Earning Per Share

The income per common share can be known as Earning Per Share. An expected amount that shareholders could get on any share held by them is Earning Per Share. It helps to determine the market price of the equity share of a company and also helps in estimation of the company’s capacity to pay dividend to Equity Shareholders.

                              Net profit after tax available to equity shareholders

           EPS =                      

                                       Number of equity shares outstanding

                              Table No.10: Calculation of EPS

       

Year	NPAT	No. of Common Share Outstanding	EPS
2061/62	57,386,634	431,865,600	13.29%
2062/63	117,001,973	640,236,100	18.27%
2063/64	254,908,844	647,798,400	39.35%
2064/65	247,770,758	874,527,840	28.33%
2065/66	316,373,495	874,528,000	36.18%
Average Ratio			27.08%

                                                                Source: Annual Report, Nepal SBI Bank Ltd

         Bar Diagram 2: Earning Per Share

Return on Shareholders’ Equity

This ratio shows the relation between the net profit after tax and shareholders funds. This ratio judges whether the firm has turned a satisfactory return to it’s shareholders or not. Generally the higher ratio shows the efficient utilization of owner’s funds and vice-versa. It is calculated by following formula.

             

                                               Net Profit after Tax

                                ROE =

                                                       Shareholder’s Equity

Where,

Shareholders Equity = Share Capital + Reserve

                         Table No.8: Calculation of ROE

Year	Net Profit	Shareholders’ Equity	ROE
2061/62	57,386,634	689,013,060	8.33%
2062/63	117,001,973	982,373,728	11.91%
2063/64	254,908,844	1,163,290,851	21.91%
2064/65	247,770,758	1,414,644,812	17.51%
2065/66	316,373,495	1,712,607,195	18.47%
Average Ratio			15.63%

                                                    Source: Annual Report, Nepal SBI Bank Ltd    

                     Trend Diagram 5: Position of ROE

 

  The table and figure given above describes that the ROE is in increasing trend in the year 2061/62 to 2063/64 and it decreases in year 2064/65. Then again it increases. The highest ROE was in the year 2063/64(i.e. 21.91%) and the lowest in the year 2061/62 (i.e. 8.33%). The average ROE for the study period was 15.63% which shows that the management is capable in better utilization of capital employed.

Profitability Ratio

Profitability Ratio

Profitability ratio is related to profit. It shows the overall efficiency of the business concern. The earning capacity of a business is measured by profitability ratio. Efficient profit is not only necessary to cover the risk but also to exist in society for overall long period of time through expansion, growth & diversification of its business. Thus, earning is essential to monitor the financial health continuously.

   

           Generally higher value of profitability ratios shows better performance of the company and vice-versa. Some of the profitability ratios are discussed below:

2.1.2.1 Net Profit Margin

      It is the relationship between net profit and sales of the firms and measures the ability to turn each rupee of sales into net profit. The ratio provides considerable insight into overall efficiency of the business. A higher net profit margin indicates that management is efficient in its performance. In other words, it is the performance evaluation of the organization. It can be calculated by dividing the Net Profit after Tax by Operating Income.

                                               Net Profit after Tax (NPAT)

  Net Profit Margin =                       

                                                                   Operating Income

Where,

Operating Income = Interest Income+ Non Interest Income

Year	NPAT	Operating Income	Net Profit Margin
2061/62	57,386,634	664,572,690	8.64%
2062/63	117,001,973	799,669,489	14.63%
2063/64	254,908,844	945,773,232	26.95%
2064/65	247,770,758	1,092,977,045	22.67%
2065/66	316,373,495	1,653,366,746	19.14%
Average Ratio			18.40%

                                                                Source: Annual Report, Nepal SBI Bank Ltd

        Trend Diagram 4: Position of Net Profit Margin

 

 The above table and figure shows that the Net Profit Margin is in increasing trend from the year 2061/62 to 2063/64. But in the year 2064/65 and 2065/66, NPM has been decreased to 22.67% and 19.14% respectively. During this study period, the highest NPM was recorded in 2063/64 (26.95%) and the lowest in the year 2061/62 (8.64%). The average NPM for 5 years was 18.40% which reflects the overall efficiency of the business.                                                   

Cash and Bank Balance Ratio (C & B ratio

                 Cash and Bank Balance Ratio is the total balance maintained by a bank on both of its total cash and it’s Bank Balance.

                                                     Total Cash & Bank Balance

                       C & B ratio =                                

                                                              Total Deposit

   Table No.6 Calculation of Cash and Bank Balance Ratio

Year	Balance in     NRB	Balance with Other Banks	Cash           Balance		Total                         Deposit	C & B ratio
2061/62	390,025,828	189.969,554	143,749,918		8,654,774,214	8.36%
2062/63	626,123,385	247,847,352	244,187,671		11,002,040,633	10.16%
2063/64	556,678,464	278,481,119	287,530,644		11,445,286,030	9.81%
2064/65	403,810,203	631,048,524	308,101,599		13,715,394,960	9.79%
2065/66	444,138,596	807,740,259	652,027,266	27,957,220,794		6.81%
Average Ratio						8.99%

Trend Diagram: 3

                 Positions of Cash and Bank Balance Ratio(C &B ratio)            

 

The above diagram shows that Nepal SBI has maintained its C & B ratio at the average of 8.99% in the last 5 year.

Cash Reserve Ratio

The reserve requirement (or Cash reserve ratio) is a bank regulation that sets the minimum reserve so that each bank must hold to customer deposits and notes. These reserves are designed to satisfy withdrawal demands, and would normally be in the form of fiat currency stored in a bank vault (vault cash), or with a central bank. Reserve requirements affect the potential of the banking system to create transaction deposits.

    A cash reserve ratio (or CRR) is the percentage of bank reserves to deposits and notes. It is also known as the cash asset ratio or liquidity ratio.

                                               Balance in NRB 

                                             CRR =

                                                                        Total Deposit

                    Table No. 5 Calculation of Cash Reserve Ratio

Year	Balance in NRB	Total Deposit	CRR
2061/62	390,025,828	8,654,774,214	4.51%
2062/63	626,123,385	11,002,040,633	5.69%
2063/64	556,678,464	11,445,286,030	4.86%
2064/65	403,810,203	13,715,394,960	2.94%
2065/66	444,138,596	27,957,220,794	1.59%
Average Ratio			3.91%

Trend Diagram: 2 Position of Cash Reserve Ratio

 

 As per NRB regulation every commercial banks is to maintain its CRR 5% per annum. The above trend diagram shows that Nepal SBI has maintained the standard level of CRR.

Quick Ratio

                    It is ratio between quick assets and current liabilities. This ratio is often called the “Acid-Test” ratio. It shows the better picture of the comparative ability to meet its short term liabilities out of short term assets. This includes all current assets except stock & prepaid expenses of advances. Stocks are excluded because it takes sometime for realizing into cash. Prepaid expenses should also be excluded because they can’t be converted into cash. Quick ratio ideally is calculated by dividing liquid assets with current liabilities and 1:1 is regarded as standard quick ratio.

                                                      

                            Quick Ratio =              Quick Assets     

                                                            Current Liabilities

Where,

Quick assets = Cash + Balance with Nepal Rastra Bank + Balance with Banks

                                Table No.4 Calculation of Quick Ratio

Year	Quick Assets		Current Liabilities	Quick Ratio
2061/62	723,745,300		149,605,114	4.84
2062/63	1,118,158,408		238,996,113	4.68
2063/64	1,122,690,227		277,258,459	4.05
2064/65	1,342,960,326		229,926,212	5.84
2065/66	1,903,906,121	319,387,524		5.96
Average Ratio				5.07

                                                                       Source: Annual Report, Nepal SBI Bank Ltd