A PROPOSAL ON ANALYSIS OF CAPITAL STRUCTURE

OF SIDDHARTH BANK LIMITED

Submitted By:
Dipendra Karki
T.U. Regd. No.: 7-2-432-188-2019
Campus Roll No.=1276048
Group: Finance

Submitted To
Madan Bhandari Memorial College
Faculty of Management
Tribhuvan University
Kathmandu, Nepal

In Partial fulfillment of the requirements for the degree of

BACHELOR OF BUSINESS STUDIES (BBS)
Kathmandu, Nepal
March, 2024
1. Introduction
Capital structure refers to the combination of debt, equity, and other financial
instruments that a company employs to finance its operations and investments. It
represents the permanent financing mix used to fund the assets and activities of a
business. Understanding capital structure is essential as it directly impacts a company's
financial performance, risk profile, and value creation.
Debt constitutes funds borrowed by the company, typically through loans, bonds, or
other forms of debt securities. It offers the advantage of leverage, allowing firms to
magnify returns on equity investment.
Equity represents ownership in the company, obtained through the issuance of common
or preferred stock. Equity financing provides funds without the requirement of
repayment, but it dilutes existing shareholders' ownership and may necessitate sharing
profits through dividends.
Siddharth Bank Limited is a leading financial institution established with the slogan
of “Relationship Forever”. that plays a vital role in the banking sector. Understanding
its capital structure is crucial for evaluating its financial health, risk management
practices, and strategic decision-making. This proposal outlines a comprehensive
analysis of Siddharth Bank Limited's capital structure to provide insights into its
funding mix, leverage levels, and overall financial stability.

2. Scope of Study
The scope of the study entails a comprehensive analysis of Siddhartha Bank Limited's
capital structure, encompassing various facets crucial for understanding its financial
framework and strategic positioning. It involves evaluating the composition of the
bank's funding sources, including debt, equity, and other financial instruments. This
analysis will delve into key financial metrics such as the debt-to-equity ratio, leverage
levels, and interest coverage to gauge the bank's risk exposure and financial stability.
Furthermore, the analysis extends to evaluating the cost of capital, incorporating
considerations such as interest rates, market conditions, and regulatory constraints. This
research focuses in analysis of capital structure using various tools of debt-to-equity
ratio. The study aims to assist Siddhartha Bank in making informed decisions to
enhance its capital structure alignment with its long-term objectives and market
dynamics. This study shall include the data from FY 2075/76 to 2079/80.

2|Page
 3. Statement of Problem
The statement of the problem in a research study outlines the specific issues or
challenges that the study aims to address. It identifies the gap in knowledge or
understanding within a particular area of interest and serves as the foundation for the
research objectives.
On the basis of profitability and productivity of commercial banks public have
confidence in their performance. However, the various factor interest rate risk, credit
risk, liquidity risk, Customer Expectations, structure of capital and money market,
financial performance and position of commercial banks. In these circumstances, it is
highly useful to make the study on capital structure of Siddhartha Bank Limited

Thus, the main problem of the study, is to inquire into the capital structure of Siddhartha
Bank Limited.
This study of targeted to find out answers to the following question:
a) What is the current composition of the bank's capital structure?
b) How does the bank balance its use of equity and debt financing?
c) How does Siddhartha Bank's capital structure impact its financial performance
indicators such as return on equity (ROE) and net profit margin?
d) What are the key factors influencing the bank's capital structure decisions?

In this context, the main purpose of the study is analyzing the capital structure of the
Siddhartha bank limited in the terms of debt and equity ratio, Return on equity, profitability.

4. Objective of the study

The objective of this study is to conduct a comprehensive analysis of Siddhartha Bank
Limited's capital structure, aiming to achieve the following objectives:
 To analyze the capital structure of Siddhartha bank limited.
 To show the trend of composition and capital of Siddhartha Bank Limited.
 To identify the Leverage Ratio of Siddhartha Bank Limited i.e. Debt- Equity ratio
(D/E Ratio), Debt-Asset ratio, Debt to total capital ratio, Interest coverage ratio.

3|Page
5. Research Methodology
Research methodology refers to the systematic process or approach used to conduct research,
gather data, analyze information, and draw conclusions in a structured manner.
5.1 Sources of Data Collection
Research method is the process of arriving to the situation of the problem
through planned and systematic dealing with the collection, analysis and
interpretation of fact and figure. Data can be collected from primary and
secondary sources. The research methods include the nature and source of data
its presentation, research and other research techniques.

5.2 Types of Data

Each research project has its own data needs and data sources. Data can be
collected from primary and secondary sources. Data collection is the secondary
task of any types of research. Secondary data are those data that has previously
been gathered and can be accessed by researchers. I have used secondary sources
i.e. book and articles, annual financial reports of Siddhartha Bank Limited,
Official website of Siddhartha Bank Limited and Data services through which
data were collected.

5.3 Methods of Data Analysis

The various data collection from different sources has been complied analyzed
and presented in the form of table of diagram. The obtained data is presented,
tabulated and graphed to analyze and achieve the goal of the study. Statistical
tools like mean standard deviation are also used. The deviation is used to
examine the consistency in the ratios.

6. Chapter Plan
i. Chapter one – Introduction
Chapter one deals with the introduction part. It consists of background of study, profile of
organization, objective of the study, literature review, Research method of data collection
and limitation of the study.

4|Page
ii. Chapter two – Result and analysis
Chapter two is the main part of the study. Within this chapter, we begin by identifying
and discussing the main themes and debates within the literature. It deals with the data
presentation and analysis of share capital, profitability, current liabilities, current assets,
leverage ratio and major findings of the study.

iii. Chapter three – Summary and Conclusion

Chapter three is the last chapter of the study focuses on evaluating and interpreting the
results obtained. In the final chapter, provide a comprehensive summary of the key
findings and insights derived from the research, culminating in a conclusion that
synthesizes the implications and contributions of the study.

7. Limitation of the study

While this study endeavors to provide a comprehensive analysis of Siddhartha Bank
Limited's capital structure, it is not without limitations. Firstly, the accuracy and depth of
the analysis may be constrained by the availability and reliability of data obtained from
the bank's financial reports, potentially leading to inconsistencies or gaps in the findings.

The major limitations of this study are mentioned below:

 The study is focused solely on Siddhartha Bank Limited.
 The research is confined to analyzing data spanning five fiscal years, specifically
from FY 2075/2076 to FY 2079/2080.
 Limited statistical tools used for data analysis may restrict depth of findings;
stakeholders should interpret results cautiously. Most of the data used in this
study are based on secondary sources mainly official website of Siddhartha
Bank Limited.
 The main focus is given to the quantitative aspect rather than qualitative aspect.
 It is only for partial fulfillment of Bachelor of Business Studies (BBS).

I) Tentative Time Frame

The required time duration to complete the proposed study is 1 month.

5|Page
 Dipendra Karki
BBS 4th year
Madan Bhandari Memorial College
Kathmandu, Nepal

6|Page