WORKING CAPITAL MANAGEMENT OF

MACHHAPUCHCHHRE BANK LIMITED

Submitted By :-
Anil Yadav
Thakur Ram Multiple Campus
T.U. Regd. No. 7-1-15-342-97
Roll No: 28/061

A Thesis Submitted to
Office of Dean
Faculty of Management
Tribhuvan University

In partial fulfillment of the Requirement of the Master of

Business Studies (MBS)
TRMC, Birgunj
March,2010
 RECOMMENDATION
This is to certify that the thesis

Submitted by:
Anil Yadav

Entitled
" Working Capital Management of Machhapuchhchre Bank Limited "
has been prepared as approved by this Department in the prescribed format of
faculty of Management. This thesis is forwarded for examination.

-------------------------------------------------
Campus Chief

Date: ....../........./...........
 VIVA-VOCE SHEET
We have conducted the viva-voce examination of the thesis presented by
By
Anil Yadav

Entitled
" Working Capital Management of Machhapuchhchre Bank Limited "
and found the thesis to be the original work of the student written according to
the prescribed format we recommend the thesis to be accepted as partial
fulfillment for Master's Degree in Business Studies (MBS).

VIVA-VOCE COMMITTEE

Chairman, Research Committee ……………………..

Member (Thesis Supervisor) ……………………..

Member (External Expert) ……………………..

Date: ....../........../.......
 DECLARATION
I hereby declare that the work reported in this thesis entitled
'Working Capital Management of Machhapurhhchre Bank Limited'
Submitted to Central Department of Management, Tribhuvan University
is my original work. It is done in the form of partial fulfillment of the
requirement for the Master of Business Studies (MBS) under the
supervision and guidance of lecturer Lalan Dwibedi Thakur Ram
Multiple Campus,Birgunj.
__________________
Anil Yadav
Thakur Ram Multiple Campus
Birgunj.
 ACKNOWLEDGEMENT

Many helpful hands are needed to complete a beautiful work. After

completion of work, immense joy can be experienced. I'm extremely
grateful with all of them we have helped, guided and supervised to
complete this work.
I would like to pay my sincere thanks to Head of Research
Department, Rajeswar Prasad Aacharya and thesis supervisors, Lalan
Dwibedi for incisive and constant guidance.
I would like to express my cordial gratitude my respected
Teachers ,senior friends and collogues for help motivation and inspiration
from the very beginning to the end for providing valuable suggestions.
I extend my deep gratitude to my family members all my friends
for their support and perpetual kinds cooperation.
I am thankful all the staff members of Library for the manifold
helps and providing good environment for this study and thank to the
Branch Manager of MBL for providing me correct data and relevant
information.
Last not least I am responsible for any errors and I apologize for
any of them committed that may have remained in this work.

Anil Yadav
 CONTENTS
Page
Recommendation
Viva-Voce Sheet
Declaration
Acknowledgement
Contents
List of Tables
List of Figures
Abbreviation

CHAPTER ONE: INTRODUCTION 1-13

1.1 General Background 1
1.2 Evaluation of Banking Sector in Nepal 3
1.3 Focus of the Study 6
1.4 Profile of MBL 7
1.4.1 General Introduction 7
1.4.2 General Function of MBL 8
1.4.3 The Main Vision Mission and Objective 9
1.5 Statement of the Problem 10
1.6 Objectives of the Study 11
1.7 Significance of the Study 12
1.8 Limitation of the Study 13
1.9 Organization of the Study 13

CHAPTER TWO: REVIEW OF LITERATURE 15-45

2.1 Conceptual Framework 15
2.2 Concept of Working Capital 17
2.3 Classification of Working Capital 21
2.4 Need of Working Capital 23
2.5 Washing Capital Cycle 26
2.6 Working Capital Policy 27
2.7 Financing of Working Capital 34
2.8 Determinants of Working 37
2.9 Review of Related Thesis 40
2.10 Review of Different Studies 45

CHAPTER THREE: RESEARCH METHODOLOGY 48-53

3.1 Research Design 48
3.2 Sources of Data 49
3.3 Population and Sample 49
3.4 Data Gathering Procedures 49
3.5 Data Processing Procedure 49
3.6 Tools and Techniques of Analysis 50
3.6.1 Financial Tools 50
3.6.2 Statistical Tools 53

CHAPTER FOUR: PRESENTATION AND ANALYSIS OF

DATA 55-83
4.1 Working Capital 55
4.1.1 Components of Current Assets 56
4.1.2 Components of Current Liabilities 58
4.1.3 Working Capital of MBL 60
4.2 Ratio and Trend Analysis 62
4.2.1 Liquidity Ratio 65
4.2.2 Activity or Turnover Ratio 71
4.2.3 Profitability Ratios 74
4.3 Correlation and Regression Analysis 76
4.3.1 Coefficient of Correlation between Investment of
Government Security and Total Deposit 77
 4.3.2 Coefficient of Correlation between Loan and Advance and
Total Deposit 78
4.3.3 Coefficient of Correlation between Cash and Bank Balance
and Current Liabilities 79
4.3.4 Coefficient of Correlation Between Loan and Advances and
Net Profit 80
4.3.5 Coefficient of Correlation between Net Working Capital and
Net Profit 81
4.3.6 Regression of Net Working Capital and Net Profit 82
4.4 Major Findings of the Study 83

CHAPTER FIVE: SUMMARY CONCLUSION AND

RECOMMENDATION 86-89
5.1 Summary 86
5.2 Conclusion 88
5.3 Recommendations 89
BIBLIOGRAPHY 91-93
APPENDIXES
 LIST OF TABLES
Page
Table 4.1: Components of Current Assets of MBL 56
Table 4.2 : Percentage Composition of Current Assets of MBL 57
Table 4.3: Components of Current Liabilities of MBL 59
Table 4.4: Percentage Composition of Current Liabilities of MBL 59
Table 4.5: Working Capital of MBL 61
Table 4.6: Trend Analysis of Current Assets (CA) and Current
Liabilities (CL) and Net Working 63
Table 4.7: Current Ratio of MBL 66
Table 4.8: Quick Ratio (Times) 68
Table 4.9: Current Assets of Fixed Assets 69
Table 4.10: Cash and Bank Balance to Deposit Ratio 70
Table 4.11: Loan and Advances to Total Deposit Ratio of MBL 72
Table 4.12: Interest Earned to Total Assets Ratio (%) 73
Table 4.13: Net Profit to Total Assets Ratio (%) 75
Table 4.14: Net profit to total deposit ratio= Net profit/Total deposit 76
Table 4.15: Coefficient of Correlation between Investment on
Government Securities and Total Deposits 77
Table 4.16: Coefficient of Correlation between Loan and
Advance and Total Deposit 78
Table 4.17: Coefficient of Correlation Between Cash and Bank
Balance and Current Liabilities 80
Table 4.18: Coefficient of Correlation Between Loan and Advance and
Net Profit 81
Table 4.19: Coefficient of Correlation between Net Working Capital
and Net Profit 82
 LIST OF FIGURES
Page
Figure 2.1: Permanent and temporary working capital 22
Figure 2.1: Working Capital Cycle 26
Figure 2.3: Alternative Current Assets Investment Policy 29
Figure 2.4: Aggressive Financing 31
Figure 2.5: Conservative Financing policy 32
Figure 2.6: Matching policy 33
Figure 4.1: Bar diagram of Percentage Composition of MBL Current
Assets 58
Figure 4.2: Percentage Composition of Current Liabilities of MBL 60
Figure 4.3: Working Capital of MBL 62
Figure 4.4: Actual and Trend Line of Current Assets 63
Figure 4.5: Trend Line of Current Liabilities 64
Figure 4.6: Actual and Trend Line of W/C 65
Figure 4.7: Current Ratio of MBL 67
Figure 4.8: Quick Ratio 68
Figure 4.9: Cash and Bank Balance to Deposit Ratio 70
Figure 4.10: Actual and Trend Line of Interest Earned to Total Assets
Ratio 74
 ABBREVIATION
B.S. : Fiscal Year
BTIC : Balatu Textle Industry Limited
CA : Current Assets
CL : Current Liabilities
MBL : Machhapuchchchhre Bank Limited
P.E. : Probable Error
r : Coefficient of Correlation
WC : Working Capital