Profit Planning Thesis

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Profit planning - thesis
Management Information System (Tribhuvan Vishwavidalaya)
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A STUDY ON PROFIT PLANNING OF

COMMERCIAL BANK
(With Reference to Standard Chartered Bank Nepal Limited)
By:
NIRMALA SHARMA
Shanker Dev Campus
Campus Roll No.: 1114/066
Regd. No.: 7-2-53-847-2004
nd
2 Year Exam Roll No.: 390597
A Thesis Submitted To:

Office of the Dean
Faculty of Management
Tribhuvan University
In partial fulfillment of the requirement for the degree of

Master of Business Studies (MBS)
Kathmandu, Nepal
April, 2017

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RECOMMENDATION
This is to certify that the thesis
Submitted by:
NIRMALA SHARMA
Entitled:

COMMERCIAL BANK
has been prepared as approved by this Department in the prescribed format of the
Faculty of Management. This thesis is forwarded for examination.
…..……..………………...... ......…………..……….….…….
Professor Amuda Shrestha Prof. Dr. Kamal Deep Dhakal

(Thesis Supervisor) (Head, Research Department)
…..……..………..…..………… …..……………………
Asso. Prof. Krishna Prasad Acharya DhurbaSubedi

(Campus Chief) (Thesis Supervisor)
Shanker Dev Campus Library 2

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VIVA-VOCE SHEET
We have conducted the viva –voce of the thesis presented
By:
NIRMALA SHARMA
Entitled:
COMMERCIAL BANK
And found the thesis to be the original work of the student and written
according to the prescribed format. We recommend the thesis to be
accepted as partial fulfillment of the requirement for the degree of
Master of Business Studies (MBS)
Viva-Voce Committee
Head, Research Department …………………….………
Member (Thesis Supervisor) …………………….………
Member (Thesis Supervisor) …………………….………
Member (External Expert) …………………….………

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DECLARATION
I Hereby declare that this thesis work entitled A STUDY ON PROFIT

PLANNING OF COMMERCIAL BANK(With Reference to Standard
Chartered Bank Nepal Limited)submitted to Office of the Dean, Faculty of
Management, TribhuvanUniversity, is my original work done in the form of partial
fulfillment of the requirement for the degree of Masters of Business Studies which is
prepared under the supervision of respected supervisorsProfessor AmudaShrestha
andDhurbaSubediof Shanker Dev Campus, T.U.
……….……………
Nirmala Sharma
Shanker Dev Campus
Campus Roll No.: 1114/066
Regd. No.: 7-2-53-847-2004

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ACKNOWLEDGEMENT
This entitled thesisA STUDY ON PROFIT PLANNING OF COMMERCIAL

BANK(With Reference to Standard Chartered Bank Nepal Limited)has been
prepared in partial fulfillment for the Degree of Master of Business Studies
(M.B.S.) under the Faculty of Management, Tribhuvan University, in based on
research models involving the use of qualitative aspect of profit planning.
I have great satisfaction and pleasure to express my appreciation and sincerity to my

thesis supervisorsProfessor AmudaShrestha andDhurbaSubediof Shanker Dev
Campus,TU for their excellent and effective guidance and supervision. I will remain
thankful for their valuable direction useful suggestion and comments during the
course of preparing this thesis without their help this work would not have come in
this form.
I highly appreciate to all the staff of Standard Chartered BankNepal Ltd., NRB
Library, Shanker Dev Campus Library and TU Central Library for their valuable
advices and support in collecting and presenting the necessary data.
I would also like to express my thankfulness to my friends, my family members as

well as all known people who supported as well as inspired me directly or indirectly
to complete this thesis.
Nirmala Sharma

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TABLE OF CONTENTS
Page
No.
Recommendation i
Viva Voce Sheet ii
Declaration iii
Acknowledgement iv
Table of Contents v
List of Tables vi
List of Figures vii
Abbreviations viii
CHAPTER – I: INTRODUCTION 1-9

1.1 Background of the Study 1
1.2 Brief Profile of Standard Chartered Bank Nepal Limited (SCBNL) 4
1.3 Statement of the Problems 6
1.4 Objectives of the Study 7
1.5 Significance of the Study 7
1.6 Limitations of the Study 8
1.7 Organization of the Study 8
CHAPTER – II: REVIEW OF LITERATURE 10-38
2.1 Conceptual Framework 10
2.1.1 Concept of Profit Planning 10
2.1.2 Concept of Profit 11
2.1.3 Concept of planning 12
2.1.4 Types of Planning 13
2.1.5 Role of Forecasting in Planning 16
2.1.6 Planning Verses Forecasting 16
2.1.7 Purposes of Profit Planning 17
2.1.8 Long Range and Short Range Profit Plan 17
2.1.9 Budgeting and Budget 18
2.1.10 Budgeting: As a Device of Profit Plan 19
2.1.11 Essentials of an Effective Budgeting 19
2.1.12 Fundamental of PPC 20

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2.1.13 Profit Planning and Control Process 20

2.1.14 Basic Assumptions and Limitations of Profit Plan 23
2.1.15 Development of Profit Plan 23
2.1.16 Resources Mobilization Plan or Budget 24
2.1.17 Resources Deployment Plan or Budget 25
2.1.18 Planning for Non-Funded Business Activities 25
2.1.19 Implementation of the Profit Plan 27
2.1.20 Performance Reports 27
2.1.21 Concept of commercials banks 29
2.1.22 Evolution of Commercial Bank 29
2.1.23 Role of Commercial Banks in the Development of Economy 31
2.2 Review of Related Studies 31
2.2.1 Review of Journals and Articles 31
2.2.2 Review of Thesis 34
2.3 Research Gap 38
CHAPTER – III: RESEARCH METHODOLOGY 39-46
3.1 Research Design 39
3.2 Population and Sample 40
3.3 Data Collection Procedures and Sources of Data 40
3.4 Research Variables 40
3.5 Data Analysis Tools 40
3.5.1 Financial Tools 40
3.5.2 Accounting Tools 42
3.5.3 Statistical Tools 43
CHAPTER- IV DATA PRESENTATION AND ANALYSIS 47-82
4.1 Analysis of Source of Income of Sample Bank 47
4.1.1 Income from Interest 47
4.1.2 Income from Commission and Discount 49
4.1.3 Other Operating Income 50
4.1.4 Exchange Fluctuation Gain/Loss 52
4.2 Analysis of Sources of Expenses of Sample Bank 53
4.2.1 Interest Expenses 53
4.2.2 Staff/Employee Expenses 55

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4.2.3 Operating Expenses 56

4.3 Cost Volume Profit Analysis 60
4.3.1 Cost Volume Ratio Analysis 60
4.3.2 Contribution Margin Analysis 61
4.3.3 Contribution Margin Ratio Analysis 62
4.4 Break Even Point (BEP) 63
4.5 Margin of Safety (MOS) 65
4.6 Profitability Analysis of SCBNL 67
4.6.1 Net Profit Margin Ratio (NPMR) 67
4.6.2 Return on Total Assets Ratio 69
4.6.3 Return on Equity 70
4.6.4 Operating Efficiency Ratio 71
4.7 Correlation Analysis 73
4.7.1 Correlation between Total Cost and Profit 73
4.7.2 Correlation between Income and Profit 74
4.8 Trend Analysis 75
4.8.1 Trend Analysis of Income 75
4.8.2 Trend Analysis of Net Profit 76
4.8.3 Trend Analysis of Total Cost 77
4.9 Major findings of the study 79
CHAPTER – V SUMMARY, CONCLUSIONS AND
RECOMMENDATIONS 83-86
5.1 Summary 83
5.2 Conclusions 84
5.3 Recommendations 85
Bibliography
Appendices

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LIST OF TABLES
Table No. Page

No.
4.1: Sector-wise Income from Interest 48
4.2: Sector-wise Income from Discount and Commission 49
4.3: Other Operating Income 51
4.4: Exchange Fluctuation Gain/Loss 52
4.5: Interest Expenses 54
4.6: Staff/Employee Expenses 55
4.7: Administrative Expenses 56
4.8: Income Statement of SCBNL 58
4.9: Cost Volume Ratio 60
4.10: Contribution Margin 61
4.11: Contribution Margin Ratio Analysis 62
4.12: BEP Income 64
4.13: BEP Ratio 65
4.14: Margin of Safety 66
4.15: Net Profit Margin Ratio 68
4.16: Return on Total Assets Ratio 69
4.17: Return on Equity Ratio 70
4.18: Operating Efficiency Ratio 72
4.19: Relationship between Total Cost & Net Profit 73
4.20: Relationship between Income & Net Profit 74
4.21: Trend Value of Income 75
4.22: Trend Value of Net Profit 77
4.23: Trend Value of Total Cost 78

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LIST OF FIGURES
Figure No. Page

No.
4.1: Total Interest Income 48
4.2:Total Commission and Discount 50
4.3: Other Operating Income 51
4.4: Exchange Fluctuation Gain/Loss 53
4.5: Interest Expenses 54
4.6: Staff Expenses 56
4.7: Administrative Expenses 57
4.8: Operating Profit and Net Profit 59
4.9: Fixed Cost and Variable Cost 59
4.10: Cost Volume Ratio 61
4.11: Contribution Margin 62
4.12: Contribution Margin Ratio Analysis 63
4.13: BEP Income 64
4.14: BEP Ratio 65
4.15: Margin of Safety 66
4.16: Net Profit Margin Ratio 68
4.17: Return on Total Assets 70
4.18: Return on Equity 71
4.19: Operating Efficiency Ratio 72
4.20: Trend Line of Income 76
4.21: Trend Line of Net Profit 77
4.22: Trend Line of Total Cost 78

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ABBREVIATIONS
% Percentage
& And
A. D Anno Domini
A/C Account
B. S. Bikram Sambat
BEP Break Even Point
C. V. Coefficient of Variation
CM Contribution Margin
F/Y Fiscal Year
FC Fixed Cost
GDP Gross Domestic Product
ICA Independent Cost Analysis
MBS Master of Business Studies
MOS Margin of Safety
NP Net Profit
NPMR Net Profit Margin ratio
P/V Profit Volume
PPC Profit Planning and Control
ROE Return on Equity
ROA Return on Total Assets
SCBNL Standard Chartered Bank Nepal Limited
S.D Standard Deviation
SDC Shanker Dev Campus
VC Variable Cost

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CHAPTER-I
INTRODUCTION
1.1 Background of the Study

Among the several modern day institution, banks are perhaps the most
important and widely known. There are many viewpoints regarding the origin
of the word Bank. Generally, it is said that the word bank is derived from the
latin word ‘Bancus’ or the French word ‘Banque’ and Italian word ‘Banco’
which all mean a bench. Previously, Italian goldsmith use to perform the
monetary task sitting on the bench. Whatever may be its origin it has become
the part and parcel of everyday activity of the present times. In a single
language, Bank is an institution, which accepts the deposits from the public and
in turns advances loans to persons or corporations in need of them.
Generally, the bank refers to those organized institution which are established
under the provision of current laws, rules and regulations to perform work
related to the currency. Practical Nepali Dictionary (2061) defines it as the
institute which accepts deposits and grants loans and the person can withdraw
deposited amount at any time. Nepali Encyclopedia takes as bank to those
commercial, government or non government institute which accept deposit,
provides interest on it, pays when demanded provides loan, Tejarath work etc.
In the banking history of Nepal, Nepal Bank Limited is the first bank of Nepal
which was established in 1994 B.S. After that, Nepal Rastra Bank,
RastraBanijya Bank, Agriculture Development Bank and Nepal Industrial
Development Bank were established. Financial institutions are any
organization/institution which is engaged in any type of financial activities. It is
classified as banking as banking financial institution and non-banking financial
institution. Some of the financial institutions which are practiced in Nepal are
finance companies, Employees Provident Fund, Insurance companies and other

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financial institution such as:- commercial bank, development bank, corporative

finance companies, postal saving plan, unit trust, investment companies etc.
According to Commercial Bank Act 2031 “Commercial banks are those banks,
which are established under this act to perform commercial function,
exchanging currency accepting the deposit and granting loan except those
which are established for specific purpose like co-operative, agricultural,
industrial or other.”
Planning is the first essence of a management and all other functions are
performed with the framework of planning. Planning means deciding in
advanced what is to be done in future. Planning starts from forecasting and
predetermination of future events. Without planning, it is not possible to fulfill
the organization goal or objective and can’t increase profit. The budget is the
primary planning operation document committed to performance. In this sense
budget is also called a profit planning. Planning is the process of developing
enterprise objectives and selecting a future course of action to accomplish
them. The term comprehensive profit planning and control it defined as a
systematic and formalized approach for performing significant phase of the
management planning and control function (Welsch, et al., 2001: 45).
The speedy development of any country in this modern era is depends upon to
some extent with financial activities of the country. Financial activities
play a role of catalyst in the process of economic development of the country.
In Nepal financial sectors (banks, finance companies etc.) plays a vital
role in the economic development of the country. The current state of
Nepalese economy is characterized by unutilized natural sources, miserable
agriculture, deficit trade, mass poverty, illiteracy and so forth. Agriculture is
the main occupation of almost village people but no scientific methods of
agriculture have yet been implemented. It is one of the richest countries in

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the world in terms of natural resources. The natural resources available here
have remained unutilized due to reasons.
Investments in productive sectors increase the economic activities. The

unutilized financial resources should be diverted towards productive sector in
order to increase the economic activities. To develop the Nepalese economy,
the financial institutions should be established. The participations of the
private sectors play ever more important role for the economic
development. Hence, various banks, insurance companies, financial
companies etc. have been established in the private sector and government
sector as well to develop the economy to develop the economy of the
country, their providing their active participation for the economic
development. But however even with the rapid development and
expansion of financial institutions, the country has not been able to achieve the
desired income yet which is due to the poor capital market condition of our
country and due to the early stage of economic growth.
Every company or institution is established based on the definite goals and

objectives. According to the objectives, the company performs is tasks.
Mainly two types of institutions such as profit oriented and service-oriented
instructions are established, but most of them are profit oriented because profit
is the KBL of the business which not only keeps it alive but also assures the
future and makes it sound. Profit planning is an important tool of the firm to
achieve the objectives. Profit do not just happen, profits are managed (Lynch
and Williamson, 1989: 125). So, to manage the profit, the management
should follow various processes of profit planning because the management
process and profit planning and control are interrelated to each other.
Profit maximization is the basic objectives of a firm and to make it reliable
service should render to its customers. Profit is a device to measure efficiency
of a firm.

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• The development and application of broad and long range objectives of

the enterprise.
• The specification of enterprise goals.
• A long range profit plan developed in broad terms.
• A short range profit plan detailed by assigned responsibilities
(divisions, product, project etc.).
• A systematic periodic performance reports detailed by assigned
responsibilities.
As like in the other profit oriented organizations, a commercial bank has also to
make reasonable profit for its survival. Most of the commercial banks are
formed as a company with joint stock and the shares being traded at
stock exchanges. Therefore, profit made by them is the important
parameter for measurement of effectiveness efficiency of them.
1.2 Brief Profile of Standard Chartered Bank Nepal Limited

(SCBNL)
Standard Chartered Bank Nepal Limited has been in operation in Nepal since
1987 when it was initially registered as a joint-venture operation. Today the
Bank is an integral part of Standard Chartered Group having an ownership of
75% in the company with 25% shares owned by the Nepalese public. The bank
enjoys the status of the largest international bank currently operating in Nepal.
Standard Chartered has a history of over 150 years in banking and operates in
many of the world's fastest-growing markets with an extensive global network
of over 1700 branches (including subsidiaries, associates and joint ventures) in
over 70 countries in the Asia Pacific Region, South Asia, the Middle East,
Africa, the United Kingdom and the Americas. As one of the world's most
international banks, Standard Chartered employs almost 87,000 people,
representing over 115 nationalities, worldwide. This diversity lies at that heart
of the bank’s values and support the bank’s growth as the word increasingly
becomes one market.

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With 15 points of representation, 23 ATMs across the country and with more
than 450 local staff, Standard Chartered Bank Nepal Ltd. is in a position to
serve its clients and customers through an extensive domestic network. In
addition, the global network of Standard Chartered Group gives the Bank a
unique opportunity to provide truly international banking services in Nepal.
Standard Chartered Bank Nepal Limited offers a full range of banking products
and services to a wide range of clients and customers encompassing
individuals, mid-market local corporate, multinationals, large public sector
companies, government corporations, airlines, hotels as well as the DO
segment comprising of embassies, agencies, NGOs and INGOs.
The Bank has been the pioneer in introducing 'customer focused' products and
services in the country and aspires to continue to be a leader in introducing new
products in delivering superior services. It is the first Bank in Nepal that has
implemented the Anti-Money Laundering policy and applied the 'Know Your
Customer' procedure on all the customer accounts.
Corporate Social Responsibility is an integral part of Standard Charterer’s

ambition to become the world's best international bank and is the mainstay of
the Bank's values. The Bank believes in delivering shareholder value in a
socially, ethically an environmentally responsible manner. Standard Chartered
throughout its long history has played an active role in supporting those
communities in which its customers and staff live. It concentrates on projects
that assist children, particularly in the areas of health and education.
Environmental projects are also occasionally considered. It supports non-
governmental organizations involving charitable community activities The
Group launched two major initiatives in 2003 under its 'Believing in Life'
campaign- 'Living with HIV/AIDS' and 'Seeing is Believing'.

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1.3 Statement of the Problems

Profit planning is the vital tool which directs the organization towards
achieving profit. Profit is the very basic primary short term and long term
objectives of every business organization. Even increasing ratio of profit is a
good symbol of organization. By nature profit is a yard stick judging of
managerial efficiency in terms of a means of measurement for the success.
The profit planning tool is a newly developed concept as a crucial way

in the business organization. The concept of profit planning has not even
familiarized in the most of the business concern. By proper profit
planning a business can be managed more effectively and efficiently.
Every financial institutions, as a commercial bank must make profit out

of its operations for its survival and fulfillment of the responsibilities
assigned. Major activities of a commercial bank comprise mobilization of
resources, which involves cost, and profitable deployment of those resources,
which generates income. The different interest income over the interest
cost, which is popularly called as interest margin, can be considered as the
contribution margin in the profit of the bank. The bank attempts to compensate
the other operational expenses by generating other income out of non-fund
based business activities of the bank.
The present study has analyzed and examined the application of PPC tool in the
commercial bank taking a case of Standard Chartered Bank Nepal Ltd. In this
ground, the study deals with the following issues for the purpose of this study.
• What are the income and expenditure sources of SCBNL?
• What are the position of break-even point and contribution margin of
SCBNL?
• What is the profitability position of the banks?
• What will be the trend of total cost and profit of sample bank?

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1.4 Objectives of the Study

The basic objectives of the study is to study the profit planning aspect
of commercial bank i.e. Standard Chartered Bank Nepal Limited.The specific
objectives of the study are:
• To analyze the income and expenditure sources of SCBNL.
• To examine the position of break-even point and contribution margin of
selected bank.
• To evaluate the profitability position of sample bank.
• To assess the trend of total cost and profit.
1.5 Significance of the Study
Profit is the ultimate goal of the any organization, because for the stability or
endurance of the each any every business house is depends upon the earning
power. This is concerned with the profit planning and procedure in the
commercial bank. It attempts to look at and analyze the applicability of profit
planning system and procedure in the bank. Profit planning process
significantly contributes to improve the profitability as well as the overall
financial performance of an organization with the help of the optimum
utilization of resources.
Profit planning is a part of an overall process and is an area in which
finance function plays major role. It is now an important responsibility of
financial manager while activities of those require an accounting background.
It's also need knowledge of business principles, economic statistics and
mathematics. Hence profit planning represents on overall plan of
preparation for a definite period of time.
Profit planning is crucial for management. Profit is the most important

indicators for judging managerial efficiency and does not just happened for this
every organization has to manage. Various functional budgets are the basic
tools for proper planning of profit and control. Therefore, this study will be
useful for those who want to know the profit-planning tool and also for
next researcher as a reference.

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1.6 Limitations of the Study

The study confines only profit planning aspect of the Standard Chartered Bank
Nepal Limited. So, the limitations of this study are:
• This study focuses on profit planning control and its application in
Standard Chartered Bank Nepal Limited.
• The study based on only the past years data from F/Y 2011/12 to F/Y
2015/16.
• Only profit planning aspect of Standard Chartered Bank Nepal Limited
has been analyzed.
• The study is based on secondary sources of data.
• The study is based on secondary data such as annual report, financial
statement etc. Inaccessibility of information which could have helped to
analyze other aspects of profit planning as well.
1.7 Organization of the study

The study is divided into five chapters. They are follows:
Chapter- I Introduction
It includes the background of the study, brief profile of the selected banks,
statement of problems, objectives of the study, significance of the study,
limitations of the study and organization of the study etc.
Chapter- II Review of Literature
This chapter presents conceptual framework, review of related literature like
books, dissertation, articles, brochure, booklets, journals, report and magazines
etc. At last research gap is also mentioned in this chapter.
Chapter- III Research Methodology
The third chapter is deals with the research methodology employed in this
study. It includes research design, population and sample, data collection
procedure and sources of data, data analysis techniques etc.
Chapter - IV Data Presentation and Analysis

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The fourth chapter is the important chapter of the study which implies the
presentation and analysis of data as well as major findings of the study.
Chapter - V Summary, Conclusion and Recommendations
This chapter presents of the brief summary of whole research report and
conclusions. It also provides some useful suggestion and recommendations to
concerned parties.
At the beginning of the study table of contents, recommendation sheet, viva

voce sheet, acknowledgement, list of table and figure and abbreviation are
presented at first and bibliography, appendix and proposal are also presented at
the end of the study.

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CHAPTER-II
REVIEW OFLITERATURE
This chapter is concerned with review of literature relevant to the topic ‘Profit
Planning of Commercial Bank’. The purpose of reviewing of literature is to
develop some expertise in one’s area, to see what new contribution has made
and to receive some ideas for developing a research design. Thus, previous
studies cannot be ignored as they provide the foundation of the present study.
This chapter highlights the literature that is available in concerned subject as to
my knowledge, research work, and relevant study on this topic, review of
books, journals and articles and review of thesis work performed previously.
2.1 Conceptual Framework

Review of supportive text provides the essential conceptual framework and
foundation to the present study. For this various books, journals, articles and
some dissertations etc. dealing with theoretical aspects profit planning is taken
into consideration.
2.1.1 Concept of Profit Planning

“A profit planning and control program can be one of the more effective
communication networks in an enterprise. Communication for effective
planning and control requires that both the executive and the subordinate
have the same understanding of responsibilities, ensure a degree of
understanding not otherwise understanding of responsibilities, and ensure a
degree of understanding not otherwise possible. Full and open reporting in
performing reports that, fouls on assigned responsibilities likewise enhance
the degree of communication essential to sound management” (Welsch, et al.,
2001:215).
“Profit Planning is a comprehensive statement of intentions expressed in
financial terms for the operation of both short and long period. It is a

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plan of the firm's expectation and is used as a basis for measuring the actual
performance of managers and their units. A profit plan has an immense value in
management; it helps in planning and coordinating if used appropriately, but
not a replacement for management. Profit planning is a comprehensive and
coordinated plan expressed in financial terms for the operations and resource of
an enterprise for some specific period in the future" (Fremgen, 1976: 12).
“Profit Planning is an example of short range planning. This planning focuses

on improving the profit especially from a particular product over a
relatively short period of time. Therefore as used here, it is not the same as
corporate planning of a cost rendition program” (Terry, 1968:245).
Profit Planning involves streamlining activities in order to get employees

profit minded and to secure maximum benefit from minimum effort and
expenditure. Best results seem to be obtained by assigning a profit planner to
investigate all the footers affecting the profit obtained from a single product;
the planner is given the right to prove the economics, the organization. The
mode of operations, the pricing, the marketing or any fact of making and
selling the product that in his judgment affects profit accruing from that
product.
2.1.2 Concept of Profit

Profit is the basic elements of profit plan so that the concept of profit
planning may not be completed and meaningful in absence of the clear-
cut well defined idea of profit. Oxford dictionary defines profit as a (a)
financial gain and amount of money gained in business especially the
difference between the amount earned and the amount spent (b) Advantage or
benefits gained from something (Horngreen, et al., 1992:63).
According to some theories, profits are the factor payment for talking the risk
for agreeing to take what is left over after contractual outlays have been made.

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In the second type of profit theory they viewed as a wage for the service of
innovation. Profits in this theory are tied to dynamic development. Profit
around which all enterprises activities directly or indirectly revolve play
the significant role for judging the managerial efficiency. In absence of profit
nobody can think about the long-term survivability of the enterprises.
2.1.3 Concept of planning

“Planning is the first essence of management and all other functions are
performed within the framework of planning. Planning means deciding in
advance what is to be done in future. Planning starts from forecasting and
predetermination of future events. Planning is the whole concept of any
business organization with proper and effective planning. No firm can
accomplish its predetermined goals and objectives. Hence it is the life blood of
any organization which helps them to run efficiently in competitive
environment. Planning is a techniques were by the use pattern of resources is
carried out” (Agrawal, 2000:24).
“The planning processes both short and long term is the most crucial
component of the whole system. It is both foundation and the bond for the
other elements because it is through the planning process that we determine
what we are going to do, how we are going to do it and who is going to do it. It
operates as the brain centre of an organization and like the brain it both
reason and communicate” (Welsch, et al., 2001:73).
Planning is the conscious recognition of the futurity of present decision

(Drucker, 1989:87).
“Planning is the feed forward process to reduce uncertainty about the future.
The planning process is based on the conviction that management can plan its
activities and condition that state of the enterprise that determines its
density” (Pandey, 1991:325).

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Planning could be taken as the tools of achieving organizational goals

efficiently and effectively from the selection of various alternatives with in a
acceptable time frame. The essence of planning is:
• To accomplish goals
• To reduce uncertainty
• To provide direction by determining the course of action in advance.
Planning is determined course of action for achieving organizational

goals or objectives effectively and efficiently at a fluid environment with
a certain timeframe through the selection of various alternatives. On the
other hand it holdsaccountability and responsibility about result to individual.
A full appreciation ofthe firm task requires distinguishing among three
types of company's activitieswhich we call strategic planning, management
control and operational control. Thestrategic planning isa important function
of top management. Planning requiresthe management to setting a future
state toward which effort will be directed i.e.objective, assessing the
organization's resources, i.e. what the organization isgoing to work with,
assessing the current and future environment with which theorganization must
connected to achieve its goals and lately determine how andwhen to
allocate resource accomplish the objective. Planning on the other hand
isselecting objective and determining a course of action including
allocation ofresources in order to achieve those objectives in a specific time
period. Planningstates what, when, and how things will be accomplished. An
adequate planning isnecessary for control of operations.
2.1.4 Types of Planning

Corporate Planning
The concept of corporate planning was first introduced and started in the
United State in the late 1950's and nowadays it has been using in several

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companies in all over the world. The premises of the corporate planning are as
follows (Robertson, 1968:245).
• Before drawing up a plan which is designed to decide something what
the corporation wants to do.
• In these days of rapid change it is necessary to look ahead as for as
possible to anticipate these changes.
• Instead of treating a company as a collection of departments treat
it as a corporate whole, and
• Take full accounts of the company's environment before drawing
up and plan.
He has also defined corporate planning as, it is to determine the long term goals
of a company as a whole and then to generate plans designated to achieve these
goalsbring in mind probable change in its environment.
Strategic Long-Range Planning

Strategic planning is a top management function in which the organization's
purpose, mission and overall objectives and policies are developed to position
the organization advantageously in its operating environment. It refers to the
selection of company objective and the determination of the growth or at least
constant and competitive policies that are most likely to accomplish those
objectives. It is carried out the highest policy making level of the organization
will travel. Management planning and control is the process carried on within
the framework established by strategic planning. "Long range 5 to 10
years varying with the enterprise sometimes extended to 10 years. It is
one of the most difficult times span involved in planning as many problems in
short range planning can be traced to the absence of clear sense of direction and
the practice which a comprehensive long-range plan provides. Basically, the
long-range planning is more important for broad and long living enterprises.
“A long-range planning is closely concerned with the concept of the
corporation as a long living institution” (David, 1964:298).

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The planner must include the following factors in his/her plan from the analysis
of available information
• Probable future opportunity
• Uncertainty and
• Challenges
Long range planning is the continuous process of making present

entrepreneurial (risk taking) decision. Systematically and best possible
organizing efforts is need to carry out these decisions and measuring the result
of these decisions against theexpectations through organized systematic
feedback (Drucker, 1989:165).
Itis a decision making process. Such decision should be related about

Determination of goals, objectives and strategies.
• Level and direction of capital expenditure.
• Accession of new sources of funds.
• Organization design and structure etc.
Tactical Short Term Planning

A tactical planning is done at all level and involves directing the
organizations activities to achieve overall strategic objectives with the
organization's mission and policies. Standing plans provide consistency
and efficiency for non going operations, and single use plans are
developed for unique situation. Projects are short term plans designed to
achieve objective within large scale programs. Short term plans cover about
a year, and are less formal and detailed than long range plans, which
usually cover more than three months. The short range planning is
selected to conform to fiscal quarters or years because of the practical
need for conforming plans to accounting periods and then some. What
arbitrary limitation of the long range to three to five years is usually based as
has been indicated on the prevailing belief that the degree of uncertainty

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over a long period makes planning of questionable value (Pant and Wolf,
1999:45).
2.1.5 Role of Forecasting in Planning

Forecasting is an integral part of decision making activities of
management. An organization establishes goals and objectives seek to
predict the environmental factors. The need for forecasting is increasing as
management attempts to decrease its dependence on change and become more
scientific in dealing with its environment. Since each area of organization is
related to others. A good or bad forecast can affect the entire organization.
Planning or budgeting is not nearly forecasting although forecasts from
the basis of budgeting. Forecasting is the estimate of the future environment
within the company will operate. Budgeting or planning on the other hand
involves the determination of what should be done, how the goals may be
reached and what individual or units are to assume responsibility and be held
accountable.
2.1.6 Planning Verses Forecasting

Planning is clearly district from forecasting. Forecasting one of the essential
elements of planning is a prediction of what will happen on the basis of
certain assumption. Planning is an attempt to determine what should happen
and what will make it likely to happen. A forecast is not a plan, rather it is a
statement of land or quantified assessment of future conditions about a
particular subject (sales revenue) based on one of more explicit assumption. A
forecast should be viewed as only one input into the development of a
sales plan. The management of a company may accept modify or eject the
forecast. In contrast a sales plan incorporates management decision that are
based on the forecast, other inputs and management judgment about such
related items as sales volume, price, production and sales, effort and financing
(Welsch, et al., 2001:109).

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2.1.7 Purposes of Profit Planning

Some purposes for the application of profit planning are:
• To state the firms expectations in clear and facilitate for attainability.
• To communicate expectations to all concerned with the management of
the firm so that they are understood, supported and implanted.
• To provide a detail plan of action for reducing uncertainty and for
the proper direction of individual and group efforts to achieve goals.
• To coordinate the activities and efforts in such as way the use of
resource in maximized.
• To provide a means of measuring the performance of individuals and
units and to supply information on the basis of which the
necessary corrective action can be taken.
2.1.8 Long Range and Short Range Profit Plan

There are two types of profit plans developed; one strategic (long-range)
and another tactical (short-range). The former profit plan takes a time horizon
of 5 to 20 years and the later for short period. The long range planning
is a picture of more summary data. A part of this plan is more or less informal
as presented by tentative commitments made by the executive committee
in the organizational planning seasons. The formal portion of long-range
profit plan includes the following component detailed by each year.
• Income Statement
• Balance Sheet
• Capital Expenditure Plan
• Personnel Requirements
• Research Plan and
• Long Range Market Penetration Plan
Thus the long range profit plan covers all the key areas of anticipated
activity; sales, expenses, research and development, capital expenditure,

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cash, profit andreturn on investment. The short range tactical profit plan
shows the primarilyannual results, the detail by months, responsibility and
products. In anorganization these annual summaries should be prepared to
provide a generalunderstanding of the profit plan and to provide an overall
view of thecomprehensive short range profit plan.
It is possible for the firms to develop these two profit plans for all aspects of
the operations. Assuming participatory planning and receipt of the executive
instruments, the manager of each responsibility center will immediately
initiate activities within his or her responsibility center to develop
strategic profit plan and tactical profit plan. Certain format and normally the
financial function should establish the general format, amount of detail, and
other relevant procedural and format requirements essentially for
aggregation of the plan. All these activities must be coordinating among
the centers in conformity with the organization structure (Welsch, et al.,
2001:523).
2.1.9 Budgeting and Budget

Budgeting is a forward planning and involves the preparation in advance for
the quantitative as well as financial statement in indicate the intention of the
management in respect of the various aspects of the business. A budget
is a comprehensive and coordinated plan expressed in financial term for the
operation and source of an enterprise for some specific period in the future
(Pandey, 1991:98).
Budget is defined as a comprehensive and coordinated plan, expressed in

financial terms for the operations and resources of enterprises for some
specified period in the future (Fregmen, 1976:256).
According to his definition the essential elements of a budget are:
• Plan
• Operations and Resources

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• Financial Terms
• Specified Future Period
• Comprehensiveness
• Co-operation
Therefore, we can say that budget is a tool, which may be used by the
management in planning the future course of action-and in controlling the
actualperformance.
2.1.10 Budgeting: As a Device of Profit Plan

Budgeting is a forward planning. It serves basically as a device (tool) for
management, control; it is rather pivot of any effective scheme of control.
Budgeting is the principal tool of planning and control offered to management
by accounting functions (Welsch, et al., 2001:346).
The prime objective of budgeting is to assist in systematic planning and in

controlling the operations of the enterprises. In fact budgeting is best sources of
communication and an important tool in the hands of management. Since,
budgeting deals with fundamental policies and objectives, it is prepared by top
management. A formal budget by itself will not ensure that a firm's operations
will be automatically geared to the achievement of the goals set in the budget.
For this to happen, the top-level managers and lower level employees have to
understand the goals and support them and co-ordinate their efforts to
attain them.
2.1.11 Essentials of an Effective Budgeting

An effective budgeting system should have some essential feature to ensure
best results. The following are the chief characteristics of an effective
budgeting.

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2.1.12 Fundamental of PPC

Comprehensively profit planning and control is one of the more important
approaches that has been developed to facilitate effective performance of the
management process. The concepts and techniques of PPC have wide
application in individual business enterprises, government units, charitable
organizations and virtually all group endeavors. "The fundamental concepts
of PPC include the underlying activities or tasks that must be carried out to
attain maximum usefulness from PPC. The fundamentals of PPC are (Welsch,
et al., 2001:235):
• A management process that includes planning organizing, staffing,
leading and controlling.
• A managerial commitment to effective management participation by all
levels in the entity.
• An organization structure that clearly specifies assignments of
management authority and responsibility at all organization levels.
• A management planning process.
• A management control process.
• Continuous and consistent co-ordination of all the management
functions.
• Continuous feed forward, feedback, follow up, and re-planning through
defined communication channels (both downward and upward).
• A strategic profit plan.
• A tactical profit plan.
• A responsibility accounting system.
• A continuous use of the exception principle.
• A behavior management program
2.1.13 Profit Planning and Control Process

A PPC program includes more than the traditional idea of a periodic or
master budget. Rather, it encompasses the application of a number of related

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management concepts through a variety of approaches techniques and

sequential steps. These steps are out lined in this study in the following
manner.
Identification and Evaluation of External Variables

The variable identification phase of the PPC process focuses on (1) identifying
and (2) evaluating the effects of the external variables. Management planning
must focus on how to manipulate controllable variables and how to work
with the existing situation of non-controllable variables. Variables, which have
a direct and significant impact on the enterprises, are called relevant variables.
Variables may have their different relevancy according to the market nature.
For the enterprises purpose the external relevant variables are, population,
G.N.P. competitive activities product line, and industry sales. And so far
internal variables are concerned employees, capital, research productivity,
pricing, operating costs, advertisements etc. A particularly significant phase
of this analysis includes an evaluation of the present strength and weakness
of the enterprises. The comprehensive PPC approach is based on the
expectation that these significant aspects of operations will be critically
analyzed and evaluated periodically and in an orderly manner (Welsch, et al.,
2001:235).
Development for the Board Objectives of the Enterprises

Development of the broad objectives of the enterprises is a responsibility of
executive management. Based on a realistic evaluation of the relevant
variables and an assessment of the strength and weakness of the
organization, executive management, can specify or restate this phase of the
PPC process.
The statement of broad objectives should express the mission, vision and
ethnical character of the enterprise. Its purpose is to provide enterprise identify

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continuity of purpose is to provide and identification. One research study listed

the purpose of the statement essentially as follows.
• To define of the purpose of the Co.
• To clarify the philosophy character of the Co.
• To create particular climate with in the business.
• To set down a guide for managers so that the decisions they
make will reflect the best interest of the business with fairness and
justice to those concerned.
Preparation and Evaluation of Project Plans
Periodic plans and project plans are different in feature and functions. It will be
recalled that project plans encompasses different time horizons because each
project has a unique time dimension, they encompasses such items as
plans for improvements of present, products, view and expanded physical
facilities, entrance in to new industrial unit from products and industries and
new technology and other major activities that can be separately identified for
planning purpose. The nature of projects is such that they must be planned as
separate units.
Implementation of Profits Plans

That profit plans strategies should be implemented by every level management
is an accepted norm. Implementation of management plans that have been
developed and approved in the planning process, involves the management
functions of leading subordinates in attaining enterprises objectives and goals.
Thus effective management at all levels requires that enterprises objectives,
goals, strategies, and policy to be communicated and understood by
subordinates. There are many facets involved in management leadership.
However the comprehensive PPC program may aid substantially in
performing this function, plans, strategies and policies foundation for
effective communication. The plan should have been developed with the
managerial conviction that they are going to be met or exceeded in all
major respects. If these principles are effective in the development

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process, the various effective and supervisor will have a clear understanding of
their responsibilities and the expected level of performance.
Use of Periodic Performance Reports

Only implementing the strategy will be on no meaning when the
implementation is not checked and trial whether used appropriately. So that the
significance has been raised that monthly and three monthly performance
reports are to be prepared.
2.1.14 Basic Assumptions and Limitations of Profit Plan
Profit planning systems are more common in business organizations and
non- business organization. But there are so many assumptions of using profit-
planning program. Firstly, the basic plans of the business must be
measured in items of money, if there is to be any assurance that many will be
available for the needs of the business. Secondly, it is possible to plan for
the future of a business in a comprehensive way, coordinating every
aspect of the business, with every other aspect to establish optimum profits
goals. Thirdly, profit planning is preplanning not merely what to do if
things work out as forecasted, but also what to do if things work out
differently from the forecast. In developing and using a profit planning
and control (PPC) program, the following limitations should consider:
• Profit plan is based on estimates.
• A PPC program must be continually adapted to fit changing
circumstances.
• Execution of a profit plan will not occur automatically the profit plan is
not a substitute for management.
2.1.15 Development of Profit Plan

Development of profit plan in commercial Bank begins with the
preparation of various functional budgets. Those functional budgets are in
fact the picture of various activities of the Bank to be performed during a
particular period of time. Therefore the functional budgets of a Bank are

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activity based such as budget for deposit collection, budget for lending and
investments, budget for non-fund based business, budgets for expenditures and
revenues. The development of profit plans process that involves managerial
decisions and ideally a high level of management participation. The following
are the budgets, which are developed in a bank while making a profit plan.
2.1.16 Resources Mobilization Plan or Budget

Planning for resources mobilization is the foundation for planning in a bank.
The all other planning is based on it. The major and the sustainable resource of
a bank are the customer deposits. Therefore, the plan for resources
mobilization has a primary focus on the customer deposit mobilization. The
lending and investment activities are depended on the deposit mobilized by
the Bank. So, the deposit mobilization or collection plan is the starting point
in preparing the other different plan.
Budgeted targets for deposit mobilization during a particular year is set in

advance with each view of optimizing the cost of deposit and the same are
allocated to the different branches of the banks. Such allocations may be
regarded as the tactical plan for deposit mobilization of the banks. Banks
resources other than customer deposits are the borrowing from other banks
and the capital fund. Generally banks borrows from other banks to meet
temporary requirement of liquidity which may occur, sometimes, during the
occurs of banking operation caused due to unexpected withdrawals of deposit
or deferment in loan repayments by the borrower by some reason or other.
Such activities are managed from the Head Office with the least possible
cost.
Among the capital fund, the equity capital is formed generally one time
during opening of the bank. The central bank (NRB) may from time to time
instruct the bank to enhance the paid up capital to improve the capital adequacy
of the bank.

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2.1.17 Resources Deployment Plan or Budget

Planning for development of resources starts from assessment of nature of
resources to be mobilized. That is the assets are allocated on the basis of the
nature of resources. This approach of deployment of resources is called asset
allocation approach. The fundamental criterion which must be followed in
allocating funds for acquiring different types of assets is that the velocity-
turnover rate of different sources of supply of fund determines the appropriate
maturity of the assets acquired through fund utilization, for instance while
relatively stable fund, like saving deposits, fixed deposits and paid up capital
could be used to buy long dated high yielding securities, demand deposit which
are more volatile, could be used to acquire relatively liquid assets like cash or
money at call and short notice on which little or no return is made by the bank
(Vaish, 1996:365).
Funds kept as cash in vault and as balance with NRB and other banks in
current account are the most liquid assets of the bank. Normally banks have
to maintain certain fixed percentage of their deposit liability in this form as
directed by the Central Bank from time to time. There is no yield in the fund
deployed as liquid assets.
2.1.18 Planning for Non-Funded Business Activities

Other activities of commercial banks where it does not have to involve its fund
yet it can generate other income are called non-funded business activities of the
Bank. They are usually letter of credit and Bank guarantee issuance business of
the bank where the bank undertakes payment liabilities, which are contingent in
nature and the banks charges certain percentage of commission on such
transaction to their client where availing these facilities from the bank. The
bank fixes annual target for such business and those are allocated to the
branches of the bank.

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Expenditure Planning
Express planning and controlling are very necessary for supporting the
objectives and planned programs of the firm. An expense is related with profit.
It is real fact, that the minimization of cost is maximization profit. So, the
expenses must be planned carefully for developing a profit plan. In a Bank
there are generally following types of expenses:
• Interest Expenses
• Personnel Expenses
• Office Operating Expenses
• Expenses meeting the loss in Exchange Fluctuation
• Non-operating expenses
• Expenses for provision for loan loss
• Expenses for provision for staff bonus
• Expenses for provision of income tax
The interest expenses are incurred while paying for the deposit mobilized by
the bank and include the expenses incurred for interest payment in all kinds of
interestbearing deposit as per the agreed rate between the bank and the
borrower. In thetotal expenses of a bank, the portion of interest expenses is
quite higher.Therefore, the expenses are categorized into interest expenses and
other expenseswhile the later includes other expenses as mention above except
the interestexpense.
Revenue Plan
Revenue of a bank is generated from the income yielding activities of the
bank. Therefore while preparing the resources deployment plan and non-funded
business activities plan, the banks make the estimation of the revenue in
advance during the period for which the plan is developed. Revenues of a bank
are generated in the following forms:
• Interest income

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• Commission and discounts

• Dividend
• Other income
• Foreign exchange income
• Non-operating income
Generally the interest income of a commercial bank holds a major portion in
total revenue of the bank and it provides the major source of earning of a bank.
Therefore total income of a bank is categorized in two type viz. interest
income and other income, while the later including other income items as
listed above except the interest income.
The interest income is earned by charging interest on the fund deployed in

interest earning assets such as loan and advances, overdraft, investments
in government securities, debentures etc. For this study, the income from
Bills discounting has also been treated as interest income, as we consider
loans overdraft and bills discounting together as a single asset portfolio as
LDO.
2.1.19 Implementation of the Profit Plan

Development of an annual profit plan ends with the planned income statement,
the balance sheet and the planned statement of changes in financial
position. These three statements summaries and integrate the details of plans
developed by management for the period. They also report the primary impact
of detailed plans on the financial characteristics of the firm. Before
redistributing the completed profit plan it is general desirable to recast certain
budget schedules so that technical accounting mechanics and jargon are
avoided as much as possible.
2.1.20 Performance Reports

Performance reporting is an important part of a comprehensive PPC
system. Its phase of a comprehensive PPC program significantly influences

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the extent to which the organization's planned goals and objectives are
attained. Performance reports deal with control aspect of PPC. The
control function of management defined as the action necessary to assure the
objectives plans, policies and standards are being attended. Performance
reports are one of the vital tools of management to exercise its control
function effectively.
Special external reports, reports to owner and internal reports are specially
presented in the organization. Performance reports include in internal reports
groups. It is usually prepared on an monthly basis and follows a
standardized format. Such reports are designed to facilitate internal control
by management. Fundamentally actual results of reports are compared with
goals and budget plans. Frequently they identify problems that require special
attention since these reports are prepared to pinpoint both efficient and
inefficient performance.
Features of Performance Reports

In comprehensive PPC, performance report is very important. The main
objective of performance reports is the communication of performance
measurement, actual results and the related variances. Performance reports
offer management essential insights in to all the facts of operational
efficiencies. Performance reports should be:
• Tailored to the organizational structure and focus of controllability (that
is by responsibility centers).
• Designed to implement the management by exception principle.
• Repetitive and related to short term period.
• Adapted to the requirements of the primary users.
• Simple understandable and reports only essential information.
• Accurate and designed to pinpoint significant distinctions.
• Prepared and presently promptly.

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• Constructive in tone.
Aspects of Performance Reports

The various managers use their performance reports depends on many
factors, some behavioral and some technical. One important factor is the extent
to while the performance reports serves the management and decisions making
needs of the users. Top management needs reports that give a complete and
readily comprehensive summary of the overall aspects of operations and
identification of major events. Middle management needs summary data as
well as detailed data on day-to-day operation. Similarly lower level
management needs reports that must be detailed, simple understandable and
limited to items having a direct bearing on the supervisor's operational
responsibilities.
2.1.21 Concept of commercials banks

The term 'Bank', signifies the place where we keep our money for safe keeping
as well as for earning some interest or the place from where we borrow
money as loan. As regard to the borrowing money from the Bank, we
may consider its function as that of money lender in our society. But a
bank a moneylender is different in the sense that the former lends the money
which is principally collected from their depositors while later does so
from its own resources. The Random House Dictionary of the English
Language defines the bank as an institution for receiving money and is
some cases, issuing notes and transiting other financial business (Decoster
and Schafer, 1985:29).
2.1.22 Evolution of Commercial Banks

The world 'Bank' is derived from the word 'Banco', "Bancus' or 'Banque' all
meaning to a bench. This refers that early bankers transacted their money
lending activities on banches in the marketplace exhibiting the coins of
different countries in different denominations for the purpose of changing

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and or lending money. Some writers are of the opinion that the word 'Bank'
came from the German word 'Banc' meaning joint stock fund (Besley,
1987:169).
The goldsmiths can be considered as the initial Bankers in England as they

used to keep strong rooms with watchmen employed. People entrusted their
cash to them. The goldsmiths used to issue duly signed receipt of the deposits
with the undertaking to return the money on demand charging some fee for safe
keeping. These undertaking helped in gaining a further confidence of the public
therefore the money were kept with them for longer periods. They were thereby
encouraged to lend some part of these funds, which became profitable
business to them. Therefore they started offering interest on the deposits to
attract more funds. In the course of time independent banking concerned were
set up. The Bank of England was established in 1694, under a special Royal
Charter. Further in 1833 legislative sanction was granted for establishment
of joint stock banks in London, which served as a big impetus to the
development of joint stock banking. These banks took the initiative for
extending current account facilities and also introduced the facilities of
withdrawals through cheques.
In India, the ancient Hindu scriptures refer to the money lending activities in
the Vedic period. During the Ramayan and Mahabharata eras, banking had
become a full-fledged business activity and during the smiriti period (after the
Vedic period), the business of Banking was carried on by the members of
Vanish community. Manu, the great law giver of the time speaks of the
earning of interest as the business of Bishyas. The bankers in the Smriti
period performed most of those functions which the banks in modern
times performs such as the accepting of deposits, granting loans, acting as
the treasurer, granting loans to the king in times of grave arises and banker to
the state and issuing and managing the currency of the country ((Khan and
Jain, 1993:183).

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Afterward, various commercial banks were opened with foreign joint venture
under private sectors in Nepal which had contributed a lot to bring the
commercial banking at present day position. Nepal Bangladesh Bank has
established in the year 2051 B.S.
2.1.23 Role of Commercial Banks in the Development of Economy

Commercial Banks play an important role in facilitating the affairs of the
economy in various ways. The operations of commercial Banks record the
economic pulse of the country. The size and composition of their transaction
reflect the economic happening in the country. Commercial Banks have played
a vital role in giving the direction in economic growth over the time by
financing the requirement of industries and trade in the country. By
encouraging thrift among the people, banks have fostered the process of
capital formation in the country. In the context of deposit mobilization,
commercial banks induce the savers to hold their savings in the form of bank
deposits thus help bringing the scattered resources into the organized
banking sector which can be allocated to the different economic activities. In
his way they help in country's capital assets formation. Through their advances,
banks also help the creation of income out of which further saving by the
community and further growth potentials emerge for the good of the economy.
In a planned economy, banks make the entire planned productive process
possible by providing funds to the public sector, joint sector or private sector
for any type of organization. All employment income distribution and other
objectives of the plan as far as possible subsumed into the production
plan which banks finance (Gitman, 1990:265).
2.2 Review of Related Studies

2.2.1 Review of Journals and Articles
Shrestha, (2008), published an article on“Current Profit Planning Premises
Adopted and its Effectiveness in Commercial Banks” has included the

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significance and the importance of profit planning in Nepal or should say for
developing countries. He has pointed out the fact that profit planning is a very
important tool for the economic development. He has also mentioned the
contribution of profit planning to the GNP of the nation. Year by year the
contribution to GNP has been increased. He has compared profit planning with
the foreign direct investment. Researcher has concluded that profit planning’s
and grants are claimed as an important source of increasing foreign exchange
earnings in Nepal, Moreover, profit planning’s may be a dependable source of
national income for economic development if there is job guarantee for the
workers with the wage level equivalent to the residence of the foreign country.
Karki, (2011), published an article on“Profit planning of BOK Bank” which is

one of the leading banks in Nepal. In this research researcher has concluded
that profit has driven the nation’s economy. Though there was a very difficult
situation in Nepal, profit planning has been able to hold the economy of the
country. Because of the huge increment in the profit planning received by
Nepal, GDP of the nation was stable, moreover say slightly increased at a
severe time in the history of Nepal, where there was an internal disputes in
country. Therefore, researched has concluded that profit planning is a very
important tool to drive the nation’s economy. Moreover, they have mentioned
that profit planning is very important tool for the development countries like
Nepal. The trend analysis conducted in term of profit planning received by
Nepal clearly showed that the growth rates of profit planning are increasing day
by day. As we can see in the present scenario that many people are migrating.
Moreover, many people age between 18 t0 40 have been migrating abroad in
the search of opportunity. So, day by day the numbers of migrating people are
also increasing and the day by day the amount of profit planning received by
Nepal have been increasing. As per the trend analysis, we expect NPR 110 Bio
of profit planning in Nepal. Looking to the increment of profit planning flow in
Nepal, it won’t be a dramatic word if we say the profit planning would be
reached to NPR 200 BIO in fiscal year 2008.

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Shakya, (2012), published an article on “A Comparative Study on Profit

Planning in the context of Particularly Commercial Banks” using two rounds
of nationally representative household survey data in this study, the authors
measure the impact on poverty in Nepal of local and international migration for
work. They apply an instrumental variable approach to deal with nonrandom
selection of migrants and simulate various scenarios for the different levels of
work-related migration, comparing observed and counter factual household
expenditure distribution. The results indicate that one-fifth of the poverty
reduction in Nepal occurring between 1995 and 2004 can be attributed to
increased levels of work-related migration and profit planning’s sent home.
The authors also show that while the increase in work migration abroad was the
leading cause of this poverty reduction, internal migration also played an
important role. The findings show that strategies for economic growth and
poverty reduction in Nepal should consider aspects of the dynamics of
domestic and international migration.
Robbins and Edward, (2014),in this article “Profit Planning and the Finance
Function”explained that the attention given to profit-planning in the literature
on business finance does to reflect its importance to the financial activities of
the modern business firm. For this reason, at least in part, we feel that students
of finance have not made the contribution to this area of analysis that is
justified but their background and interests. In order to sustain this position, we
endeavor in this paper to evaluate the importance of the profit-planning aspects
of the finance function as practice in business today to discuss some tools of
profit-planning, particularly the break-even point which are often employed but
business firms in their financial analyses and finally to demonstrate the
relationship between the individual-product and over-all break-even points in
order both to clarify this problem and to show how the application of some
simple analytic techniques may improve the results of accounting
presentations.

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Harris, (2015), in this article “Profit Planning for Hospitality and

Tourism”published inScandinavian Journal of Hospitality and Tourism with a
focus on the Hospitality and Tourism (H&T) industry. The purpose of the
article is to provide H&T students and professionals with a guide to the
application of key managerial accounting techniques in planning, controlling
and improving profitability at the business property level. The article
emphasizes how to apply managerial accounting techniques in practical, day to
day, profit management new research and development applicable to
practitioners in the H&T sector. Major additions include new chapters on the
profit and panning framework comparing and benchmarking operating results
and customer profitability analysis.
Adesina, (2016), had published an article on “Accounting Information and

Profit Planning” stated the relationship between accounting information and
profitability of listed companies with a particular reference to the listed
manufacturing companies in Nigeria from where a total sample of 222 top
management staff were drawn using stratified and purposeful sampling
techniques. Independent variables captured in the study were cost information,
sales information and marketing information while the dependent variable was
profitability. The results indicate that a positive significant relationship exists
between accounting information and profitability of manufacturing
organization. It is therefore recommended that functioning accounting system
should be put in place by the manufacturing organization to enable them
actualize their profit target.
2.2.2 Review of Thesis

Maharjan, (2011), had conducted a study on the topic “Profit Planning
in a Commercial Bank (With Reference to Standard Chartered Bank Nepal
Ltd.)”.

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The main objectives were:
• To highlight the current profit-planning premises adopted and its

effectiveness in Standard Chartered Bank Nepal Ltd.
• To analyze the variance of budgeted and actual achievements
• To study the growth of the business of the Bank over the period.
• To make necessary suggestions and recommendations.
The major findings were:

• The decision making process is highly centralized however,
management takes the feed forwards for annual planning and strategy
building through manager conferences and strategy building
through manager conferences and strategic meeting organized twice in
every year at the head office.
• Interest expenses amount is the highest among total expense items
of the bank every year.
• The total deposit of the bank is found increasing every year
corresponding to the increase in interest expenses the total deposit is
perfectly and positively correlated with total interest expenses.
Pandey, (2012), had conducted a study on the topic “A Comparative study on

Profit Planning of Commercial Banks (With Reference to BOK and NBL).”

• To highlight the current profit planning premises adopted and its
effectiveness in NABIL and BOK .To analyze the variance of budgeted
and actual achievements.
• To study the growth of the business of the Banks over the period.
• To provide suggestion and recommendations for improvements of the
overall profitability of the banks.

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• This shows that overall efficiency of the SC Bank and better utilization
of total resources available is higher and strong

• The both banks are fluctuating rate over the study period, but in
the FY 2010/11 is negative growth of BOK L by -1.54% (on the
basis of FY 2007/08).
• Comparatively BOK is good position than NABIL. From the average
growth rate i.e. 16.08% > 14.11% respectively.
• Expenditure of the both banks are increasing trend but in the FY
2009/10 of BOK and FY 2008/09 of BOK is decreased. In
comparatively more increasing trend in the NABIL than BOK.
Bhattrai, (2013), had conducted a study on the topic "The sales budget of
Manufacturing Public Enterprises".

• To evaluate the variance between standard and actual result.
• To comparison of sales with profit of the HPPCL.
• To provide suggestion and possible guidelines to improve investment
policy and its problems.

• Actual sales are very below than the budgets sales.
• Sales forecasting is not based on realistic ground. HPPCL only use the
sales force composite method in sales forecasting but it has not practice
of using statistical techniques in sales forecasting.
• Net profit of the bank is the amount, which is obtained by subtracting
the amount of the net burden from the amount of gross interest margin.
• To analyze the sales budget prepared by HPPCL.

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Acharya, (2014), had conducted a study on the topic “Analysis of Profit

Planning Procedure of commercial Ban (With Reference to Nepal SBI Bank
Ltd.)”.

• To observe Nepal SBI’s profit planning based on overall budgets by the
bank.
• To analyze the variance of budgeted allocation and actual achievements.
• TO study the growth of the business of the bank over the period.
• To provide suggestion and recommendation for improvements of the
overall profitability of the bank.

• NSBI has followed profit plan at different component.
• NSBI performs SWOT analysis before prepare of profit plan.
• NSBI has three types of core planning team to make plan, policy,
program and budget.
• NSBI is well performing in the deposit collection.
Pandey, (2015), had conducted a study on the topic “Profit Planning of Nabil
Bank Limited.”

• To find out the relationships between total investment loan and
advances, deposit, net profit and outside assets.
• To identify the investment priority sectors of commercial Bank
• To analyze and forecast the trend and structure of deposit utilization and
its projection or five years of Commercial Bank.

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• The study is conducted on profit planning of Nabil Bank, which is one
of the leading banks in Nepal. NABIL has been maintaining a steady
growth rate over this period.
• NABIL has earned a net profit of Rs 747 million for the fiscal year
2013/14 and this comes to be 10.83% more as compared to the
same period in the previous fiscal year.
• Correlation between interest expenses and deposit of NABIL is
negative, it shows there is no relation between interest expenses
and deposit but it is not possible. So NABIL should increase its cost
of deposit rate.
2.4 Research Gap

Research gap refers to the gap between previous research and this
research.There is research gap between the present study and previous
studies.This study has analyzed the financial position of SCBNL by applying
the tools of ratio analysis and statistical tools. It concludes the various findings
of research and recommendations to the SCBNL. Most of the past research
studies about profit planning system are basically related to profit
planning system of manufacturing sectors or production oriented activities.
The researcher found only few study so far that has been related to profit
planning system of a commercial bank i.e. Standard Chartered Bank Nepal
Limited. All the past research have pointed out that there is no proper profit
planning system and recommend for the effective implementation of profit
planning system in the concerned institutions. This study has used latest data
for analysis of profit planning of Standard Chartered Bank Nepal Limited.

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CHAPTER–III
RESEARCH METHODOLOGY
Research is a systematic and organized effort to investigate a specific problem

that needs a solution. This process of investigation involves a serious of well
throughout activities of gathering, recording, analyzing, and interpreting the
data with the purpose of finding answers to the problem. Thus, the entire
process by which we attempt to solve problems or search the answers to
questions is called research (Wolf and Pant, 2002:75).
Research methodology descries the methods and process applied in the entire
study. In other words, research methodology is a systematic process to
approach any research problem to and explore it objectively.
3.1 Research Design

The research design is the conceptual structure within which research is
conducted. It constitutes the blueprint for the collection, measurement and
analysis of data. As such the design includes an outline of what the researcher
will do from writing the hypothesis and its operational implications to the final
analysis of data.
This study is an examination and evaluation of budget process in profit

planning of SCBNL. Various functional budgets and other related accounting
information and statement of the banks are materials to analyze and
evaluate the profit planning system of banks. Descriptive as well as
analytical approaches have been adopted in this research. This is a comparative
study research of commercial banks.

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3.2 Population and Sample

As this research aims at studying the profit planning aspect of the
commercial bank taking the reference of SCBNL and data have been
analyze for several years of its operation. Here, all together 28 commercial
banks are population of the study SCBNL has been selected as sample for the
present study.
3.3 Data Collection Procedures and Sources of Data

This study is mostly based on secondary data. However, primary data and
information have been obtained through informal discussions with the staffs of
the bank. Secondary data has been collected from the annual published
accounting and financial statement of the banks. Similarly other necessary data
have collected from website, newspapers and related publications.
3.4 Research Variables

Loans/Advances overdrafts and Bills discounted (LIDO), customer deposits,
total resources, total deployment interest expenses, other expenses, interest
income, other income etc. of the banks are the research variables of this study.
3.5 Data Analysis Tools

Various accounting, financial and statistical tools will be used to complete
theresearch study such as breakeven point, profit volume ratio, margin of
safety, ratioanalysis, coefficient of correlation and hypothesis for presentation
purpose,different types of tables, charts, figures and graphs are used as per
necessary.
3.5.1 Financial Tools

Financial analysis is the process of identifying the financial strengths
andweaknesses of the organization by properly establishing relationships
between theitems of the balance sheet and the profit and loss account. Ratio

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analysis is apowerful tool of financial analysis. A ration is designed as “the

indicated quotientof two mathematical expressions” and as “the relationship
between two or morethings”. In financial analysis, ratio is used as a benchmark
for evaluating thefinancial position and performance of a firm. Several ratios,
calculated from theaccounting data, can be grouped into various classes
according to the financialactivity and function to be evaluated.
i. Net Profit Margin

The ratio signifies the effectiveness of expenses management and cost control
andgives the direction to the management for service pricing policies. It means
howmuch of total revenue has been declared as net profit after all the charges
are overup. The higher ratio means the management has been able to control its
operationalcosts and maintain efficiency.
Net profit After Tax
Net Profit Margin =
Total Operating Income
ii. Return on Total Assets (ROA)

The ratio is a primary indicator of managerial efficiency. It indicates
howefficiently the assets were utilized by the bank. The ratio measures how far
themanagement has utilized all the assets of the bank for profit generating
activities.Higher ROA indicates higher efficiency in the utilization of the total
assets andvice versa.
Return on Total Assets (ROA) =
Total Assets
iii. Return on Equity (ROE)

Equity refers to the owner’s claim of a bank. The excess amount of total asset
overoutsiders liabilities is known as shareholder’s equity. It is also known as
net worth.This ratio measure how prudently the management has employed
shareholder’sfund keeping the interest of shareholders and maximize their net
worth. It is themeasurement of the rate of return available to the bank’s

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shareholders. The ratioprovides the company to deliver a good return on equity.

This ratio is calculated bydividing net profit by total equity capital.
Return on Equity (ROE) =
Shareholders equity
iv. Operating Efficiency Ratio

To maximize profitability and the value of the shareholder’s investments in
thebank, bank management must maintain efficiency in their operations. This
usuallymeans reducing their operating expenses and increasing the productivity
of theiremployees. Since banks are to pay huge amount of the interest costs for
theirfunds, they like to reduce non-interest costs especially, staff costs, wages
andoverhead costs. Lower the ratio means greater the success of management.
Total Operating Expenses
Operating Efficiency Ratio =
3.5.2 Accounting Tools

i. Contribution Margin
The difference between production amount and variable cost is known as
thecontribution margin. In other words, fixed cost plus the amount of profit
isequivalent to contribution margin. Contribution margin can be expressed by
Contribution margin (CM) = Production volume (Sales) – variable cost
ii. Profit Volume Ratio

It establishes a relationship between the contribution and production volume.
Thefactors profit and volume are interconnected and dependent with each
other. Profitdepends upon contribution margin and production. It can be
expressed by;
Contribution Margin
Profit volume ratio =
Production or Sales
iii. Break Even Point

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The point which breaks the total costs and selling price evenly to show the
level ofoutput or production, at which there shall be neither profit nor loss, is
regarded asbreak-even point. Through contribution margin approach, break-
even point can beexpressed by;
Fixed Cost
Break - even point (in Rs.) =
PV Ratio
iv. Break Even Ratio

Total sales revenue consists two parts: Break even sales and Margin of Safety.
Theproportion of Break even sales is BE Ratio.
Actual Sales = Break Even Sales + Margin of Safety
BE Ratio =
v. Margin of Safety (MOS)

It is the difference between the actual sales revenue and the break even
salesrevenue. It can be expressed by;
Margin of Safety = Actual Production – Break Even Production
vi. Margin of Safety Ratio

The proportion of Margin of Safety sales is MOS Ratio. The contribution
marginobtained from Margin of safety is operating profit for company. MOS
Ratio showsthe part of profit earning sales volume of the company.
MOS Sales
MOS Ratio =
Actual Sales
3.5.3 Statistical Tools

Statistical tools are used to analyze the relationship between two or more
variablesand to find how these variables are related. In this study, following
statistical toolsare used.
i. Arithmetic Mean or Average

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The arithmetic mean or simple mean of set of observations in the sum of all
theobservation divided by the number of observations. It is the best value,
which Representto the whole group... means is the arithmetic average of a
variable. Arithmetic mean of aseries is given by:
– x1 + x2 + x3 + ………..xn Σx
Mean (X) = =
n n
Where,
–
X denotes arithmetic mean, n denotes the no. of periods andx1, x2 and
x3 are the individual observations.
ii. Standard Deviation

The standard deviation is the absolute measure of dispersion in which
the drawbackpresent in other measure of dispersion as it satisfied most
of the requisites of a goodmeasure of dispersion. Standard deviation is
defined as the positive square root of themean as square of the deviation takes
from the arithmetic mean. It indicates the rangesand size of deviance from
the middle or mean. It measures the absolute dispersion.Higher the
standard deviation Higher will be the variability and vice versa.Dispersion
measures the variation of the data from the central value. In other words,
ithelps to analyze the quality of data regarding its variability. It is calculate as:
–
Σ(X -X) 2
Standard Deviation (S.D.) =
n
iii.Co-efficient of Variation (CV)

Standard deviation is the absolute measure of dispersion. The relative measure
ofdispersing based on the standard deviation is known as the measurement of
coefficientof standard deviation. The percentage of measure of co-efficient
of so is called co-efficient of variation. Less CV is the more uniformity and
consistency and vice versa.Only standard deviation is not appropriate to
compare two pairs of variables but also CVis capable to compare two

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variables independently in terms of their variability. It iscalculated as

under:
σ
Coefficient of Variation (C.V.) = × 100
–
X
iv. Coefficient of Correlation

Correlation is a statistical tool design to measure the degree of association
betweentwo or more variables. In other word if the changes in one variable
affects thechanges in other variable, then the variable are said to be co-related
when it is usedto measure the relationship between two variables, then it is
called simplecorrelation. The coefficient of correlation measures the degree of
relationshipbetween two sets of figures. Among the various methods of finding
out coefficientof correlation, Karl Pearson's method is applied in the study. The
result ofcoefficient of correlation is always lying between +1 and -1.The
formula for thecalculation of coefficient of correlation between X and Y is
given below.
Σ x1.x2
r=
Σx12Σx22
Where,
–
x1 = X 1 - X 1
–
x2 = X 2 - X 2
v. Least Square Linear Trend Analysis

Trend analysis has been a very useful and commonly applied statistical tool
toforecast the future events in quantitative terms. On the basis of tendencies in
thedependent variables in the past periods, the future trend is predicted. This
analysistakes the historical data as the basis of forecasting. This method of
forecasting thefuture trend is based on the assumptions that the past tendencies
of the variable arerepeated in the future or the past events affect the future

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events significantly Thefuture trend is forecasted by using the following

formula.
Y = a + bx
Where,
Y = the dependent variable
a = the origin i. e. arithmetic mean
b = the slope coefficient i. e. rate of change
X= the independent variable
vi. Hypothesis T-Test

For this study, t-test for significance of an observed and sample
correlationcoefficient is used.Set up Hypothesis
Null hypothesis (H₀); ρ = 0 i.e. There is no correlation between the
consideredvariables.
Alternative Hypothesis (H₁); ρ ≠ 0 i.e. There is significant correlation between
theconsidered variables.
Test statistic under H₀;
r
t= × n-2
1 - r2
Where,
r = Sample correlation between two variables
r² = Sample correlation Coefficient
n = No of Pair of observations
Level of significance: Level of significance ∝ = 5%
Critical Value: Tabulated or critical value of t at ∝ % level of significance for
(n -2) degree of freedom obtain from ‘t’ tables.
Decision: If calculated ‘t’ is less than or equal to tabulated value of ‘t’ it falls in
theaccepted region and the null hypothesis is accepted and if calculated ‘t’ is
greaterthan tabulated ‘t’ null hypothesis is rejected.

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CHAPTER - IV
PRESENTATION AND ANALYSIS OF DATA
This chapter includes analysis of data collection and their presentation. In this
chapter, the effort has been made of analyze profit planning of commercial
bank. The chapter data presentation and analysis is the main body of the study.
The purpose of this chapter is to analyze and elucidate the collected data to
achieve the objective of the study following conversion of unprocessed data to
an understandable presentation. In this course of analysis, data gathered from
various sources have been inserted in the tabular form and shown in diagram
form. The data have been analyzed by using financial and statistical tools. The
results of the computation have also been summarized in appropriated tables.
On the background of various reading and literature review in the preceding
chapter, it is tried to analyze and diagnose the recent Nepalese Commercial
Bank, with taking a special reference with commercial bank of Nepal. The
samples of computation of each model have been included in annexes. Among
the listed commercial banks only one commercial bank is taken as sample i.e.
SCBNL. Different tables and figures (diagrams) are drawn to make the result
more simple and understandable.
4.1 Analysis of Income

4.1.1 Income from Interest
Interest income is the amount of interest that has been earned during a specific
time period. This amount can be compared to the investments balance to
estimate the return on investment that a business is generating. It is the major
sources of income of bank.As income from interest is the main source of
income of bank. It has to be veryaware while doing investment. Such income
is classified under various headsor source such as loan, overdraft, agency
balance, investment etc.

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Table: 4.1
Sector-wise Income from Interest
(Rs. in million)
Particulars 2011/12 2012/13 2013/14 2014/15 2015/16
Rs. % Rs. % Rs. % Rs. % Rs. %
Loan and 1,930 71 2,213 78.84 2,258 89.07 2281 88.27 2291 88.97
Advance
Investment 609 22.4 554 19.7 187 7.38 201.6 7.80 203.5 7.90
1
At Agency 5.66 0.21 0.85 0.03 0.81 0.03 0.93 0.03 0.45 0.01
Money at call 5.66 0.21 8.94 0.32 8.30 0.33 7.82 0.30 6.42 0.25
or short notice
Other 173.6 6.39 94.9 3.38 81.28 3.21 92.7 3.59 74.5 2.89
Total 2,718 100 2,807 100 2,535 100 2,584 100 2,575 100
(Source: Annual Reports of SCBNL from F/Y 2011/12 to 2015/16)
Figure: 4.1
Total Interest Income
2,850
2,800
2,750
2,700
Rs. in million
2,650
2,600
2,550
2,500
2,450
2,400
2,350
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal Year

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The above table 4.1 and figure 4.1 present that the total income from Rs. 2,718
in F/Y 2011/12, Rs. 2,807 in F/Y 2012/13, Rs. 2,535 in F/Y 2013/14, Rs. 2584
in F/Y 2014/15 and Rs. 2575 millions in F/Y2015/16. It means the income
from interest earn is in fluctuating trend. It can be defined also in
percentage as interest income from loan & overdraft covered out of total
interest income are 71 %, 78.84 %, 89.07%, 88.27% and 88.97% in F/Y
2011/12, F/Y 2012/13, F/Y 2013/14, F/Y 2014/15 and F/Y2015/16
respectively.
4.1.2 Income from Commission and Discount

It is another source of income generation. All commission’s income is booked
at the time of transaction. Whatever charge or commission has totake for
servicerendered, customer has to debit at the time of transaction. Commission
is receivedon LC, remittance, annual fees on cards, etc.
Table: 4.2
Sector-wise Income from Commission and Discount
(Rs. in million)
Particulars 2011/12 2012/13 2013/14 2014/15 2015/16
Rs. % Rs. % Rs. % Rs. % Rs. %
Bills purchase 15.93 4.95 12.47 4.66 10.48 3.55 7.88 2.05 6.49 1.78
& Discount
Commission 123.9 38.5 127.4 47.57 171.9 58.29 173.4 45.20 165.4 45.48
Other 181.9 56.53 127.9 47.76 112.6 38.18 202.3 52.74 192.8 53.01
Total 321.8 100 267.8 100 294.9 100 383.6 100 363.7 100

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Figure: 4.2
Total Commission and Discount
450
400
350
300
Rs. in million
250
200
150
100
50
0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal Year
The above table 4.2and figure 4.2 show the income from commission and
discount. According to table and figure the total income from commission and
discount are Rs.321.8, Rs.267.8, Rs.294.9, Rs.383.60 and Rs.363.7 millions in
F/Y 2011/12, F/Y 2012/13, F/Y 2013/14, F/Y 2014/15 and F/Y2015/16
respectively. It has fluctuating trend during the five years study period.
4.1.3 Other Operating Income

Bank charge various service charges for providing services. It is also
anothersource of income such service can be renewable charges, vault
and safe charge,stop payments, Remittance etc. These amounts are little but
help in bank’s income.The following table shows the sundry income of
Standard Chartered BankNepal Ltd.

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Table: 4.3
Other Operating Income
(Rs. in million)
Particulars 2011/12 2012/13 2013/14 2014/15 2015/16
Rs. % Rs. % Rs. % Rs. % Rs. %
Safe Charge 4.79 13.02 4.65 12.11 5.44 12.74 6.65 15.06 5.8 14.29
Credit Card & 12.41 33.72 14.99 39.04 15.59 36.51 13.40 30.32 9.3 22.91
renewal Charge
Debit Card & 8.43 22.91 8.17 21.28 9.84 23.04 10.06 22.76 11.68 28.77
renewal Charge
Telex/Tax 8.46 22.99 8.93 23.26 9.99 23.39 12.36 27.96 11.4 2.81
Service Charges - - - - - - - - - -
Renewals fees 0.73 1.98 0.21 0.55 0.01 0.023 0.46 1.04 1.03 2.54
Other 1.96 5.33 1.41 3.67 1.85 0.043 1.27 2.87 1.39 3.42
Total 36.8 100 38.4 100 42.7 100 44.2 100 40.6 100
Figure: 4.3
Other Operating Income
50
45
40
35
Rs. in million
30
25
20
15
10
5
0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal Year

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The above table 4.3and figure 4.3 depict the income from other operating
income. According to table and figure the total income from operating income
is Rs. 36.8 million in F/Y 2011/12 then it slowly increases to Rs. 38.8 million
in F/Y 2012/13. Similarly, it is Rs.42.7 million in F/Y 2013/14. After that it
also increases to 44.2 million in, 2014/15 and in final year i.e. F/Y2015/16, it
decreases to 40.6. It indicates that it is increasing trend except the final year.
It shows that charges earn these five years are in increasing trend except the
year 2015/16. As insecurity increase in the country, many people depend on
banks lockers for safety of valuable property. Users of credit and debit cards
has been increased and students going abroad for further studies increasing
hence such income increases each year that effect on profit of the bank.
4.1.4 Exchange Fluctuation Gain/Loss

It is regardedas Revaluation Gain. Incomerealized from the difference
betweenbuying and selling rates of foreign currency is accounted under trading
gain. Thisis one of the source of income generation.
As per NRB approximately 25% of suchrevaluation gain is transferred to

exchange fluctuation fund through P/Lappropriation account.
Table: 4.4
Exchange Fluctuation Gain/Loss
(Rs. in million)
Particulars 2011/12 2012/13 2013/14 2014/15 2015/16
Rs. % Rs. % Rs. % Rs. % Rs. %
Change in 85.53 18.7 190.8 40.7 111.9 21.7 201.4 37.1 223.3 36.4
Exchange rate
Foreign Exchange 373.0 81.5 277.8 59.3 403.2 78.3 340.8 62.9 390.6 63.6
Transaction
Total 387.1 100 468.6 100 515.1 100 542.2 100 613.9 100

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Figure: 4.4
Exchange Fluctuation Gain/Loss
700
600
500
Rs. in million
400
300
200
100
0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal Year
The above table 4.4 and figure 4. reveal that exchange fluctuation gain/loss is
in increasing trend throughout the study period. They are 387.1, 468.6, 515.1,
542.2 and 613.9 million inF/Y 2011/12, F/Y 2012/13, F/Y 2013/14, 2014/15
and F/Y2015/16 respectively.
4.2 Analysis of Source of Expenses

4.2.1 Interest Expenses
Bank not only makes income on various heads but also have to expense on it.
Suchexpenses can be personnel expenses, office expenses, interest etc. As
bank takeinterest on loan and overdrafts in same way it has to pay interest on
deposits. Suchinterest can be different according to nature of deposits.

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Table: 4.5
Interest Expenses
(Rs. in million)
Particulars 2011/12 2012/13 2013/14 2014/15 2015/16
Rs. % Rs. % Rs. % Rs. % Rs. %
Fixed 516.05 51.23 497.41 49.39 189.61 31.01 173.98 30.19 206.7 31.27
Deposit
Savings 231.15 22.95 275.65 27.37 337.21 55.15 298.75 51.84 325.3 49.21
Deposit
Call Deposit 248.8 24.7 230.2 22.86 75.36 12.33 91.80 15.93 115.9 17.53
At Loan 3.52 0.35 0.35 0.03 5.63 0.92 9.46 1.64 9.89 1.49
(Borrowing)
Other 3.58 0.36 3.58 0.36 3.58 0.59 2.31 0.40 3.34 0.51
Total 1007.2 100 1007.2 100 611.4 100 576.3 100 661.1 100
Figure: 4.5
Interest Expenses
1200
1000
800
Rs. in million
600
400
200
0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal Year

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The above table 4.5 and figure 4.5 describe the total interest expenses of
Standard Chartered Bank Nepal Limited. In the F/Y 2011/12, it is Rs. 1007.2,
in F/Y 2012/13, it increases to Rs. 1007.2. After that it decreases to Rs.611.4 in
the F/Y 2013/14 and in F/Y 2014/15 it is Rs. 576.3. Then it slowly increases in
F/Y2015/16 i.e. Rs. 661.1 million. Interest expenses play vital role in profit
hence it need proper planning to manage profit each year. It indicates that the
trend of interest expenses is in fluctuating trend.
4.2.2 Staff Expenses

Personnel expenses are that for employees of the office. Without employees
workcannot be done. These expenses are regarded as fixed cost such as
salary,allowance, uniform, medical and insurance etc.
Table: 4.6
Staff Expenses
(Rs. in million)
Particulars 2011/12 2012/13 2013/14 2014/15 2015/16
Rs. % Rs. % Rs. % Rs. % Rs. %
Salary 211.0 57.67 240.1 62.03 262.9 62.36 278.9 57.85 298.8 59.09
Allowance 0.98 0.27 1.19 0.31 0.97 0.23 1.34 0.28 1.78 0.35
Contribution 10.20 2.79 10.92 2.82 11.39 2.7 14.6 3.03 15.3 3.03
PE
Training 5.69 1.56 3.80 0.98 2.80 0.66 3.89 0.81 3.60 0.71
Uniform 0.20 0.05 0.29 0.07 0.27 0.06 0.81 0.17 0.75 0.15
Medical 4.36 1.19 6.09 1.57 7.22 1.71 8.93 1.85 7.68 1.52
Insurance - - 0.74 0.19 0.07 0.02 0.36 0.07 0.43 0.09
Gratitude 30.49 8.33 24.31 6.28 23.89 5.67 24.1 4.99 25.76 5.09
Other 103.0 28.15 100.1 25.88 112.1 26.59 149.1 30.94 151.6 29.98
Total 365.9 100 386.8 1000 421.6 100 482.1 100 505.7 100

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Figure: 4.6
Staff Expenses
600
500
Rs. in million
400
300
200
100
0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal Year
The above table 4.5 and figure 4.6 highlight that the staff expenses are in
increasing trend of SCBNL. The total interest expenses are 365.9, 386.8, 421.6,
482.10 and 505.7 million in F/Y 2011/12, F/Y 2012/13, F/Y 2013/14, 2014/15
and F/Y2015/16 respectively. It shows how much amount spending on
employee salary, allowance,PF, training, etc.
4.2.3 Administrative Expenses

Bank purchase various goods & materials for daily operation and
providingservices to the customers. It is also another source of expenses such
expenses canbe rent, repair and maintenance, office equipment, stationary,
advertisement etc.The following table shows the sundry expensesof Standard
Chartered Bank Nepal Ltd.
Table: 4.7
Administrative Expenses
(Rs. in million)
Fiscal Year Administrative Expenses
2011/12 305.22
2012/13 349.36
2013/14 382.48
2014/15 368.03
2015/16 406.11

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Figure: 4.7
Administrative Expenses
450
400
350
300
Rs. in million
250
200
150
100
50
0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal Year
The above table 4.7 and figure 4.7 represent that administrative expenses is in
increasing trend except the year 2014/15. The expenses are Rs. 305.22, 349.36,
382.48, 368.03 and 406.11 million for the fiscal year 2011/12, 2012/13,
2013/14, 2014/15and F/Y2015/16 respectively.

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Table: 4.8
Income Statement of SCBNL
(Rs. in million)
S.N. Particular 2011/12 2012/13 2013/14 2014/15 2015/16
1. Interest Income 2718.7 2870.9 2535.4 2583.9 2574.6
2. Commission & Discount 314.7 267.8 294.9 383.6 363.7
A Total Operating Income 3033.4 3138.7 2830.3 2967.5 2938.3
3. Less: variable Cost
Interest Expenses 1003.1 1007.2 611.4 576.3 661.1
Variable Adm. Expenses 138 162 187 194.8 162.44
B Total variable Cost 1141.1 1169.2 798.4 771.1 823.54
C CM (A – B) 1892.3 1969.5 2031.9 2196.4 2116.76
4. Less: Fixed Cost
Staff Expenses 365.9 386.8 421.6 482.1 505.7
Fixed Adm. Expenses 167 187 195 173.6 243.66
D Total Fixed Cost 532.9 573.8 616.6 655.7 749.36
E Operating Profit (C – D) 1359.4 1395.7 1415.3 1540.7 1368.4
5. Add: Other Operating 36.8 38.4 42.7 44.2 40.6
Income
Non-Operating Income 6.4 0.71 1.2 51.9 63.9
Exchange Fluctuation 387.1 468.6 515.1 542.2 613.9
Income
Exp written of Loan - - - - -
F Total Sundry Income 430.3 507.7 559.0 638.3 718.4
G NIBP (E +F) 1789.7 1903.4 1974.3 2179 2086.8
6. Less: Provision
Provision for loss 82.7 208.3 110.1 84.4 175.2
Provision for staff Bonus 159.5 167.6 174.2 196.1 187.3
Provision for Income tax 479.2 506.6 524.1 583.5 577.7
Written Back provision (67) (191) (50) (64) (149.7)
H Total Provision 654.4 691.5 758.4 800.0 790.5
I (G - H) 1135.3 1211.9 1215.9 1379 1296.3
Profit/Loss From Extra (22.8) (42.6) 2.4 (1.5) (1.5)
Ordinary
Net Profit 1112.5 1169.3 1218.3 1377.5 1294.8
The above table shows that the all variables ofincome statement like operating
income, variable cost, fixed cost, operating profit,net profit are in increasing
trend. The net profit of the bank are Rs. 1112.5, 1169.5, 1218.3, 1377.5 and

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1294.8 million for the fiscal year 2011/12, 2012/13, 2013/14, 2014/15and
2015/16 respectively. Similarly, the operating profit ofthe bank are also
increasing trend they are Rs.1359.4, 1395.7, 1415.3, 1540.7 and 1368.4
million for the year 2011/12, 2012/13, 2013/14, 2014/15 and 2015/16
respectively. It is shows in the following figure.
Figure: 4.8
Operating Profit & Net Profit
1800
1600
1400
1200
Rs. in million
1000
800 Operating Profit
600
Net Profit
400
200
0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal Year
The above figure displays that the operating profit and net profit of the Bank
are in increasing trend except the final year.
Figure: 4.9
Fixed Cost & Variable Cost

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1400
1200
1000
Rs. in million
800
600 Fixed Cost
400 Variable Cost
200
0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal Year
The above figure 4.9 exhibits that the fixed cost is increasing trend over
the study period and variable cost is fluctuating trend.
4.3 Cost Volume Profit Analysis

Cost-Volume-Profit (CVP) Analysis is a tool for planning and decision-making
that emphasizes the interrelationships of cost, quantity sold, and price (Hansen,
et al., 2007). It studies the effects of changes in cost and volume on a
company's profits. It can be used for analyzing management decisions such as
setting selling prices, determining product-mix, and maximizing the use of
production facilities.
4.3.1 Cost Volume Ratio Analysis

Only the VC varies proportionately with the level of output or income.
The cost volume formula is used to derive the total cost that will be incurred at
certain production volumes. The formula is useful for deriving total costs for
budgeting purposes, or to identify the approximate profit or loss levels likely to
be achieved at certain sales volumes.

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Table: 4.9
Cost Volume Ratio
(Rs. in million)
Year Income (A) VC (B) VC Ratio (%) % of Change
2011/12 3033.4 1141.1 37.62 -
2012/13 3138.7 1169.2 37.25 -0.37
2013/14 2830.3 798.4 28.21 -9.04
2014/15 2967.6 771.1 25.98 -2.23
2015/16 2938.3 823.54 28.03 2.05
(Source: Table 4.8)
Figure: 4.10
Cost Volume Ratio

40
35
30
25
Ratio in %
20
15
10
5
0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal Year
The above table 4.9 and figure 4.10 show that the cost volume ratio is in
decreasing trend except the F/Y 2015/16. The highest VC ratio is 37.62% in
F/Y 2011/12 and the lowest ratio is 25.98% in F/Y 2014/15.
4.3.2 Contribution Margin Analysis
CM isregarded as the excess of income price of a unit of output over its VC. It
also canbe defined as the excess of income amount over VC.
Table: 4.10

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Contribution Margin
(Rs. in million)
Year Income (A) VC (B) CM % of Change
2011/12 3033.4 1141.1 1892.3 -
2012/13 3138.7 1169.2 1969.5 4.08
2013/14 2830.3 798.4 2031.9 3.17
2014/15 2967.6 771.1 2196.4 8.09
2015/16 2938.3 823.54 2116.8 -3.62
(Source: Table 4.8)
Figure: 4.11
Contribution Margin
2250
2200
2150
2100
Rs. in million
2050
2000
1950
1900
1850
1800
1750
1700
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal Year
The above table 4.10 and figure 4.11 exhibit that the contribution margin is in
increasing trend except the F/Y 2015/16. The highest CM is 2196.4 million in
F/Y 2014/15 and the lowest CM is 1892.3% in F/Y 2011/12.
4.3.3 Contribution Margin Ratio Analysis
C/M Ratio is also known as PV Ratio. The full form is Profit Volume Ratio. It
isimportant tool in studying profitability index. It can be obtained as follows.

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Table: 4.11
Contribution Margin Ratio
(Rs. in million)
Year Income CM CM Ratio % Change
2011/12 3033.4 1892.3 62.38 -
2012/13 3138.7 1969.5 62.75 0.37
2013/14 2830.3 2031.9 71.79 9.04
2014/15 2967.6 2196.4 74.01 2.22
2015/16 2938.3 2116.8 72.04 -1.97
(Source: Table 4.8)
Figure: 4.12
Contribution Margin Ratio

76
74
72
70
Ratio in %
68
66
64
62
60
58
56
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal Year
The above table 4.11 and figure 4.12 ensure that CM ratio or PV ratio is in
increasing trend except the final year.The highest P/V ratio is 74.01% in F/Y
2014/15 and lowest is 62.38% in F/Y 2011/12.
4.4 Break Even Point (BEP)

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BEP is the powerful tool to analyze the profit making process. It is the
specificway of presenting & studying the interrelationship between the costs. It
is the mostpopular technique that indicates the level of income in which cost &
revenue are inequilibrium position.
i.e.BEP = No Profit No Loss. BEP can be computed as
BEP (U) = TFC/ SPPU- VCPU
BEP (Rs) = TFC/PV Ratio or TFC/1- VC/SR

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Table: 4.12
BEP Income
(Rs. in million)
Year TFC PV Ratio BEP Income % Change
2011/12 532.9 0.6238 854.3 -
2012/13 573.8 0.6275 914.4 7.04
2013/14 616.6 0.7179 858.9 6.07
2014/15 655.7 0.7401 885.9 3.14
2015/16 749.36 0.7204 1040.2 17.42
(Source: Table 4.8 and Table 4.11)
Figure: 4.13
BEP Income
1200
1000
800
Rs. in million
600
400
200
0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal Year
The above table 4.12 and figure 4.13 reveal that the BEP is in fluctuating trend
throughout the study period. The highest BEP is 1040.2 million in F/Y 2015/16
and the lowest BEP is 854.3 million in F/Y 2011/12.

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Table: 4.13
BEP Ratio
Year Income BEP Income BE Ratio % Change
2011/12 3033.4 854.3 28.16 -
2012/13 3138.7 914.4 29.13 0.97
2013/14 2830.3 858.9 30.35 1.22
2014/15 2967.6 885.9 29.85 -0.50
2015/16 2938.3 1040.2 35.40 5.55
Figure: 4.14
BEP Ratio
40
35
30
25
Ratio in %
20
15
10
5
0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal Year
The above table 4.13 and figure 4.14 depict that the BE Ratio is in increasing
trend except the F/Y 2014/15. The highest BE ratio is 35.40% in F/Y 2015/16
and the lowest BE ratio is 28.16% in F/Y 2011/12.
4.5 Margin of Safety (MOS)

Margin of safety is the excess of budgeted (or actual) income over the break
evenincome volume. It is the difference between the budgeted or actual income

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revenueand the break- even income revenue. MOS of SCBNL for the
five fiscal year is asfollows.
MOS = Actual Income - B.E. Income
MOS
MOS Ratio =
Income
Table: 4.14
Margin of Safety
(Rs. in million)
Year Actual Income BEP Income MOS MOS Ratio
(%)
2011/12 3033.4 854.3 2179.1 71.84
2012/13 3138.7 914.4 2224.3 70.87
2013/14 2830.3 858.9 1971.4 69.65
2014/15 2967.6 885.9 2081.7 70.15
2015/16 2938.3 1040.2 1898.1 64.60
Figure: 4.15
Margin of Safety
2300
2200
2100
Rs. in million
2000
1900
1800
1700
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal Year

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The above table and figure deal that the margins of safety are in fluctuating
trend. They are Rs. 2179.1, 2224.3, 1971.4, 2081.7 and 1898.1 million for the
year 2011/12, 2012/13, 2013/14, 2014/15and F/Y2015/16 respectively.
4.6 Profitability Analysis of SCBNL

The “bottom line” in a company’s income statement is its net income or
reportedprofits. This figure is the basis for dividends and it is used to determine
bonuses.Financial statements report both on a firm’s position at a point in time
and on itsoperations over some past period. However, the real value of
financial statementslies in the fact that they can be used to help predict the
firm’s future earnings anddividends. Predicting the future is what financial
statement analysis is all about.
An analysis of the firm’s ratios is generally the first step in a financial analysis.
Itshows relationship between financial statement accounts. Generally, ratio
analysisis helpful in financial forecasting and planning effective control
of the business,communicates the strength and financial standing of the firm
to the related partiesfor comparison of a particular firm progress and
performance for decision making.There are various ratios helps to measure the
profitability effectiveness of banks.They are as follows.
4.6.1 Net Profit Margin Ratio (NPMR)

The profit margin ratio, also called the return on income ratio, is a profitability
ratio that measures the amount of net income earned with each dollar of income
generated by comparing the net income and net income of a company. In other
words, the profit margin ratio shows what percentage of income are left over
after all expenses are paid by the business.NPMR shows the ratio between net
profit and income of bank. Higher the NPMRindicate the highest overall
efficiency of business.

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Table: 4.15
Net Profit Margin Ratio
(Rs. in million)
Fiscal Year Net Profit Income Ratio
2011/12 1112.5 3033.4 36.68
2012/13 1169.3 3138.7 37.25
2013/14 1218.3 2830.3 43.04
2014/15 1377.5 2967.6 46.42
2015/16 1294.8 2938.3 44.07
Mean 41.49
S.D. 3.86
C.V. 9.30%
(Source: Annual Reports of SCBNL from F/Y 2011/12 to 2014/1 and Appendix-
i)
Figure: 4.16
Net Profit Margin Ratio
50
45
40
35
Ratio in %
30
25
20
15
10
5
0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal Year
The table 4.15 and figure 4.16 disclose that the ratio of net profit margin ratio of
SCBNL are 36.68%, 37.25%, 43.04%, 46.42% and 44.07% in the year 2011/12,

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2012/132013/14, 2014/15and F/Y2015/16 respectively. This ratio is in

fluctuating trend over the study period.The average net profit margin of SCBNL
is 41.49% and standard deviation and the coefficient of variations are
3.86% and 9.30 percent respectively.
4.6.2 Return on Total Assets Ratio

Return on total assets ratio shows the ratio between NP and TA of the bank. TA
includes fixed assets, cash balance, loan and bill purchase, etc. TA can be
obtaining from balance sheet of the company. Higher NP to TA ratio shows
thebetter performance of the bank.
Table: 4.16
Return on Total Assets Ratio
(Rs. in
million)
Fiscal Year Net Profit Total Assets Ratio
2011/12 1112.5 43,811 2.54
2012/13 1169.3 41,667 2.81
2013/14 1218.3 45,631 2.67
2014/15 1377.5 53,723 2.56
2015/16 1294.8 65,255 1.98
Mean 2.51
S.D. 0.28
C.V. 11.27%
i)

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Figure: 4.17
Return on Total Assets Ratio
3
2.5
Ratio in % 2
1.5
1
0.5
0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal Year
The above table 4.16 and figure 4.17 express that the ratio of ROA of SCBNL
are 2.54%, 2.81% , 2.67% , 2.56% and 1.98% in the year 2011/12, 2012/13,
2013/14, 2014/15and F/Y2015/16 respectively. Standard deviation and the
coefficient of variations are 0.28% and 11.27 percent respectively.
4.6.3 Return on Equity (ROE)

This ratio measure how prudently the management has employed
shareholder’sfund keeping the interest of shareholders and maximize their
net worth. It is themeasurement of the rate of return available to the bank’s
shareholders.
Table: 4.17
Return on Equity Ratio
(Rs. in million)
Fiscal Year Net Profit Total Equity Ratio
2011/12 1112.5 3677 30.26
2012/13 1169.3 4122 28.37
2013/14 1218.3 4617 26.39
2014/15 1377.5 5976 23.05
2015/16 1294.8 5088.1 25.45
Mean 26.70
S.D. 2.47
C.V. 9.24%
i)

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Figure: 4.18
Return on Equity
35
30
25
Ratio in %
20
15
10
0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal Year
The above table 4.17 and figure 4.18 point out that the ratio of ROE of SCBNL
are 30.26%, 28.37% , 26.39%, 23.05% and 25.45% in the year 2011/12, 2012/13,
2013/14, 2014/15and F/Y2015/16 respectively. The average return on equity of
SCBNL is 26.70% and standard deviation and the coefficient of variations
are 2.47 and 9.24 percent respectively.
4.6.4 Operating Efficiency Ratio

This ratio shows the relation between operating income and operating
expenses. Lower ratio is shows the better performanceof the company.
Operating incomeincludes interest income and other operating income and
operating expensesincludes interest expenses, personal expenses and
administrative expenses.

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Table: 4.18
Operating Efficiency Ratio
(Rs. in million)
Fiscal Year Operating Operating Income Ratio
Expenses
2011/12 305.22 430.3 70.93
2012/13 349.36 507.7 68.81
2013/14 382.48 559.0 68.42
2014/15 368.03 638.3 57.66
2015/16 406.11 718.4 56.53
Mean 64.47
S.D. 6.09
C.V. 9.45%
i)
Figure: 4.19
Operating Efficiency Ratio
80
70
60
50
Ratio in %
40
30
20
10
0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal Year
The above table 4.18 and figure 4.19 provide that the operating efficiency ratio
of SCBNL are 70.93%, 68.81%, 68.42% , 57.66% and 56.53% in the year

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2011/12, 2012/13, 2013/14, 2014/15and F/Y2015/16 respectively. The average

Operating efficiency of SCBNL is 64.47% and standard deviation and the
coefficient of variations are 6.09 and 9.45 percent respectively.
4.7 Correlation Analysis

To find out the correlation between two continuous variables, Karl Pearson’s
co-efficient of correlation (r) is used. One of the very convenient and useful
way ofinterpreting the value of coefficient of correlation (r) between the two
variables iscoefficient of determination, which is denoted by r². It explains the
total variationin dependent variable is explained by independent variable.The
significance of coefficient of correlation (r) is tested with the help of ‘t’ test.If
calculated ‘t’ is less than or equal to tabulated value of ‘t’ it falls in the
acceptedregion and null hypothesis is accepted or ‘r’ is not significant, if
calculated ‘t’ isgreater than tabulated ‘t’ null hypothesis is rejected or ‘r’ is
significant ofcorrelation in the population.
4.7.1 Correlation between Total Cost & Profit

Coefficient of correlation measures the degree of relationship between
twovariables, Total Cost (TC) & Profit (P). TC is independent variable (X1)
and P is dependent variable (X2). The purpose of computing is to find out the
relationshipbetween TC and P is going to same direction or opposite direction.
Table: 4.19
Relationship between Total Cost & Net Profit
Factor Value
Correlation (r) -0.6860
Coefficient of Determination (r2) 0.4706
Calculated t – value -1.63
Tabulated t – value 2.201
Remarks Insignificant
(Source: Appendix-ii)

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The above table4.19 explains the relationship between total cost and net profit
duringthe period of study. The SCBNL coefficient of correlation (r)
between total cost and net profit is -0.6860. This figure shows the
negative association between total cost andnet profit. It means total cost and
net profit both move towards inverse direction. Thecoefficient of determination
(r2) is 0.4706. It shows that 47.06% of the variation inthe dependent variable
(i.e. net profit) is explained by the independent variable (i.e. total cost). The
calculated value of ‘t’ is less than the tabulated value of ‘t’ (i.e. -1.63 <
2.201) therefore true value of ‘r’ is insignificant. It reveals that there
isinsignificant relationship between the total cost and net profit.
4.7.2 Correlation between Income & Profit
Coefficient of correlation measures the degree of relationship between
twovariables, Income& Profit. Incomeis independent variable (x) and
Profit is dependent variable (y). The purpose of computing is to find out the
relationshipbetween Income and Profit is going to same direction or opposite
direction.
Table: 4.20
Relationship between Income & Net Profit
Factor Value
Correlation -0.3928
Coefficient of Determination 0.1543
Calculated t – value -0.8045
Tabulated t – value 2.201
Remarks Insignificant
(Source: Appendix- iii)
The above table 4.20 presents that the coefficient of correlation (r) between
operating income and net profit is -0.3928. This figure shows the negative
association between income andnet profit. It means total cost and net profit
both move towards inverse direction. Thecoefficient of determination (r2) is
0.1543. It shows that 15.43% of the variation inthe dependent variable (i.e. net
profit) is explained by the independent variable (i.e. income). The calculated

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value of ‘t’ is less than the tabulated value of ‘t’ (i.e. -0.8045 < 2.201)
therefore true value of ‘r’ is insignificant. It reveals that there
isinsignificant relationship between the income and net profit.
4.8 Trend Analysis

Under this topic, trend analysis of Income and Net Profit of SCBNL is studied
duringthe period. The objective of this topic is to forecast the Income and Net
Profit forthe next five years.The projections are based on the these
assumptions; The bank will run in the present style, Nepal Rastra Bank and the
Government of Nepal will not make any amendments in the guidelines for the
operation of commercial banks and other all the things also remain constant.
4.8.1 Trend Analysis of Income

Under this topic, an effort has been made to calculate the trend value of income
of SCBNL under five years study period and project the trend for next five
years. Thefollowing table describes the trend values of income of SCBNL for
five years.
Table: 4.21
Trend Value of Income
(Rs. in million)
a b 2016/17 2017/18 2018/19 2019/20 2020/21
2981.6 (36.14) 2873.18 2837.04 2800.9 2764.76 2728.62
(Source: Appendix-iv)

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Figure: 4.20
Trend Line of Income
2900
Rs. in million 2850
2800
2750
2700
2650
2016/17 2017/18 2018/19 2019/20 2020/21
Fiscal Year
The above table 4.21 and figure 4.20 reveal that the trend of income which
shows that the bank has inconsistent income throughout the study period.
Since, the calculated value of ‘b’ is positive, it means that income is decreasing
with time. If other things remaining the same, SCBNL in the year
2020/21, income is Rs. 2728.62 million and it will decrease by Rs. 36.14
million in every year.
4.8.2 Trend Analysis of Net Profit

Net profit is the major objectives of any business. It attracts to invest more in
the industry. I encourages entrepreneur to introduce new technology, new
product. It also shows the competence of management to operate in the given
business environment. It also shows the health of the firm or company. Trend
analysis is conducted to predict future net profit.
Under this topic, an effort has been made to calculate the trend value of net
profitof SCBNL under five years study period and project the trend for next
five years. Thefollowing table describes the trend values of net profit of
SCBNL for five years.

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Table: 4.22
Trend Value of Net Profit
(Rs. in million)
a b 2016/17 2017/18 2018/19 2019/20 2020/21
1234.48 57.28 1406.32 1463.6 1520.88 1578.16 1635.44
(Source: Appendix- v)
Figure: 4.21
Trend Line of Net Profit
1700
1650
1600
1550
Rs. in million
1500
1450
1400
1350
1300
1250
2016/17 2017/18 2018/19 2019/20 2020/21
Fiscal Year
The above table 4.22 and figure 4.21 indicatesthat the trend of Net profit
which shows that the both banks have inconsistent net profit throughout the
study period. Since, the calculated value of ‘b’ is positive, it means that the
bank net profit is increasing with time. If other things remaining the
same, the trend of SCBNL in the year 2020/21 net profit is Rs. 1635.44
million and it will increase by Rs. 57.28 million every year.
4.8.3 Trend Analysis of Total Cost

There are three types of costs from their nature of variability. They are:
variable costs, fixed cost and semi variable cost.

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Under this topic, an effort has been made to calculate the trend value of total
cost of SCBNL under five years study period and project the trend for next
five years. Thefollowing table describes the trend values of total cost of
SCBNL for five years.
Table: 4.23
Trend Value of Total Cost
(Rs. in million)
a b 2016/17 2017/18 2018/19 2019/20 2020/21
1566.34 (51.84) 1410.82 1358.98 1307.14 1255.30 1203.46
(Source: Appendix vi)
Figure: 4.22
Trend Line of Total Cost
1450
1400
1350
Rs. in million
1300
1250
1200
1150
1100
1050
2016/17 2017/18 2018/19 2019/20 2020/21
Fiscal Year
The above table 4.23 and figure 4.22 explain that the trend of total cost
which shows that the bank has inconsistent total cost throughout the study
period. Since, the calculated value of ‘b’ is positive, it means that total cost is
decreasing with time. If other things remaining the same, SCBNL in the
year 2020/21, total cost is Rs. 1566.34 million and it will decrease by Rs.
51.84 million in every year.

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4.9 Major Findings of the Study

• The total income from interest Rs. 2,718 in F/Y 2011/12, Rs. 2,807 in
F/Y 2012/13, Rs. 2,535 in F/Y 2013/14, Rs. 2584 in F/Y 2014/15 and
Rs. 2575 millions in F/Y2015/16. It means the income from interest earn
is in fluctuating trend. It can be defined also in percentage as
interest income from loan & overdraft covered out of total interest
income are 71 %, 78.84 %, 89.07%, 88.27% and 88.97% in F/Y
2011/12, F/Y 2012/13, F/Y 2013/14, F/Y 2014/15 and F/Y2015/16
respectively.
• The total income from commission and discount are Rs.321.8,
Rs.267.8, Rs.294.9, Rs.383.60 and Rs.363.7 millions in F/Y 2011/12,
F/Y 2012/13, F/Y 2013/14, F/Y 2014/15 and F/Y2015/16 respectively.
It has fluctuating trend during the five years study period.
• The total income from operating income are 36.8, 38.4, 42.7, 44.2and
40.6 million in F/Y 2011/12, F/Y 2012/13, F/Y 2013/14, 2014/15 and
F/Y2015/16 respectively. It has increasing trend during the five years
study period.
• The exchange fluctuation gain/loss is in increasing trend throughout the
study period. They are 387.1, 468.6, 515.1, 542.2 and 613.9 million in
F/Y 2011/12, F/Y 2012/13, F/Y 2013/14, 2014/15 and F/Y2015/16
respectively.
• The total interest expenses are in fluctuating trend. In the F/Y 2011/12,
it is Rs. 1007.2, in F/Y 2012/13, it increases to Rs. 1007.2. After that it
decreases to Rs.611.4 in the F/Y 2013/14 and in F/Y 2014/15 it is Rs.
576.3. Then it slowly increases in F/Y2015/16 i.e. Rs. 661.1 million.
Interest expenses play vital role in profit hence it need proper planning
to manage profit each year.
• The staff expenses are in increasing trend of SCBNL. The total interest
expenses are 365.9, 386.8, 421.6, 482.10 and 505.7 million in F/Y
2011/12, F/Y 2012/13, F/Y 2013/14, 2014/15 and

lOMoARcPSD|35433157
F/Y2015/16respectively. It shows how much amount spending on

employee salary, allowance, PF, training, etc.
• Operating expenses is in increasing trend except the year 2014/15. The
expenses are Rs. 305.22, 349.36, 382.48, 368.03 and 406.11 million
for the fiscal year 2011/12, 2012/13, 2013/14, 2014/15 and F/Y2015/16
respectively.
• The income statement of the SCBNL shows that the all variables of
income statement like operating income, variable cost, fixed cost,
operating profit, net profit are in increasing trend. The net profit of the
bank are Rs. 1112.5, 1169.5, 1218.3, 1377.5 and 1294.8 million for the
fiscal year 2011/12, 2012/13, 2013/14, 2014/15 and 2015/16
respectively. Similarly, the operating profit of the bank are also
increasing trend they are Rs.1359.4, 1395.7, 1415.3, 1540.7 and
1368.4 million for the year 2011/12, 2012/13, 2013/14, 2014/15 and
2015/16 respectively.
• The Income, VC and CM of five years study period of Standard Charted
Bank Ltd. CM variables is increasing trend except the final year and
income and VC is fluctuating trend except in year 2013/14. It shows that
the CM of the F/Y 2011/12, F/Y 2012/13, F/Y 2013/14, F/Y 2014/15
and F/Y2015/16 are Rs.1892.3, 1969.5, 2031.9, 2196.4 and 2116.8
million respectively.
• CM ratio or PV ratio is in increasing trend except the final year. The
highest P/V ratio is 74.01% in F/Y 2014/15 and lowest is 62.38% in F/Y
2011/12.
• SCBNL’s income revenue is higher than BEP income in every year over
the study period. So, it indicates that CVP position of SCBNL is
very good. It means SCBNL is earning profit in each fiscal year over the
study period.
• The margins of safety are in fluctuating trend. They are Rs. 2179.1,
2224.3, 1971.4, 2081.7 and 1898.1 million for the year 2011/12,
2012/13, 2013/14, 2014/15and F/Y2015/16 respectively.

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• The BE ratios are in fluctuating trend throughout the study period.

The highest ratio is 35.40% in the F/Y 2015/16 and lowest ratio is
28.16% in F/Y 2011/12. Similarly, the margins of safety ratios are in
fluctuating trend. The highest ratio is 71.84% in the F/Y 2011/12 and
lowest ratio is 64.60% in F/Y 2015/16. However, the trend of MOS ratio
is highest than BE ratio over the study period.
• The net profit margin ratio of SCBNL are 36.68%, 37.25%, 43.04%,
46.42% and 44.07% in the year 2011/12, 2012/132013/14, 2014/15and
F/Y2015/16 respectively. This ratio is in fluctuating trend over the study
period. The average net profit margin of SCBNL is 41.49% and standard
deviation and the coefficient of variations are 3.86% and 9.30
percent respectively.
• The ratio of ROA of SCBNL are 2.54%, 2.81% , 2.67% , 2.56% and
1.98% in the year 2011/12, 2012/13, 2013/14, 2014/15and F/Y2015/16
respectively. Standard deviation and the coefficient of variations are
0.28% and 11.27 percent respectively.
• The ratio of ROE of SCBNL are 30.26%, 28.37% , 26.39%, 23.05% and
25.45% in the year 2011/12, 2012/13, 2013/14, 2014/15and F/Y2015/16
respectively. The average return on equity of SCBNL is 26.70% and
standard deviation and the coefficient of variations are 2.47 and
9.24 percent respectively.
• The operating efficiency ratio of SCBNL are 70.93%, 68.81%, 68.42% ,
57.66% and 56.53% in the year 2011/12, 2012/13, 2013/14, 2014/15and
F/Y2015/16 respectively. The average Operating efficiency of SCBNL is
64.47% and standard deviation and the coefficient of variations are
6.09 and 9.45 percent respectively.
• The relationship between total cost and net profit during the period of
study. The SCBNL coefficient of correlation (r) between total cost and
net profit is negative i.e. -0.6860. The coefficient of determination (r2)
is 0.4706. It shows that 47.06% of the variation in the dependent
variable (i.e. net profit) is explained by the independent variable (i.e.

lOMoARcPSD|35433157
total cost). The calculated value of ‘t’ is less than the tabulated
value of ‘t’ (i.e. -1.63 < 2.201) therefore true value of ‘r’ is
insignificant. It reveals that there is insignificant relationship between
the total cost and net profit.
• The coefficient of correlation (r) between operating income and net
profit is negative i.e. -0.3928. The coefficient of determination (r2) is
0.1543. It shows that 15.43% of the variation in the dependent variable
(i.e. net profit) is explained by the independent variable (i.e. income).
The calculated value of ‘t’ is less than the tabulated value of ‘t’
(i.e. -0.8045 < 2.201) therefore true value of ‘r’ is insignificant. It
reveals that there is insignificant relationship between the income and
net profit.
• The trend of income which shows that the bank has inconsistent net
profit throughout the study period. Since, the calculated value of ‘b’ is
positive, it means that income is decreasing with time. If other things
remaining the same, SCBNL in the year 2020/21, income is Rs.
2728.62 million and it will decrease by Rs. 36.14 million in every year.
• The trend of Net profit which shows that the both banks have
inconsistent net profit throughout the study period. Since, the
calculated value of ‘b’ is positive, it means that the bank net profit is
increasing with time. If other things remaining the same, the trend
of SCBNL in the year 2020/21 net profit is Rs. 1635.44 million and it
will increase by Rs. 57.28 million every year.

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CHAPTER - V
SUMMARY, CONCLUSION& RECOMMENDATIONS
This is the final chapter of this thesis, which has been divided into
summary,conclusions and recommendations. In this chapter, we examine the
processed datato come into new concluding upon the profit planning of
SCBNL. It alsoaims to give forth some suggestion that must be helpful for
further enhancement ofthe operation of SCBNL.
5.1 Summary
The economic development of a country depends upon the development of
commerce and industry. And, there is no any doubt; banking promotes the
development of commerce because banking itself is the part of commerce. The
process of economic development depends upon various factors, however
economists are now convinced that capital formation and its proper utilization
plays a paramount role for rapid economic development.
Every business organization set up with certain objective of providing services

topeople and earns profit as income whether that is productive or non-
productive.But it is not a joke to fulfill that objective easily in this
competitive world ofbusiness. As globalization take place it became tougher
to sustain in market. So,they not only just try and see the result also do
hard work and provide manyfacilities to secure from loss. Hence they
need to think about future course ofaction in such a way so that they can
accomplish their business objectives. In orderto make profit it is necessary to
check business capacity, activities, utilization ofresources and if there is any
part to reduce cast because little reduction in expensescan make profit in
income. Hence, profit planning tools helps to assist in analyzingthe situation.
Therefore, proper planning & controlling is important to survive &lead the
company successfully. Organization cannot achieve its goal withoutproper

lOMoARcPSD|35433157
planning and implementation. People invest huge amount of money in

thebusiness to earn profit
PPC means the development of objectives, which motivates the

organization toachieve the objectives effectively and efficiently. It is one of
the most importantmechanisms for planning and controlling business
operations. The effectiveoperation of a business concern resulting into the
excess of income over theexpenditure fully depends upon as to what extent
the management follows properplanning, effective coordination and dynamic
control. There are 29 commercial banks have been operating in Nepal
which areconsidered to be the population of the study and out of them SCBNL
hasbeen taken as a sample of thestudy and the collected data have been
analyzed by using various financialtools and statistical tools like ratio analysis,
correlation coefficient,regression equation etc.
The main objective of the present research is to examine the profit planning of
SCBNL. So, this study is undertaken to evaluate PPCanalysis of the
commercial bank. As per the nature of the study, the secondary data havebeen
used. This study covers 5 fiscal years data from FY 2011/12 to 2015/16.
Thisstudy is divided into five chapters, which consists (1) Introduction (2)
Conceptualframework and Review of literature, (3) ResearchandMethodology
(4) Presentation and Analysis of Data and (5) Summary, Conclusion and
Recommendations.
5.2 Conclusion
Management can effectively achieve organizational objectives through
theefficient use of scarce available resources in a changing environment of
business.Future is uncertain which creates risk and only the good management
can reduceit. Profitplanning is management technique and it is a written plan in
all aspect of businessoperation for definite future period. Profit planning is

lOMoARcPSD|35433157
usefulness and effectiveness for every commercial bank. Infact, profit planning
has become associated with profit.
From the above analysis it is found that the profitability ratios, are strong
profitable of SCBNL. It also found that high contribution margin and low fixed
cost of SCBNL. Staff expenses has played the key role to increase the
administrative fixed cost. In addition, SCBNL has been successful in
mobilizing their total assets on loans andadvances for the purpose of income
generation. The bank is successful to mobilize its total assets on purchase
of shares &debentures of other companies to generate incomesAll the level of
management is not involved in profit planning & decisionmaking.MOS is very
higher than BEP income. It means well performance of SCBNL.Income from
interest is in increasing trend.Sundry income is also increasing each
year.Interest expenses are also increasing each year.Net profit increases every
year i.e., it is profit making bank.
5.3 Recommendations
Recommendations are the final output of the whole study. It helps to convey
positive information and proper way of improvement to concern bank
SCBNLas well as other interest researcher in upcoming days. Various analyses
have been done until this stage. On the basis of analysis and finding of the
study, following suggestion and recommendation can be advanced to overcome
weakness, inefficiency and satisfactory improvement policy of SCBNL.
• Standard Chartered Bank Nepal Ltd. should reduce its service charge.
• Cost should be segregated into fixed and variable.
• BEP analysis should be done while planning.
• SCBNL should consider the cost – volume – profit relationship while
fixing the price of its products.

lOMoARcPSD|35433157
• The bank should develop the budgeting practice, which is one of the
tools of profit planning. To improve the financial condition of the
industry, it should develop annual (tactical) and long term profit plan.
• SCBNL should increases interest rate providing in deposits to lure
people.
• Trend analysis show the operating income is decreasing trend. So, it
is better to make efficient and professional in cost bearing,
monitoring and proper risk management and net profit amount of
SCBNL will increase in future so bank has to train its employee.
• Further studies can be conducted by increasing sample size, no. of
observations econometric and other various tools and techniques.

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BIBLIOGRAPHY
Books:
Agrawal, G. R. (2000). Project Management in Nepal.Kathmandu: M.K.
Publishers and Distributors Pvt. Ltd.
Besley, J.B. (1987). Banking Management. New Delhi: Sujeet
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David, S. R. (1964). Statistical for Management. New Delhi: Prentice Hall
Inc. N.J.
Decoster, D. T. & Schafer, E. F. (1985).Management Accounting. New
York: John Wiley and Sons Limited.
Dongol, R.M. (1999). Accounting for Business.Kathmandu:
TalejuPustakBitarak.
Drucker, P.F. (1989). The Practice of Management. New York: Harper
and Raw Publisher.
Frank, K. Reily, (1999). Investment management. Tokyo: The Dryden
Press, CBS Publishing Ltd.
Fremgen, J. M. (1976). Accounting for Managerial Analysis. New
York: Illinos Publications.
Gitman, L.J. (1990). Fundamentals of Investing. New Delhi: Harper and
Row Publishing Publishers.
Gupta, S.P. (1992). Management Accounting. Kathmandu: Agra
SahityaBhandar.
Horngreen, C.T. (1992). Cost Accounting and Management Emphasis.
New Delhi: Prentice Hall of India Pvt. Ltd.
Khan, M. Y. and Jain, P.K. (1993).Management Accounting.New Delhi:
Tata MC Grew Hill Publishing Co.
Kothari, C.R. (1984). Quantitative Techniques. New Delhi: Vikash
Publishing House.
Lynch, R. M. and William, R. W. (1989). Accounting for Management.
New Delhi: Tata MC Grew Hill Publishing Co.

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Pandey, I.M (1991). Finacial Management. New Delhi: Vikash

Publishing House.
Pant, P.R. and Wolf, H. K. (1999). Social Science Research and Thesis
Writing. Kathmandu: Buddha Academic Enterprises Pvt. Ltd.
Shrestha, M. K. (1994). Financial Management, Theory and Practice.
Kathmandu: Curriculum Development Center, T.U.
Terry, G.R. (1968). Principle of Management. New Delhi: Wiley
Publishing Co. Ltd.
Van Horne and James, C. (1998).Financial Management and Policy. New
Delhi: Prentice Hall Pvt. Ltd.
Welsch, G.A., Hilton, R.W. and Gordon, P.N. (2001).Budgeting Profit
Planning and Control. New Delhi: Prentice Hall of India Pvt. Ltd.
Weston, J.F. & Brigham, E.F. (1980).Managerial Finance. New York:
The Dryden Press, Hinsdale Illinois.
Journal and Articles:

Adesina, O. (2016). Accounting Information and Profit Planning.
London: ‘European Journal of Accounting Auditing and Finance
Research’, Vol. (3), 4:86.
Harris, P. (2015). Profit Planning for Hospitality and
Tourism.‘Scandinavian Journal of Hospitality and Tourism’, New
Delhi.Vol. 21 (3).
Karki, M. (2011).Profit Planning of BOK Bank.‘PUC Journal of
Management, Kathmandu.
Khadka, K. (2007). A profit Planning Commercial Banks BOK and
NIBL.‘Nepal Bank Patrika’, P.13.
Robbins, S. and Edward, F. (2015).ProfitPlanning and the Finance
Function.‘The Journal of Finance’, New York.
Shakya, A.S. (2012). A comparative Study on Profit Planning in the
context of particularly commercial banks.‘Nepal Bank Patrika’,
NBL, Vol, 25.

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Shrestha, R. (2008). Current Profit Planning Premises adopted and its

effectiveness in Commercial Bank.‘Nepal Rastra Bank Samachar’,
Kathmandu.
Thesis:
Acharya, R. K. (2014). Analysis of Profit Planning Procedure of
commercial Ban (With Reference to Nepal SBI Bank Ltd.). An
Unpublished Master's Degree Thesis, Summitted to Office of the
Dean, FOM, T.U.
Bhattrai, B. P. (2013). The sales budget of Manufacturing Public
Enterprises.An Unpublished Master's Degree Thesis, Summitted to
Office of the Dean, FOM, T.U.
Maharjan, L. (2011).Profit Planning in a Commercial Bank (With
Reference to Standard Chartered Bank Nepal Ltd.)”. An
Dean, FOM, T.U.
Pandey, I. M. (2012).A Comparative study on Profit Planning of
Commercial Banks (With Reference to BOK and NBL). An
Dean, FOM, T.U.
Pandey, R. (2015).Profit Planning of Nabil Bank Limited.An Unpublished
Master's Degree Thesis, Summitted to Office of the Dean, FOM,
T.U.
Websites:
www.nrb.org.np
www.Standardchartered.com/np
www.wikipedia.com

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Appendix – I
Calculation of Mean, Standard Deviation and Coefficient of Variation of
SCBNL
(In
%)
Fiscal Net profit ROA ROE Operating
Year Margin Ratio Efficiency Ratio
X – X – X – X –
(X -X) 2 (X -X) 2 (X -X) 2 (X -X) 2
2011/12 36.68 23.1361 2.54 0.0009 30.26 12.6736 70.93 41.7316
2012/13 37.25 17.9776 2.81 0.09 28.37 2.7889 68.81 18.8356
2013/14 43.04 2.4025 2.67 0.0256 26.39 0.0961 68.42 15.6025
2014/15 46.42 24.3049 2.56 0.0025 23.05 13.3225 57.66 46.3761
2015/16 44.07 6.6564 1.98 0.2809 25.45 1.5625 56.53 63.0436
Total 207.46 74.4775 1256 0.3999 133.52 30.4436 322.35 185.5894
Mean 41.49 2.51 26.70 64.47
S.D. 3.86 0.28 2.47 6.09
C.V. 9.30% 11.27% 9.24% 9.45%
–
– Σx Σ(X -X) 2 S. D.
X= , S.D. = and C.V. =
n n –
X

lOMoARcPSD|35433157
Appendix – II
Calculation for Mean Value, & Correlation between Total Cost & Net
Profit of SCBNL
(Rs. In
million)
Year TC (X1) NP (X2) x1 = X 1 x2 = X2 x1. x2 x1 2 x22
– –
- X1 - X2
2011/12 1674 1112.5 107.66 -121.98 -13132.368 11590.67 14879.12
2012/13 1743 1169.3 176.66 -65.18 -11514.69 31208.76 4248.43
2013/14 1415 1218.3 -151.34 -16.18 2448.6812 22903.79 261.79
2014/15 1,426.8 1377.5 -139.54 143.02 -19957.010 19471.41 20454.72
2015/16 1572.9 1294.8 6.56 60.32 395.6992 43.03 3638.50
ΣX1 = ΣX2 = Σ x1.x2 = - Σx12 = Σx22 =
Sum(Σ) 7831.70 6172.4 41759.696 85217.672 43482.568
– ΣX1 7831.70
Mean for TC (X 1 ) = = = 1566.34
n 5
– ΣX2 6172.4
Mean for NP (X 2 ) = = = 1234.48
n 5
Σ x1.x2 -41759.696 -41759.696
r= = = = -0.6860
Σx12Σx22 85217.672× 43482.568 60872.68
r2 = (-0.6860)2 = 0.4706 = 47.06%
r
t= × n-2
1 - r2
-0.6860
= × 5-2
1 - (-0.6860)2
-0.6860
= × 1.7321
0.7276
= -0.9428× 1.7321
= -1.63

lOMoARcPSD|35433157
Appendix – III
Calculation for Mean Value, & Correlation between Operating income &
Net Profit of SCBNL
(Rs. In
million)
Year Operating Net x1 = X1 x2 = X2 x1. x2 x1 2 x2 2
income profit – –
- X1 - X2
(X1) (X2)
2011/12 3033.4 1112.5 51.8 -121.98 -6318.56 2683.24 14879.12
2012/13 3138.7 1169.3 157.1 -65.18 -10239.8 24680.41 4248.43
2013/14 2830.3 1218.3 -151.3 -16.18 2448.03 22891.69 261.79
2014/15 2967.50 1377.5 -14.1 143.02 -2016.58 198.81 20454.72
2015/16 2938.3 1294.8 -43.3 60.32 -2611.86 1874.89 3638.50
ΣX1 = ΣX2 = Σx1.x2 = - Σx12 = Σx22 =
Sum(Σ)
14908.2 6172.4 18738.7 52329.04 43482.568
– ΣX1 14908.2
Mean for Operating income (X 1 ) = = = 2981.6
n 5
– ΣX2 6172.4
Mean for NP (X 2 ) = = = 1234.48
n 5
Σ x1.x2 -18738.7 -18738.7
r= = = = -0.3928
Σx12Σx22 52329.04× 43482.568 47701.16
r2 = (0.3928)2 = 0.1543 = 15.43%
r
t= × n-2
1 - r2
-0.3928
= × 5-2
1 - (-0.3928)2
-0.3928
= × 1.7321
0.8457
= -0.4641 × 1.7321
= -0.8045
APPENDIX - IV

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Least Square of Linear Trend of Total operating Income

(Rs. In
million)
Fiscal SCBNL
Year (t) Operating
income X = t-2013/14 X2 XY
(Y)
2011/12 3033.4 -2 4 -6066.8
2012/13 3138.7 -1 1 -3138.7
2013/14 2830.3 0 0 0
2014/15 2967.50 1 1 2967.5
2015/16 2938.3 2 4 5876.6
Σy = 0 10 Σxy = −361.4
Sum(Σ)
14908.2
For SCBNL
Σ y 14908.2 Σxy -361.4
Since, Σx = 0, a = = = 2981.6 &b = = = -Rs. 36.14
n 5 Σx2 10
Substituting these values in the following formula, y = a + bx
Year SCBNL
2016/17 2981.6 + (-36.14× 3) = Rs. 2873.18
2017/18 2981.6 + (-36.14× 4) = Rs. 2837.04
2018/19 2981.6 + (-36.14× 5) = Rs. 2800.9
2019/20 2981.6 + (-36.14× 6) = Rs. 2764.76
2020/21 2981.6 + (-36.14× 7) = Rs. 2728.62

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APPENDIX - V
Least Square of Linear Trend of Net Profit
(Rs. In million)
Fiscal SCBNL
Year (t) Net Profit (Y)
X = t-2013/14 X2 XY
2011/12 1112.5 -2 4 -2225
2012/13 1169.3 -1 1 -1169.3

2013/14 1218.3 0 0 0
2014/15 1377.5 1 1 1377.5
2015/16 1294.8 2 4 2589.6
Sum(Σ) Σy = 0 10 Σxy =572.8
For SCBNL
Σ y 6172.4 Σxy 572.80
Since, Σx = 0, a = = = 1234.48&b = = = Rs. 57.28
n 5 Σx2 10
Year SCBNL
2016/17 1234.48 + 57.28 × 3 = Rs. 1406.32
2017/18 1234.48 + 57.28 × 4 = Rs. 1463.6
2018/19 1234.48 + 57.28 × 5 = Rs. 1520.88
2019/20 1234.48 + 57.28 × 6 = Rs. 1578.16
2020/21 1234.48 + 57.28 × 7 = Rs. 1635.44

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APPENDIX - VI
Least Square of Linear Trend of Total Cost
(Rs. In million)
Fiscal SCBNL
Year (t) Total Cost (Y)
X = t-2013/14 X2 XY
2011/12 1674 -2 4 -3348
2012/13 1743 -1 1 -1743

2013/14 1415 0 0 0
2014/15 1,426.8 1 1 1426.8
2015/16 1572.9 2 4 3145.8
Sum(Σ) ΣX1 = 7831.70 0 10 Σxy =−518.4
For SCBNL
Σ y 7831.70 Σxy -518.4
Since, Σx = 0, a = = = 1566.34&b = = = Rs. -51.84
n 5 Σx2 10
Year SCBNL
2016/17 1566.34+ (-51.84× 3) = Rs. 1410.82
2017/18 1566.34+ (-51.84× 4) = Rs. 1358.98
2018/19 1566.34+ (-51.84× 5) = Rs. 1307.14
2019/20 1566.34+ (-51.84× 6) = Rs. 1255.30
2020/21 1566.34+ (-51.84× 7) = Rs. 1203.46

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I Hereby declare that this thesis work entitled A STUDY ON PROFIT

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This entitled thesisA STUDY ON PROFIT PLANNING OF COMMERCIAL

I have great satisfaction and pleasure to express my appreciation and sincerity to my

I would also like to express my thankfulness to my friends, my family members as

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CHAPTER – I: INTRODUCTION 1-9

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2.1.13 Profit Planning and Control Process 20

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4.2.3 Operating Expenses 56

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Table No. Page

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Figure No. Page

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1.1 Background of the Study

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financial institution such as:- commercial bank, development bank, corporative

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Investments in productive sectors increase the economic activities. The

Every company or institution is established based on the definite goals and

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• The development and application of broad and long range objectives of

1.2 Brief Profile of Standard Chartered Bank Nepal Limited

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Corporate Social Responsibility is an integral part of Standard Charterer’s

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1.3 Statement of the Problems