium and large sized
steel companies have played a vital role in determining the working capital management of the
selected Indian steel companies.
 13

1.7 Methods of study

1.7.1 Research Methodology
Research methodology is the process used to collect information and data for the propose of
making business decisions. It is a way to systematically solve the research problem. The
methodology may include publication research, interviews, surveys and other research techniques.
The study has been conducted to assess the existing situation of working capital management of
NIC ASIA BANK LTD and describe the situation and events occurring at present.

The major contents of research methodology followed in course of this study includes research
design, nature and source of data, research variables, statistical tools used, research procedure
followed.

1.7.2 Research design

Selection of appropriate research design is necessary to meet the study objectives of any research.
Research design is the blueprint of research, roadmap of research, strategy of research which shows
the overall plan of actions of the research. The research design of this study is analytical as well
as descriptive. The main objective of this analytical and descriptive study is to analyze the working
capital of NIC Asia Bank and to highlight its impact on profitability. This study is also an
examination and evaluation of existing practices on the working capital management of NIC Asia
Bank. In this way, this study will be considered to comprise both qualitative and quantitative
aspects of the study to reach in fulfilling the objectives.

1.7.3 Population and sample

A population is the entire group that we want to draw conclusions about. A sample is the specific
group that we will collect data from. The size of the sample is always less than the total size of the
population. Thus, total number of commercial banks constitute the population of data and the bank
under study constitute the sample for the study. So, NIC ASIA BANK has been selected as the
sample for the analysis of working capital management based on availability of data and
comparative study is made.
 14

1.7.4 Sources of data

The study of the working capital analysis is chiefly based on secondary data. Besides, primary data
are also used in the study. The primary data are collected through interview and observations.
While secondary data are collected through the accounts and annual report of the bank.

The fieldwork is basically a case study. This section presents the procedures adopted to carry out
the fieldwork report. Both the primary and secondary data are gathered from NIC Asia Bank Ltd.
which are as follows.

i. Primary Data

The general interviews with the concerning staff of the NIC Asia Bank and observations of the
accounts department have been made in order to understand the working capital and ratios related
to it and bank itself as whole. Different questionnaires were structured; information's and data were
taken from executive directors and others staffs. Information and data are collected on face to face
basis which has no evidence that the data and information collected are legit which turns out to be
a major drawback.

ii. SecondaryData

To prepare this thesis, secondary data collection method has been applied. These secondary
sources consist of two sources:

A. Internal Sources

➢ Annual Report of NIC Asia Bank Ltd. from 2072/73 to 2076/77

➢ Quarterly Reports
➢ Brochures, Reports

B. External Sources

➢ Books and Publications

➢ Journal Article, Articles from Newspapers
 15

➢ Previous Fieldwork Report etc.

1.7.5 Data Analysis Tools

Data collected from various sources are in raw form. The method of analysis is directed to study
the working capital management of the bank. The obtained data are presented in the tabular form,
diagrams and graphs with the supporting interpretations. The collected data are accumulated in
organized way and are grouped for calculation using the method given by formulas.

Two kinds of tools have been used to achieve certain goals:

I. Financial Tools
II. Statistical Tools

I. Financial Tools

It basically helps to identify the financial strengths and weakness of the firm by establishing
relationship between the item of the financial position and statement of profit and loss account.
Following are the financial tools used in this study:

➢ Gross Working Capital

Gross Working Capital refers to the firm's investment in all the current assets taken together. Gross
Working Capital is also known as Total Working Capital. Gross working capital is a measure of a
company's total financial resources. Gross working capital is calculated by totaling a company's
current assets such as cash, short-term investments, accounts receivable, inventory, and marketable
securities.

➢ Net Working Capital

To operate day to day business activities, different types of current assets are needed. The bank
needs cash to make investments and pay expenses. The excess or inadequate working capital
affects the profitability and liquidity position of the company. Therefore, the effective composition
of working capital should be made in any organization. Net Working Capital is the aggregate
 16

amount of all current assets and current liabilities. It is used to measure the short term liquidity of
a business and can also be used to obtain a general impression of the ability of company
management to utilize asset in an efficient manner. It is the difference between Current Assets and
Current Liabilities. Net Working Capital can be calculated by:

Net Working Capital = Current Assets- Current Liabilities

➢ Current Ratio

It is a test of liquidity. It measures short-term debt paying ability of the firm. In other words, it
measures the availability of current assets for meeting current liabilities. This ratio is also called
working capital ratio. It is calculated by dividing current assets by current liabilities. It indicates
the current short term solvency position of the bank. Higher current ratio indicates better liquidity
position. It is calculated by dividing current assets by current liabilities. Current ratio can be
measured by:

Current Ratio
Current Ratio =
Current Liabilities

➢ Liquidity Ratio

The quick ratio, also known as the acid-test ratio, is a liquidity ratio that further refines the current
ratio by measuring the level of the most liquid current assets available to cover current liabilities.
The quick ratio is more conservative than the current ratio because it excludes inventory and other
current assets, which generally are more difficult to turn into cash. A higher quick ratio means a
more liquid current position. It is calculated by summing up cash and cash equivalent, marketable
securities and account receivable and divided by current liabilities.

Cash & Cash Equivalent+Marketable Securities+Account Receivable

Quick Ratio =
Current Liabilities
 17

➢ Working Capital Turnover Ratio

Working capital turnover ratio is a ratio that measures how efficiently a company is using its
working capital to support a given level of sales. Also referred to as net sales to working capital,
work capital turnover shows the relationship between the funds used to finance a company's
operations and the revenues a company generates as a result. A high turnover ratio shows that
management is being very efficient in using a company's short-term assets and liabilities for
supporting sales. The working capital requirements of firms are explored, with the particular
stress placed on the competitive advantage gained by firms that retained flexibility in the time
structure of their production. In contrast, a low ratio may indicate that a business is investing in
too many accounts receivable and inventory to support its sales, which could lead to an excessive
amount of bad debts or obsolete inventory. It is calculated by dividing net sales by average working
capital.

Net Sales
Working Capital Turnover Ratio =
Average Working Capital

II. Statistical Tools

For supporting the study, following statistical tools have been under it:

➢ Mean
The mean value is a single value within the range of the data that is used to represent all
the values in the series. Since it is somewhere within the range of the data, it is also called
a measure of central value. It is obtained by adding together all the terms and dividing this
total by the number of items. If X1 , X2, X3,….., Xn are the given n observations, then
their mean is given by:
Sum of all datas
Mean =
Number of datas
 18

➢ Standard Deviation
Standard Deviation is the statistic used as a measure of dispersion in a distribution, equal
to the square root of the arithmetic mean of the square of the deviations from the arithmetic
mean. It can be calculated as:

∑(x−𝑥̅ )2
Standard Deviation (σ) = √
N

➢ Coefficient of Variance
It is the standardized measure of dispersion of a probability distribution. It is often
expressed as a percentage, and is defined as a ratio of standard deviation to the mean. It
can be calculated as:

Standard Deviation
C.V =
Mean

1.8 Limitations of the study:

This study is based on the data collected from various sources, observations, personal
visits, etc. Some of the major limitations of the study are as follows:
a) The study is based on the annual report published by NIC ASIA BANK LTD. So there
will be the limitation of use of secondary data.
b) This study is based on the past five years’ data only.
c)The accuracy and correctness of the data depends upon the reliability of data.
d)Due to the time factor, the report cannot reach to the depth of subject matter.
 19

CHAPTER TWO

RESULTS AND ANALYSIS

2.1 Introduction
This chapter deals with the presentations, analysis and interpretation of the data. In this, data
collected from different sources are first presented in tables, graphs and charts, then these data are
analyzed by developing various analyzing tools and results are then interpreted to find out the
reason of happening.

Five year's data period covering from the F/Y 2072/73 to 2076/77 have been analyzed and
interpreted as per the research methodology defined in chapter three. In the following section, the
relevant and generated data (i.e. both primary and secondary) relating to the study is presented in
tabular form and analyzed it in systematic way. The chapter has been divided into two parts, the
first part deals with presentation of results and second part deals with findings of project work.

2.1.1 Analysis of secondary data

This section deals with presentation of collected secondary data in tables and figures. Various
ratios and tabular presentations have been computed which have given an insight into the financial
techniques used by the business to maintain the working capital. Both financial and statistical
approaches have been used along with graphical representation, in the below analysis.

2.2 Financial Analysis

Finance is the language of business. Business goals and objectives are set in financial terms and
their outcomes are measured in financial terms. Financial analysis is an aspect of the overall
business finance function that involves examining historical data to gain information about the
current and future financial health of a company.
 20

2.2.1 Position of Gross Working Capital in NIC Asia

Gross Working Capital refers to the firm's investment in all the current assets taken together. Gross
Working Capital is also known as Total Working Capital. Gross working capital is a measure of a
company's total financial resources. Gross working capital is calculated by totaling a company's
current assets such as cash, short-term investments, accounts receivable, inventory, and marketable
securities.

Table 2:Calculation of gross working capital

(Rs in Millions)

Particulars 2073/74 2074/75 2075/76 2076/77 2077/78

Cash and Bank 3,479 8,132 20,214 12,294 23,876

Balance

Deposits with NRB 10,291 15,860 16,097 18,721 9,072

Loan and Advances 72,245 120,462 149,497 172,892 263,114

Short-term

Investments 10,019 14,132 18,152 29,317 33,061

Other Assets 1,293 8620 12,419 15,977 5,494

Gross Working 97327 167226 216379 249201 334617

Capital

(Sources: Annual Report of NIC Asia Bank 2073/74, 74/75, 75/76,76/77 & quarterly report of
2078/79)
 21

Figure 1: Gross working Capital

Gross Working Capital (Rs in Million)

400000

350000

300000
Gross Working Capital

250000

200000

150000

100000

50000

0
2073/74 2074/75 2075/76 2076/77 2077/78
Year

From the table and figure it can be observed that the gross working capital of NIC Asia Bank is in
a growing trend. The gross working asset has reached the highest point during the year 2077/78 at
Rs. 334,617 Million in fourth quarter.

2.2.2 Position of Net Working Capital in NIC Asia

To operate day to day business activities, different types of current assets are needed. The bank
needs cash to make investments and pay expenses. The excess or inadequate working capital
affects the profitability and liquidity position of the company. Therefore, the effective composition
of working capital should be made in any organization. Net Working Capital can be calculated by:

Net Working Capital = Current Assets - Current Liabilities

 22

Table 3: Calculation of Net Working Capital

(Rs in Millions)

Particulars 2073/74 2074/75 2075/76 2076/77 2077/78

Cash and Bank 3,479 8,132 20,214 12,294 23,876

Balance

Deposits with NRB 10,291 15,860 16,097 18,721 9,072

Loan and Advances 72,245 120,462 149,497 72,892 263,114

Short-term

Investments 10,019 14,132 18,152 29,317 33,061

Other Assets 1,293 8620 12,419 15,977 5,494

Current Assets (A) 97327 167226 216379 249201 334617

Borrowing - - - -

Deposit Liabilities 79,905 139,589 185,356 210,901 286,820

Other Liabilities 1,458 2,073 9,694 12,790 5,215

Current Liabilities (B) 81363 141662 195050 223691 292035

Working Capital (A-B) 15964 25564 21329 25510 42582

(Sources: Annual Report of NIC Asia Bank 2073/74, 74/75, 75/76,76/77 & quarterly report of
2078/79)
 23

Figure 2: Net Working Capital

Net Working Capital (Rs in Million)

45000

40000

35000
Net Working Capital

30000

25000

20000

15000

10000

5000

0
2073/74 2074/75 2075/76 2076/77 2077/78
Year

The net working capital stands at Rs. 15,964 Million at 2073/74, the succeeding year 2074/75, the
net working capital has increased to Rs 25,564 Million positive balance due to excess current assets
over current liabilities. On 2075/76, the balance has decreased to Rs. 21,329 Million whereas the
net working capital stands on Rs 25,510 Million on 2076/77. The level of working capital enhances
to Rs. 42,582 Million in fourth quarter of 2077/78.

2.2.3 Current Ratio

It is a test of liquidity. It measures short-term debt paying ability of the firm. In other words, it
measures the availability of current assets for meeting current liabilities. This ratio is also called
 24

working capital ratio. It is calculated by dividing current assets by current liabilities. It indicates
the current short term solvency position of the bank. Higher current ratio indicates better liquidity
position. In other words, current ratio represents a margin of safety, i.e. a 'caution' of protection
for creditors. Hence, higher the current ratio, greater the margin of safety and larger the amount of
current assets in relation to current liabilities, more the bank's ability to meet current obligations.

Current Ratio
Current Ratio =
Current Liabilities

Table 4: Calculation Of current ratio

Years Total current assets Total current liabilities Current Ratio

2073/74 97327 81363 1.2

2074/75 167226 141662 1.18

2075/76 216379 195050 1.11

2076/77 249201 223691 1.11

2077/78 334617 292035 1.15

(Sources: Annual Report of NIC Asia Bank 2073/74, 74/75, 75/76,76/77 & quarterly report of
2078/79)
 25

Figure 3: Current ratio

Current Ratio
1.22

1.2

1.18
Current ratio

1.16

1.14

1.12

1.1

1.08

1.06
2073/74 2074/75 2075/76 2076/77 2077/78
Year

The current ratio of Fiscal year 2073/74 is 1.20. On the following year 2074/75 the current ratio
has decreased to 1.18 and to 1.11 in 2075/76 and 2076/77. Further in the year 2077/78, the current
ratio has increased to 1.15.

2.2.4 Liquidity Ratio

The quick ratio, also known as the acid-test ratio, is a liquidity ratio that further refines the current
ratio by measuring the level of the most liquid current assets available to cover current liabilities.
The quick ratio is more conservative than the current ratio because it excludes inventory and other
current assets, which generally are more difficult to turn into cash. A higher quick ratio means a
more liquid current position.
 26

Cash & Cash Equivalent+Marketable Securities+Account Receivable

Quick Ratio =
Current Liabilities

Table 5: Calculation of Quick Asset

Year Cash & Cash Marketable Accounts Quick Assets

Equivalent Securities Receivable

2073/74 3,479 10,019 72,245 85743

2074/75 8,132 14,132 120,462 142726

2075/76 20,214 18,152 149,497 187863

2076/77 12,294 29,317 172,892 214503

2077/78 23,876 33,061 263,114 320051

(Sources: Annual Report of NIC Asia Bank 2073/74, 74/75, 75/76,76/77 & quarterly report of
2078/79)

Table 6: Calculation of quick Ratio

Years Quick Assets Total current liabilities Quick Ratio

2073/74 85743 81363 1.05

2074/75 142726 141662 1.01

2075/76 187863 195050 0.96

2076/77 214503 223691 0.96

2077/78 320051 292035 1.1

 27

Figure 4: Quick ratio

Quick Ratio
1.15

1.1

1.05
Quick Ratio

0.95

0.9

0.85
2073/74 2074/75 2075/76 2076/77 2077/78
Year

According to the figure and tables, the liquidity ratio has fluctuated and diminished over the period
of 5 years. In the Fiscal year 2073/74, the liquidity ratio is 1.05, this has depleted on 2074/75 to
1.01 and remain constant to 0.96 on 2075/76 and 2076/77. However, the ratio takes the uptrend to
1.10 in fourth quarter of the year 2077/78.

2.2.5 Sales to Working Capital Ratio

Working capital turnover ratio is a ratio that measures how efficiently a company is using its
working capital to support a given level of sales. Also referred to as net sales to working capital,
work capital turnover shows the relationship between the funds used to finance a company's
operations and the revenues a company generates as a result. A high turnover ratio shows that
management is being very efficient in using a company's short-term assets and liabilities for
supporting sales. In contrast, a low ratio may indicate that a business is investing in too many
 28

accounts receivable and inventory to support its sales, which could lead to an excessive amount of
bad debts or obsolete inventory.

Working capital turnover ratio = Net Sales / Average Working Capital

Table 7:Calculation of working capital turnover

Calculation of Working Capital Turnover Ratio

Years Annual Sales Working Capital Working Capital Turnover

2073/74 7,088 15964 0.44

2074/75 13,545 25564 0.53
2075/76 19,345 21329 0.91
2076/77 20,723 25510 0.81
2077/78 23,562 42582 0.55

Figure 5:Working Capital turnover

Working Capital Turnover

1
0.9
Working Capital Turnover

0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2073/74 2074/75 Year
2075/76 2076/77 2077/78
 29

The sales to working capital ratio on 2073/74 is 0.44, after which in the following year the working
capital the ratio has been up trending in the year 2074/75 and 2075/76 to 0.53 and 0.91
respectively. However, the ratio decreases to 0.81 in the year 2076/77 and decreases in year
2077/78 that being 0.55.

2.3 Statistical Analysis

Statistical Analysis is the science of collecting data and uncovering patterns and trends. It's really
just another way of saying "statistics". It is the science of collecting, exploring and presenting large
amount of data to discover underlying patterns and trends. Statistics are applied every day - in
research, industry and government to become more scientific about the decisions that need to be
made.

A. Mean

The mean is the average of the numbers: a calculated "central" value of a set of numbers. The
statistical mean refers to the mean or average that is used to derive the central tendency of the data
in question. It is determined by adding all the data points in a population and then dividing the
total by the number of points. The resulting number is known as the mean or average.

Mathematically,
∑𝑥
Mean (𝑥̅ ) = 𝑁

Where, N= no. of individuals

B. Standard deviation

Standard deviation is a measure of the dispersion of a set of data from its mean. It is calculated as
the square root of variance by determining the variation between each data point relative to the
mean. If the data points are further from the mean, there is higher deviation within the data set.
 30

In finance, standard deviation is a statistical measurement; when applied to the annual rate of return
of an investment, it sheds light on the historical volatility of that investment. The greater the
standard deviation of a security, the greater the variance between each price and the mean,
indicating a larger price range.

Mathematically,

∑(x−𝑥̅ )2
Standard Deviation (σ) = √ N

1. Gross Working Capital

The mean and standard deviation of Gross working Capital of NIC Asia over last five years has
been presented below:

Table 8(a): Calculation of mean and standard deviation

Years GWC (x) (x-x̅) (x − x̅)2

2073/74 97327 -115623 13368678129

2074/75 167226 -45724 2090684176

2075/76 216379 3429 11758041

2076/77 249201 36251 1314135001

2077/78 334617 121667 14802858889

∑ 𝑥 = 1064750 ∑(x − x̅) = 0 ∑ (x − x̅)2 = 31588114236

∑𝑥
Mean (𝑥̅ ) = 𝑁

1064750
= 5
 31

=212,950

∑(x−𝑥̅ )2
Standard Deviation (σ) = √ N

48777846328.4
=√ 5

= 79,483.48

2. Net Working Capital

The mean and standard deviation of net working capital of NIC Asia over last five years has been
presented below:

Table 9(b): Calculation of mean and standard deviation

Years NWC (x) (x-x̅) (x − x̅)2

2073/74 15964 -10225.8 104566985.64

2074/75 25564 -625.80 391625.64

2075/76 21329 -4860.8 23627376.64

2076/77 25510 -679.80 462128.04

2077/78 42582 16392.2 268704220.84

∑ 𝑥 = 130949 ∑(x − x̅) = 0 ∑ (x − x̅)2 = 397752336.8

∑𝑥
Mean (𝑥̅ ) = 𝑁

130949
= 5
 32

= 26189.8

∑(x−𝑥̅ )2
Standard Deviation (σ) = √ N

397752336.80
=√ 5

= 8919.11

Hence, the average mean of NWC of NIC Asia over last five years is 26,189.80 and the standard
deviation is just 8,919.11.

3. Current Ratio

The mean and standard deviation of current ratio of NIC Asia over last five years has been
presented below:

Table 10(c): Calculation of mean and standard deviation

Calculation of mean and standard deviation

Years CR (x) (x-x̅) (x − x̅)2

2073/74 1.2 0.05 0.0025

2074/75 1.18 0.03 0.0009

2075/76 1.11 -0.04 0.0016

2076/77 1.11 -0.04 0.0016

2077/78 1.15 0 0

∑ 𝑥 = 5.75 ∑(x − x̅) = 0 ∑ (x − x̅)2 =0.0066

∑𝑥
Mean (𝑥̅ ) = 𝑁
 33

5.75
= 5

=1.15

∑(x−𝑥̅ )2
Standard Deviation (σ) = √ N

0.0066
=√ 5

= 0.03633

Hence, the average mean of Current ratio of NIC Asia over last five years is 1.15 and the standard
deviation is just 0.03633.

4. Liquidity Ratio

The mean and standard deviation of liquidity ratio of NIC Asia over last five years has been
presented below:

Table 11(d): Calculation of mean and standard deviation

Years LR (x) (x-x̅) (x − x̅)2

2073/74 1.05 0.034 0.001156

2074/75 1.01 -0.006 0.000036

2075/76 0.96 -0.056 0.003136

2076/77 0.96 -0.056 0.003136

2077/78 1.1 0.084 0.007056

∑ 𝑥 = 5.08 ∑(x − x̅) = 0 ∑ (x − x̅)2 = 0.01452

 34

∑𝑥
Mean (𝑥̅ ) = 𝑁

5.08
= 5

=1.016

∑(x−𝑥̅ )2
Standard Deviation (σ) = √
N

0.01452
=√ 5

= 0.05389

Hence, the average mean of Liquidity ratio of NIC Asia over last five years is 1.016 and the
standard deviation is just 0.05389.

5. Sales to Working Capital Ratio

The mean and standard deviation of Sales to working capital ratio of NIC Asia over last five years
has been presented below:

Table 12(e): Calculation of mean and standard deviation

Years SWC (x) (x-x̅) (x − x̅)2

2073/74 0.44 -0.21 0.0441

2074/75 0.53 -0.12 0.0144
2075/76 0.91 0.26 0.0676
2076/77 0.81 0.16 0.0256
2077/78 0.55 -0.1 0.01
∑ 𝑥 = 3.24 ∑(x − x̅) = 0 ∑ (x − x̅)2 = 0.1617
 35

∑x
Mean (𝑥̅ ) =
N

3.24
=
5

= 0.65

∑(x−𝑥̅ )2
Standard Deviation (σ) = √ N

0.1617
=√ 5

= 0.0804

Hence, the average mean of Sales to Working Capital Ratio of NIC Asia over last five years is
0.65 and the standard deviation is just 0.0804.

2.4 Respondent’s Profile

It contains the details of primary data gathered from the mix of employee and customers, and the
rate of response from the total questionnaire distributed.

Table 13: Respondent Profile

Respondents Distributed Responded No Respond Rate of Response

Employee 15 12 3 80%

Customer 15 13 2 86.66%

Total 30 25 5 83.33%
 36

Figure 6: Respondent profile

Response Rate(%)

Employee
Customer 48%
52%

From above table, out of total responds received, the respond comprises of 48% from employee
and 52% from the customers. The result reveals that the majority of the respondents are customers.
 37

CHAPTER THREE

SUMMARY AND CONCLUSION

3.1. Summary

For many developing countries, banking sector has become the medium of developing economic
situation, as banks help in capital formation in the country. Bank fills the gap between the searcher
and the provider of the fund. Bank provides sufficient back support for the growth and expansion
of trade and industry of the country, which eventually helps to develop the economic condition of
the country. In this process, JVBs are putting their best effort. Such banks help to transfer foreign
investment and advanced technology from one country to the other. Nepal has adopted different
liberal and free economic policy to encourage such foreign investments in banking sector.

The main purpose of this study is to make the comparative analysis of the working capital as well
as financial performance of NIC Asia Bank Ltd. To make this thesis more understandable to the
readers, available data and information are presented in different suitable tables and diagrams with
appropriate analysis and interpretations. This thesis work has been divided into five chapters. They
are- Introduction, Review of Literature, Research Methodology, Presentation, Data Analysis and
Findings and finally Summary and Recommendations. To carry out the thesis work secondary data
have been utilized. The necessary data are derived from the Balance Sheet and Profit and Loss
Account of NIC Asia Bank Ltd. for the period of four years from the fiscal year 2072/73 to
2076/77.

To fulfill the objectives mentioned in the chapter one, a suitable research methodology has
been developed, which includes the ratio analysis as a financial tool and trend analysis &
correlation coefficient as statistical tools. The major ratio analysis consists of the composition of
working capital position, liquidity position, and profitability position. Under these main ratios,
their trend values are also studied in the chapter four. In order to test the relationship between
 38

various components of working capital. And at last in this very chapter findings of the whole study
with some suggestions and recommendations which might be useful for the concerned bank to
improve the performance, have been presented.

3.2. Conclusion

After drawing above findings we can draw the following conclusion. This study is basically related
to various aspect of working capital. This study particularly deals about the working capital
position with financial analysis of NIC Asia Bank Ltd. The present study is mainly an attempt to
give account of comparative study about NIC Asia Bank Ltd. in different aspects such a liquidity
position, profitability position of the basis of financial statement. After conducting the working
capital management of NIC Asia Bank Ltd. covering the study period 2072/73 to 2076/77, the
following conclusions can be drawn from the study.

The major conclusions derived from analysis are as follows:

1. The Gross Working Capital of NIC Asia Bank Ltd. is in an increasing rate. This indicates that
the current assets of the bank i.e. cash and cash equivalent, deposits, loan and advances and
marketable securities has been increasing over the period of 5 years. This shows that the bank has
been financing more on its current assets and widening its operations.

2. From analyzing the Net Working Capital of the bank, it can be known that Current Assets is
greater than the Current liabilities in every year which has lead net working capital to grow every
year. Generally, a high working capital is supposed to be good for a firm. So, it can be concluded
that the Net Working Capital of NIC Asia is in a good position as the net working capital is in
growing trend.

3. The ideal current ratio is 2. The current ratio of the bank is almost near to 1 which shows that
the current assets and current liabilities of the bank are nearly equal, as a result the liquidity
position of the bank is doubtful.
 39

4. The liquidity ratio of NIC Asia has diminished throughout the period. This indicates that the
degree of enhancement of the current liabilities is higher than that of the liquid assets. So despite
the fact that liquid assets are increasing, the liquid ratio is still in a diminishing trend.

5. From the analysis of Working Capital Turnover Ratio, it can be concluded that the sale of the
Bank i.e. the interest income has been rapidly increasing. The working capital turnover ratio has
good trend, during the period of 5 years. This also signifies that bank has been operating smoothly
in terms of revenue generation. Customers are satisfied with the services provided by the bank.

Based on the results of the study, following are the recommendations:

1. Current assets of NIC Asia need to be increased so that the working capital requirement of the
bank can be fulfilled.

2. Sources of financing the current assets other than the current liabilities should be identified and
appropriate source of financing should be applied so as to manage the working capital effectively.

3. The current liabilities of the bank have been increasing in a greater rate which needs to be
decreased so that the working capital can be managed in an efficient way.

4. The marketing strategies of the bank should be maintained since the sales have been rapidly
increasing with the currently adopted strategies.
 40

BIBLIOGRAPHY

Bhandari, D.R. (2003), Banking and Insurance, Kathmandu: Aayush Publication.

Jain S.P & Narang, K.L, Financial Management Accounting, Kalyani Publishers,

New Delhi-Ludhiana-1989

Pradhan, R.S, Management of Working Capital, National Book Organization-1986

Pradhan, R.S & Koirala, K.D. Some Reflections on Working Capital Management

in Nepalese Corporations, Management Dynamics, A journal on

management& Economics, Shankar Dev Campus, Volume 3 No. 1,

Purushottam Gautam, A study on Working Capital Management with respect to

Soaltee Crowne Plaza, Shankar Dev Campus, 2004

Shrestha Sunity & Silwal Dhurba Pd., Statistical Methods in Management, Taleju

Prakashan, Kathmandu-2002

Shrestha, Manohar K, Working Capital Management in Public Enterprises; A

case study on Financial Results and Constraints, ISDOC, Volume 8 No.1-

4, 1883, July

Van Horne, James C. (1998) Financial Management and Policy, New Delhi:

Prentice Hall of India

Weston, J. Fred and Brigham Eugene F., (1984) Managerial Finance, Chicago:

The Dryden Press

 41

References

Investopaper. (2019). Profile of NIC. https://www.investopaper.com/news/nic-asia-bank-

financial-analysis/

mbaknol. (2021). Working capital. https://www.mbaknol.com/financial-management/working-

capital-and-its-
factors/#:~:text=According%20to%20Weston%20%26%20Brigham%20%E2%80%93%20
%E2%80%9CWorking%20capital,the%20short-
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www.googlesite.com.np

[email protected]