FINANCIAL ANALYSIS OF NEPAL TELECOM LIMITED

Submitted By:
SABIN SILWAL
T.U. Regd. No.:7-2-39-1122-2019
Campus Roll No. 1548/076

Group: Finance

Submitted To:
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
 DECLARATION

I hereby declared that the project work entitled “Financial Analysis Of Nepal Telecom
Limited” submitted to the Faculty of Management, Tribhuvan University, Kathmandu is
an original piece of work under the supervision of Mr……. of Shanker Dev Campus,
Kathmandu, and is submitted in partial fulfillment of the requirements for the award of the
degree of Bachelor of Business Studies (BBS). This project work report has not been
submitted to any other university or institution for the award of any degree or diploma.

……………………………
Sabin Silwal

March, 2024

ii
 SUPERVISOR’S RECOMMENDATION

The project work report entitled “Financial Analysis of Nepal Telecom Limited”
submitted by Sabin Silwal of Shanker Dev Campus, Kathmandu, is prepared under My
Supervision as per the procedure and format requirement laid by the Faculty of
Management, Tribhuvan University as partial fulfillment of the requirements for the award
of the degree of Bachelor of Business Studies (BBS). I, therefore recommend the project
work report for evaluation.

……………………………
Date:

iii
 ENDORSEMENT

We hereby endorsed that the project work entitled “Financial Analysis of Nepal Telecom
Limited” submitted by Sabin Silwal of Shanker Dev Campus, Kathmandu in partial
fulfillment of the requirements for award of the Bachelor of Business Studies (BBS) for
external evaluation.

……………………. ……………………………..
Management Research Committee Campus Chief/ Principal

Date: Date:

iv
 ACKNOWLEDGEMENT

This study entitled “Financial Analysis Of Nepal Telecom Limited” which has been
prepared for the partial fulfillment of requirement of Bachelor of Business Studies (BBS).
However the study is my original work, it would not be possible to me to complete this
project without the valuable guidance, insightful comments and encouragement of our
subject teacher.

I would like to express my deep gratitude for his unflagging supervision, advice and
direction.

I am also grateful to Telecom for making availability of required data easily. I would also
like to thank to Tribhuvan University and Shanker Dev library and administration staffs for
providing support and reference materials.

Sabin Silwal
BBS 4th Year
Shanker Dev Campus

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 Table of Contents
Title Page………….…………………………………………………………………………..i

Declaration .................................................................................................................. ii

Supervisor’s Recommendation..................................................................................... iii

Endorsement ................................................................................................................ iv

Acknowledgement .......................................................................................................... v

List of Tables…………………………………………………………………...…….vii

List of Figure………………………………………………………………………….ix

Abbreviations………………………………………………………………………….x

CHAPTER I INTRODUCTION ............................................................................... 1

1.1. Background of the Study ..................................................................................... 1

1.2. Profile ................................................................................................................... 2

1.3. Objective ............................................................................................................. 4

1.4. Rational ................................................................................................................ 4

1.5. Review of Literature.......................................................................................... 5

1.5.1. Conceptual Framework ..............................................................................5

1.5.2. Review of Articles ........................................................................................6

1.5.3. Review of Previous Thesis.......................................................................... 7

1.5.4. Research Gap .............................................................................................. 9

1.6. Research methodology ........................................................................................ 9

1.6.1. Research Design......................................................................................... 10

1.6.2. Population and Samples ............................................................................ 10

1.6.3. Nature and source of data ........................................................................... 11

1.6.4. Data Collecting Procedures ...................................................................... 11

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 1.7. Method of Data Analysis Technique .................................................................. 11

1.7.1. Financial analysis Tools ............................................................................ 12

1.7.2. Statistical Analysis .................................................................................... 14

1.8. Limitation of the Study. ..................................................................................... 14

CHAPTER II RESULTS AND ANALYSIS ............................................................ 15

2.1. Data Presentation and Analysis ......................................................................... 15

2.1.1. Liquidity ratio Analysis ..............................................................................

15

2.1.2. Debt Management Ratio ............................................................................ 18

2.1.3. Profitability ratios ..................................................................................... 20

2.1.4. Market value ratio ..................................................................................... 24

2.2. Major finding...................................................................................................... 26

CHAPTER III SUMMARY AND CONCLUSION ................................................ 28

2.1. Summary ............................................................................................................ 28

2.2. Conclusion .......................................................................................................... 29

BIBLIOGRAPHY………………………………………………………………………31

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 LIST OF TABLES

Table No. Page No.

1 Current Ratio …………………………………………………………………………16

2 Quick Ratio……………………………………………………………………….…..17

3 Debt-Asset Ratio………………………………………………………………….......18

4 Debt-Equity Ratio…………………………………………………………………….20

5 Net Profit Margin………………………………………………………………….….21

6 Return on Assets(ROA)………………………………………………………………22

7 Return on Equity (ROE)…………………………………………………….………..24

8 Earnings Per Share………………………………………………………….…………25

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 LIST OF FIGURES

Figure No. Page No.

1 Current Ratio…………………………………………………………….16

2 Quick Ratio………………………………………………………….…..17

3 Debt-Asset Ratio……………………………………………………..….19

4 Debt-Equity Ratio…………………………………………………….…20

5 Net Profit Margin…………………………………………………….….22

6 Return on Assets(ROA)…………………………………………………23

7 Return on Equity (ROE)…………………………………………….…..24

8 Earnings Per Share …………………………………………………….…25

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 ABBREVIATIONS

CA : Current Assets.

CL : Current Liabilities.

CR : Current Ratio.

HCD : Home Country Direct.

IN : Intelligent Network.

IVR : Interactive Voice Response.

NTC : Nepal Telecommunications Corporation.

PCC : Prepaid Calling Card.

ROA : Return on Assets.

ROE : Return on Equity.

VAS : Value Added Services

x
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 1

CHAPTER I

INTRODUCTION

1.1.Background of the Study

The overall development of the nation depends upon the uplifting of the national economy
which in turn depends upon the nature of its infrastructure. One of the basic elements in
achieving self-reliant growth of the economy for sustaining desired level of economic
development is an accelerated ratio infrastructure development. Telecommunication been
identified as one of the three basic infrastructure apart from power and roads, which is
needed for the socio – economic development. Investment in telecom sector has multiplier
effects. The company’s financial situation is diverse and a multifaceted complex
phenomenon; consequently, this diversity is transferred also into the financial analysis
process. The user of the financial analysis results decides which indicators to select and the
priority of utilization of individual parts of the financial analysis according to demand and
intention (Baran et. al, 2011).

In facts the development of telecommunication is not only vital for it based industry but it
has wide effect on entire economy of the country. Realizing the facts, Nepal Government
has also recognized that the provision of world class Telecommunication infrastructures is
the key to rapid economic and social development. For bringing telecommunication as the
major infrastructure of development, government has implemented national communication
policy (1992). At this context, to speed up the process of telecommunication development,
the Telecommunication Act, 1997 was brought into action which has created the
competitive atmosphere in telecom industry which resulted the private sector investment in
the telecommunication industry. As size share to the public and expected to enjoy full
autonomy after its share disbursement to private sector Telemedicine, e-governance, e-
commerce, e-education etc. the government brought the telecommunication policy; 2004 to
address the entire telecommunication sector. And sector of telecommunication grew up to
it, of government in decision making process.
 2

Company is on the process of issuing. At this point of time, there are various telecombased
company which are actively doing their business.

1.2.Profile

In Nepal, operating any form of telecommunication service dates back in B.S. 1970. But f
ormally telecom service was provided mainly after the establishment of MOHAN AKAS
HWANI in B.S. 2005. Later as per the plan formulated in First National Five-year plan (2
016-2021); Telecommunication Department was established in B.S.2016. To modernize t he
telecommunications services and to expand the services, during third five-year plan (2 023-
2028) , Telecommunication Department was converted into Telecommunications Dev
elopment Board in B.S.2026. After the enactment of Communications Corporation Act 2
028 , it was formally established as fully owned Government Corporation called Nepal Te
lecommunications Corporation in B.S. 2032 for the purpose of providing telecommunicat
ions services to Nepalese People Nepal Telecommunication Corporation was transformed
into Nepal Dursanchar Company Limited from Baisakh 1, 2061. Nepal Dursanchar Comp
any Limited is a company registered under the companies Act 2053. However, the compa
ny is known to the general public by the brand name Nepal Telecom as registered tradem
ark.

Nepal Telecommunications Corporation (NTC), first government won company converte d

to public limited company. The share classified is a public sector entity owned almost (
90% of share capital) by government and 5% by general public and 5% by employee, ad
ministered by a government appointed Board of Directors, which includes a chairman an d
six voting members which includes Managing Director of the company and Employees’
Representative. The company is an inevitably accountable autonomous and organized ins
titution. The existing ICT (Information and Communication Technology) scenario in the
country clearly shows that the Nepalese telecom market is poised for significant growth. I
n Nepal Telecom, we pride ourselves on the timely forecast of the scale of business oppor
tunities few years back and subsequently embarking upon the vision of having big-sized t
elecom infrastructure projects catering both urban and rural markets.

1.2.1. Mission
 3

Nepal Telecom as a progressive, customer spirited and consumer responsive Entity is co

mmitted to provide nation-wide reliable telecommunication service to serve as an impetu s to
the social, political and economic development of the Country.

1.2.2. Vision

Vision of Nepal Telecom is to remain a dominant player in telecommunication sector in t he

Country while also extending reliable and cost effective services to all.

1.2.3. Goal

Goal of Nepal Telecom is to provide cost effective telecommunication services to every n ook
and corner of country.

It is the first operator to provide 4G LTE service in Nepal on technology neutral frequenc y
band of 1800 MHz as standard for 4G in Nepal.

Nepal Telecom is the role institution in the state to provide telecom services. It has offere d
and provided its services to all possible parts all over the nation in affordable price and
position. Nepal Telecom as far as possible has adopted the new technologies and inventio
ns around the world. Liberalization in telecommunication services is the result of globaliz
ation growth of markets, new technological changes and the emergence of new services.

The services provided by Nepal Telecom are as follow:

• GSM Mobile Services (Post-Paid, Pre-Paid and WCDMA 3G Mobile)

• Services of CDMA technology (Fixed type, SKY with mobility, CDMA Pre- Paid Mo bile
and PCMCIA Data Card, EVDO services)

• Marts Telephone Services

• VHF Telephone Services

• V-SAT Telephone Services

• Pay Card Phone

• Internet & Email Services of NT

 4

• Internet through PSTN dial up and ISDN dial up

• Internet through CDMA and GSM technology

• Internet through ADSL technology

• E-mail services

• Telex Services ( NTC has a Telex Capacity of 256 and only 70 lines of them are distri
buted.)

• It has been providing other Value Added Services (VAS) like Voice Mail (VMS) ser vices,
Interactive Voice Response (IVR) services and Intelligent Network (IN) servic es such as
Prepaid-Calling-Card (PCC) service, Advanced- Free phone (AFS) service, PSTN-Credit-
Limit (PCL) service, Home- Country- Direct (HCD) service.

• 3G service

Video call, Live TV, High speed internet, On demand video, Video chat

• 4G LTE service

Video call, Live TV, High speed internet, On demand video, Video chat

1.3.Objective

The main objectives of the study are to evaluate strengths and weakness and analysis the
financial performance of Nepal Telecom and to recommend the suitable suggestion for
improvement. The specific objectives were as following:

- To examine the financial position of NTC.

- To analyze the Share price of NTC in financial Market.

- To analyze the financial performance of Nepal telecom through liquidity, profitability ratios.

1.4.Rational
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This study has been mentioned already that the research focuses only on the financial
performance of Nepal Telecom. This financial performance analysis gives insight into the
financial condition and performance of these Nepal Telecom. This will provide guideline
for improving its performance to achieve the Nepal Telecom overall objectives. Similarly,
this study helps to identify its hidden weakness regarding financial administration. Further
it will be important for the following groups and individuals: -

• This study explains the shareholders about the financial performance of Nepal Telecom.

• The study also compels the management of Nepal Telecom for self-assessment of what
they have done in the past and guides them in their future plan and program.

• present and perspective customers and investors

• financial policy making authority
• Government
• ICT based companies
• further researchers

1.5.Review of Literature

The review of literature basically highlights the existing literature and research work related
to the present research. This chapter deals with the theoretical aspect of the topic on
financial performance analysis in more detail and descriptive manner. It provides the
foundation for developing a theoretical framework and knowledge of the status relevant to
the field of research in order to explore the relevant and true facts for the reporting purpose.
Hence, in this chapter, the focus has been made on the review of literature relevant to
financial performance analysis of Nepal Telecom. For this study, different books, journals,
articles, annual reports and some research paper related with this topic has been reviewed.

1.5.1. Conceptual Framework

Finance is concerned with those activities related to money. Previously finance was limited
for procurement of long term fund. Due to industrialization, technological innovations and
intense competition, there has been a vast change in the philosophy of management.
Likewise, the discipline of financial management has undergone an unprecedented change.
Financial performance analysis is a scientific evaluation of profitability and financial
strength of any business concern. Nowadays, finance is best characterized as ever changing
 6

with new ideas and techniques. Financial decision is very sensitive and important and can’t
be taken blindly or in a vacuum. Financial decision must be based on proper financial
analysis by using financial tools-such as financial ratios are used to measure the financial
performance of financial institution. Evaluation of financial performance is a study of
overall financial position of any organization it is closely related to the decision making. In
the modern context it gives vital support for the investment decisions, financing decision
and dividend decisions. Financial performance analysis is under gone with the help of
periodically made financial statements of the firm.

"Financial management is that managerial activity which is concerned with planning and
controlling of the firm's financial resources (Panday, 2004)

According to Mayer “Financial statement analysis is largely a study of relationship among

the various financial factors in a business as disclosed by the single set of statement and a
study of trend of these factors as shown in a series of statement.” (Mayer, 1961)

1.5.2. Review of Articles

Under this heading, efforts have been made to examine and review some of the related
articles published in different economic journals, dissertation papers, magazines,
newspapers and other related books.

Latasri, et al. (2014), had written an article on “A Study on Financial

Performance of Ashok Leyland at Chennai”.

The main objectives were:

• To know the financial position of the Ashok Leyland.
• To know the liquidity and profitability position of the company.
• To know the financial strength and weakness of the company.

Islam (2014), had written a journal on “An Analysis of the Financial Performance of National
Bank Limited Using Financial Ratio”.
The major objectives were:
• To Discussed the Financial ratio measurement and analysis.
• To analyze National Bank trading recent years.
 7

• To measure profitability, liquidity and credit management of National Bank • To show

the financial stability analysis consists of (profitability and liquidity).

• To analyze the balance sheet and income statement.

• To measure descriptive statistics.
• To using financial ratio analysis (FRA method).
• To using student T test for hypothesis testing.
• And to know overall Bank financial performance condition.
The major findings were:
• Profit rate is low in recent years. So to somebody it is unattractive.
• Profitability performance of NBL not satisfactory level because of last 2 years’ lower
growth.

• Liquidity quit good compare to others but they have chance to improve more.
• Credit management last few years really good because the trend of nonperforming loan
getting lower.

• Overall Financial performance effective if we compare to others bank because of last

few years’ unstable environment in our country

• In case of import and export financing it takes long time to sanction the fund.

1.5.3. Review of Previous Thesis

There are few researches that have been made in the areas of financial performance of NTC.
Most of the researches have not been fully able to explain the financial condition of this
organization. Thus an attempt has been made to review the available thesis, which is
relevant to this study. Several thesis work have been conducted by various students
regarding the various aspect of Nepal Telecommunication Corporation such as, Financial
Position, profit planning, Working capital management etc. Some of them as supposed to
be relevant for the study are presented below.

Aryan (1999), has submitted the Thesis entitled “Working capital management in Nepal
telecommunication corporation”.
The Major Objectives were:
 8

• To appraise working capital of NTC with respect to cash, receivables and inventory
management.

• To know how far NTC is being able to utilize its current assets properly.
• To evaluate the credit policy of NTC and its effectiveness.
• To study the relationship between sales and different variables of working capital.

The Major findings were:

• Cash and bank balance constitute the most important and largest element of working
capital in NTC. About 36% of current assets is held as cash during the study period.

• NTC kept excess amount of working capital. The volume of sales seems to be
increasing every year. But rate of growth in working capital is higher than that of sales.
Therefore, the turnover ratios are continuously decreasing every year.

• There is no camperships long/midterm planning and control system of account

receivable and cash budget should be prepared.

Joshi, (2004), has made a study on, “Financial Analysis of Standard Chartered Bank
Nepal, NABIL bank and Everest bank.”

The major objectives were:

• To trace out the credit position of the commercial banks

• To analyze the earning capacity of the banks

• To measure the investors’ degree of satisfaction on the banks

The findings were:

• The lending condition of the commercial banks is in decreasing trend.

• Strong banks are holding good customers and discoursing low rated and less amounted
loans.

• Many banks are showing aggressive and are spontaneously increasing loan loss
provision.
 9

The earning capacity of SCBNL and NABIL is comparatively higher than that of Everest.
Neupane, (2001), had make study on the topic "A study on profit planning in Nepal
Telecommunications Corporation”.

The general objective of the study:

• To examine the present comprehensive profit planning system applied by NTC.
• The other specific objectives of the study were to highlight NTC to analyze functional
budgets adopted in the Corporation, to analyze Ratio Analysis and variances of NTC
etc.

The main findings were as follows:

• Budgets are prepared for the formalities.
• The corporation has no skilled planners.
• NTC has not adequately considered controlled and non- controllable variables affecting
the organization.

• Actual sales line trends are always below the budgeted sales lines.
• There is no clear -cut criterion to separate cost into fixed and variable.

1.5.4. Research Gap

Research gap focuses that the researcher how much trying to give new things from the study
with compare to previous studies held by different researcher. Due to changing the time and
circulation of environment the previous and present may be different in many ways. This is
a research gap between the present research and previous research. Though many affiliated
researchers have been done in this area but these have been very few exclusive researchers
on this subject. Therefore, to fulfill this gap, this research is selected. To complete this
research work, many book, journals, articles and various published and unpublished
dissertations are followed a guideline to make the research easier and smooth. In this regard,
here we are going to analyze the different procedure of loan management and latest data are
included to fulfill the gaps.

1.6.Research methodology
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Research methodology can be defined as systematic process that is adopted by the researc
h in studying problem with certain objective. Research is careful investigation or inquiry
especially through search for new fasts in any branch of knowledge is research.
"The research of knowledge through objective and systematic method of finding solution to
a problem in research" (Kothari, 1989).

The topic of the study has been selected as financial performance analysis of NTC. In ord
er to reach and accomplish the objectives of the study, different activities will be carried
out. For this purpose, the chapter aims to present and reflect the methods and techniques t
hat are carried out and followed during the study period. The research methodology that i
s adopted for the present study is mentioned in this chapter which deals with research des
ign, sources of data, data collection, processing and tabulating procedure and methodolog
y. The main purpose of this chapter is to focus on different research method and conditio
ns, which are used while conducting this study. Every study needs a systematic methodol
ogy to show the better results of the research the following titles of research methodology
have been discussed in this chapter.

1.6.1. Research Design

Research is a theory building activity. Research design is the plan, structure and strategy of
investigations conceived so as to obtain answer to research questions and to control var
iances.

“A research design is the arrangement of condition for collection and analysis of data in a
manner that aims to combined relevance to the research purpose with economic in proced
ure” (Kothari, 1999).

The research study attempts to analyze the financial performance NTC. Hence, descriptiv
e as well as analytical research designs have been employed. The study depends on the se
condary data. Various financial parameters and Descriptive research is essentially effecti
ve research.

Techniques are employed to evaluate the financial performance of corporation. The study
is designed as to give a clear picture of the financial performance and circumstances with
the help of available data with useful suggestions and recommendation.
 11

1.6.2. Population and Samples

In the present context, there are various branch of NTC in Nepal. It is not possible the stu dy
all the data related with all corporation because of the limited time period and showed also
taken in to consideration of the partial fulfillment of the Bachelor’s Degree. So here Nepal
Telecom limited (NTC) has been selected as sample for the present study.

1.6.3. Nature and source of data

The data used in this study are secondary as they have been collected from concerned aut
horities. For any research work, information is considered the life blood. Thus it is the ma
jor task to gather the information and data collection. For the purpose of the study, variou
s related books, booklets, magazine, journals, newspaper and thesis made in this field hav
e been referred. Besides necessary suggestions are taken from various experts both inside
and outside the corporation whenever required.

The major source of data and information are as follows:

• website of Nepal telecom

• Annual reports and other published documents of Nepal telecom.
• Economic survey F\Y 2078/2079, ministry of finance, various planning documents.

1.6.4. Data Collecting Procedures

The annual reports of the concerned telecommunication will be collected from their head
office and their website. The main sources of data are annual report of concern financial
institutes. NRB’s publication, such as banking and Financial Statistics Economic Reports,
Annual Reports of NRB etc. has been collected from the personal visit of concerned
department of NTC at Sundhara.

Besides, a details review materials are collected from the library of Campus and central li brary
of T.U.

1.7.Method of Data Analysis Technique

For the purpose of the study all collected primary as well as secondary data are arranged,
tabulated under various heads and them after disunities and statistical analysis have been
carried out to enlighten the study. Mainly financial methods are applied for the purpose of
 12

this study. Appropriate statistical tools are also used. To make the study more specific and
reliable, the researcher uses two types of tool for analysis:
1.7.1. Financial analysis Tools

The fundament of the analysis of the analytical techniques so to simplify or reduce the data
under review to the understandable term. There are various tools and techniques of financial
statement analysis, each of which is used according to the purpose for which the analysis is
carried out. A ratio analysis is a quantitative analysis of information contained in a
company’s financial statements. Ratio analysis is based on line items in financial statements
like the balance sheet, income statement ; the ratios of one item – or a combination of items
- to another item or combination are then calculated. Ratio analysis is used to evaluate
various aspects of a company’s operating and financial performance such as its efficiency,
liquidity, profitability and solvency. The trend of these ratios over time is studied to check
whether they are improving or deteriorating. Ratios are also compared across different
companies in the same sector to see how they stack up, and to get an idea of comparative
valuations. Ratio analysis is a cornerstone fundamental analysis.

Liquidity ratios

Liquidity ratio is an indicator of whether a company's current ratio will be sufficient to meet
the company' obligations when they become due. The liquidity ratios include the current
ratio and the acid test or quick ratio. The current ratio and quick ratio are also referred to as
solvency ratios. Working capital is an important indicator of liquidity or solvency, even
though it is not technical Ratio. Liquidity ratios sometimes include the accounts receivable
turnover ratio and the inventory turnover ratio. These two ratios are also classified as
activity ratios.

Current ratio (CR)

Quick ratio

Debt management ratio

It is also known as capital structure or leverage ratio. The long term creditors would judge
the soundness of a firm on the basis of long term financial strength measured in terms its
ability to pay the interest regularly as well as repay the installment of principal due to dates
or in one lump sum at the time of maturity. Leverage ratios show how of an enterprise's
 13

fund are financed by debt and equity. Theses ratio show how much of an enterprise's fund
are financed by debt and equity. These Ratios also show the prospects for future and the
soundness of capital structure of an enterprise.

Total Debt
Total Debt to Assets=
Total Asset

Total Debt
Debt to Equity ratio=Shareholde r 's Equity

Profitability ratio

Profitability ratios are a class of financial metrics that are used to assess a business's ability
to generate earnings compared to its expenses and other relevant costs incurred during a
specific period of time. For most of these ratios, having a higher value relative to a
competitor's ratio or relative to the same ratio from a previous period indicates that.

Together these Ratios indicates the firms’ efficiency of operation.

Net profit after tax

Net Profit Margin(NPV)
Sales

Market value ratio

Market value ratio indicate how the stock of the company is assumed in the capital marke
t. The market value ratios are used to asset firm’s stock price in relation to its earning and
book value of shares. The commonly used market value ratio are earnings per share, book
Net income after tax
value share, and price earnings ratio. Earnings Per Share EPS =

No. of shares
 14

1.7.2. Statistical Analysis

Fact and figures about any phenomenon whether it relates to population, production sales
profit or any other matter are called statistics. In this sense, the term statistics is considered
synonymous with figure. To the layman, the term statistics usually carries only the nebulous
and too often distasteful connections of figures." The word statistics refer either to
quantitative information or to a method of dealing with quantitative information." (Gupta
1983). This Research applies the following statistical tools for the required financial
analysis.

Simple line Diagram

A diagram that presents the data preparing line is known as line diagram. It is one of the
easiest and commonly used diagrams to present data. It is one of the easiest and commonly
used diagrams to present data. It consists of a group of equidistance. Each category of the
data and the value of the data is presented by the Line

1.8.Limitation of the Study.

There will be some limitations while undergoing these study the main limitations of the study
will be:

• This study is based on the latest 5 years’ financial report

• The study makes the analysis of financial performance of Nepal Telecom, it may not
be applicable to any other enterprise

• Secondary data are collected from annual reports of the concerned enterprises. So the
study may not suitable in other enterprise.

• This report is based on secondary

CHAPTER II
RESULTS AND ANALYSIS

2.1.Data Presentation and Analysis

 15

Data presentation and analysis is the core of the project and all the above mentioned tools
are used below to analyze the financial performance analysis of Nepal telecom. Presentati
on and analysis of data is an important stage of the research study. The main purpose of a
nalyzing the data is to change it from an unprocessed from in an understandable presentat
ion. The basic objective of this study is to have a true insight into "cash management" of
NTC. For the accomplishment of these objectives a specific research methodology has be
en followed. Now in this section an effort has been made to assess and analyze the actual
cash management of NTC. The analysis of data consists of organizing data by tabulating
and then placing the data in presentable form by using figures and tables. The presentatio
n and analysis of data section is the main text of the study. It provides insight into the pre
determined objectives of the study. For the purpose of presentation of data, the most rece
nt published financial statements and annual reports are used. The collected and tabulated
data have been analyzed using different financial tools. This chapter includes presentation
, analysis and interpretation of collected data with organizing sequentially as per the obje
ctives of the study. The analysis is regarding to financial performance of NTC. Ratio anal
ysis is most important finding and tool for project work.

2.1.1. Liquidity ratio Analysis

Liquidity ratio measures the firm's ability to satisfy its short term communication out of
current or liquid assets. These ratios focus on current assets and liabilities and are used to
ascertain the short-term solvency position of a firm. The two primary tests of liquidity are
current ratio and quick ratio.

Current Ratio

The current ratio is a financial ratio that measures whether or not a firm has enough resources
to pay its debts over the next 12 months. It compares a firm's current assets to its current
liabilities. The current ratio is an indication of a firm's market liquidity and ability to meet
creditor's demands. Acceptable current ratios vary from industry to industry and are generally
between 1.5 and 3 for healthy businesses. It is expressed as follows:

Current Assets
Current Ratio =
Current Liabilities
 16

Table 1.
Current Ratio

Fiscal year 2017/18 2018/19 2019/20 2020/21 2021/22

Current ratio 3:15 3:09 3:93 3:88 3:12

Source: Annual Report of NTC (2017/2018 – 2021/2022)

Table 1: Higher the current ratio better is the liquidity position of company. If there is less
than standard ratio, it shows the solvency position and vice versa. For many company
standard ratio is 2:1. NTC Company is meeting the standard ratio in all year.

Figure 1.

Current Ratio
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
2017/18 2018/19 2019/20 2020/21 2021/22
Year

Source: Table 1.
Figure 1. shows that the highest and lowest current ratios of Nepal telecom is 4.21 times in
FY 2017/18. And 3.09 times in FY 2018/19 respectively current ratio of Nepal telecom is
in increasing trend. The average ratio is 3.12 time in FY 2021/22. While observing the
current Ratio it is notices that the NTC has more than standard ratio, which is more feasible
to meet its current obligation.

Quick Ratio
 17

The purpose of this ratio is to test the ability of the firm for immediate payment of current
liability. The relationship between quick (liquid) asset and current liability is termed as
quick ratio. Quick asset includes all the current asset other than stock and prepaid.

Quick Ratio Current Assets -Inventory

Current Liabilities

Table 2.

Quick Ratio

Fiscal year 2017/18 2018/19 2019/20 2020/21 2021/22

Quick ratio 1:85 2:09 2:71 2:06 1:50

Source: Annual Report of NTC (2017/2018 – 2021/2022)

Table 2. More or less standard ratio is not favorable for NTC. The liquid ration of 1:1 is
consider to be an adequate ratio. During the study period it has recorded the highest ratio is
2.71 times in FY2019/20 and lowest ratio of 1.50 times in FY2021/2022. It shows that NTC
has maintained some liquidity position to meet its short term obligation for given time
period.

Figure 2.

Quick ratio
4
2
0
2017/18 2018/19 2019/20 2020/21 2021/2022
Year

Source: Table 2.
Figure 2. here quick ratio meets the standard because it is higher than ratio of 1:1 and also
seems it is gradually decreasing its QR ratio from 2019/20. So far NTC has able to pay back
its current liabilities on time so it is satisfactory level in financial management.

2.1.2. Debt Management Ratio

 18

The capital structure is how a firm finances its overall operations and growth by using
different sources of funds. Debt comes in the form of bond issues or long-term notes
payable, while equity is classified as common or Stock. Short debt such as working capital
requirements is also considered to be part of the capital structure.

Debt-Asset Ratio

The debt-asset ratio, simply known as debt ratio, shows the proportion of total debts used in
financing total assets of a firm. It is calculated as follows:

Total Debt
Debt Assets Ratio =
Total Assets

Table 3.

Deb-Asset Ratio

Fiscal year 2017/18 2018/19 2019/20 2020/21 2021/22

D/A ratio 24:80 29:86 27:23 26:62 25:80

Source: Annual Report of NTC (2017/2018 – 2021/2022)

Table 3. debt on Asset ratio is used to measure the financial risk of the NTC and creditor.
A higher debt equity ratio shows the large share of financing by the creditors. A low debt
ratio implies larger safety margin for creditors. Low debt ratio provider a cushion protection
to the creditors against lower. Higher risk is in 2018/19 that is 29.86 and lower risk is
2017/18 that is 24.80.
 19

Figure 3.

Debt-Asset Ratio
35
30
25
20
15
10
5
0
2017/18 2018/19 2019/20 2020/21 2021/22
Year
Source: Table No.3
Figure 3, there has represented the Debt assets of financial statement of NTC for different
past five years from FY 2017/18 to FY 2021/22. The debt ratio denotes what percentage of
total funds is provided by creditors. Although creditors tend to prefer a lower ratio,
management must prefer to lever operations, producing a higher ratio. Here debt ratio was
decreasing gradually and was reached at least at FY 2018/19. As a whole, DA ratio was
decreasing with satisfactory level. It shows the company NTC was able to take leverage
advantage of debt. It also shows there was no any such danger condition that might cause
against possible losses at the time of liquidation.

Debt-Equity Ratio

This ratio expresses the relationship between debt capital and equity capital and reflects the
relative claim of them on asset of the NTC. The debt equity ratio is calculated by dividing
total debt by total equity.

Total debt consists of long term debt and current liabilities and total equity consists of equity
capital, preference share capital and undistributed profits.

Total Debt
DE Ratio
Total Equity
 20

Table 4.

Debt-Equity Ratio (DE Ratio)

Fiscal year 2017/18 2018/19 2019/20 2020/21 2021/22

DE Ratio 3.33 4.21 3.57 3.62 3.65

Source: Annual Report of NTC (2017/2018 – 2021/2022)

Debt on equity ratio is used to measure the financial risk of the NTC and creditor. A higher
debt equity ratio shows the large share of financing by the creditors. A low debt equity ratio
implies larger safety margin for creditors. Low debt equity ratio provider a cushion
protection to the creditors against lower.

Higher risk is in 2018/19 that is 4.21 and lower risk is 2017/2018 that is 3.33 times.

Figure 4.

Debt-Equity Ratio
5
4
3
2
1
0
2017/18 2018/19 2019/20 2020/21 2021/22

Year

Source: Table No.4

There has represented the debt equity ratio of financial statement of NTC for different past
five years from FY 2017/18 to FY 2021/22. DE ratio was maintained at lower rates at FY
2019/20. DE ratios is increasing.

2.1.3. Profitability ratios

Profitability ratio is the main concern of the owners and management firm. The management
of the firm always wants to know how efficient the operation of the firm is. Likewise, the
owners of the company always expect a reasonable return for their investment in the firm.
For this reason, profitability ratio can be a good measurement of the operating efficiency
 21

and profitability of the firm. By the help of the profitability ratios, one can make a quick
and clear view towards the firm's profitability, return on assets and return on equity and
earning’s per the share etc. in the general profitability ratios can be determine by two factors
of the financial statements. One is related to the income statements i.e. sales, expenses, etc.
and other one is related to the balance sheet i.e. the investment, capital etc.

These ratios how much profit earned or how much expenses occurred by the company on
each rupee of is sales. The following profitability related to income statements are presented
here. Net profit margin

Net profit margin is the residue of revenue over total cost. The costs include operating &
selling expenses, interest and taxes. The profit margin ratio measures the relationship
between net profit and sales of the firm. It indicates the ability of the management in running
the business efficiently in terms of revenue generation, costs of producing goods and
services, operating and selling expenses, costs of borrowed capital and making a reasonable
return for its owners. It is computed by dividing net profit after tax by sale

Net profit margin (NPM) = Net profit after tax (NPAT)\sales

Table 5.

Net Profit Margin

Fiscal 2017/18 2018/19 2019/20 2020/21 2021/22
year

NPM 27:17 28:10 31:33 32:64 34:48

Source: Annual Report of NTC (2017/2018 – 2021/2022)

Table No. 5 The profit margin ratio measures the relationship between net profit and sales
of the firm. It indicates the ability of the management in running the business efficiently in
terms of revenue generation, costs of producing goods and services, operating and selling
expenses. There has represented the ratio of net profit margin of NTC for difference 5 year
of F.Y 2017/18 to 2021/22 it is clearly show that there are up down fluctuation. In One
Fiscal Year to another fiscal year.
 22

Figure 5.

Net Profit Margin

40
30
20
10
0
2017/18 2018/19 2019/20 2020/21 2021/22

Year

Source: Table No.5

There has represented the ratio of net profit margin of NTC for difference 5 year of F.Y
2017/18 to 2021/22 it is clearly show that there are up down fluctuation. In One Fiscal Year
to another fiscal year. Return on assets (ROA)

Here, the profitability ratio is measured in terms of the relationship between net profits and
the assets of the firm. Different approaches are applied to define net profit and assets for
calculating ROA. But we will apply net profit after tax (NPAT) plus interest and total
closing assets for this study. It is computed as:

Return on assets = (NPAT + interest after taxes) \total assets

Table 6.

Return on Assets

Fiscal year 2017/18 2018/20119 2019/2020 2020/2021 2021/2022

ROA 12:64 17:03 14:17 16:21 18:44

Source: Annual Report of NTC (2017/2018 – 2021/2022)

Higher ratio implies that the available source and tool are employed efficiently. NTC
company have more return on 2021/22 i.e. 18.44. In 2017/18 Return on asset is less i.e 12.64
on 2017/2018.
 23

Figure 6.

Return on Asset
20

15

10

0
2017/18 2018/2019 2019/2020 2020/2021 2021/2022
Year

Source: Table 6.

There has represented the ratio of return on asset of NTC for different five year from year
of 2017/2018 to 2021/2022. It is clearly show that ROA is increasing gradually from year
of 2019/2020 up to 2021/2022. Return on equity (ROE)

The return on equity measure the profitability of equity fund invested in NTC Company. It
is a ratio of net profit available for the equity. Higher return on equity is better for NTC.
Higher ROE reflect the most efficient of management and the more profitability enjoyed by
the shareholder.

Return on equity =Net profit after taxes (NPAT)/Net worth (NW)

Table 7.
Return on Equity
Fiscal year 2017/2018 2018//2019 2019/2020 2020/2021 2021/2022

ROE 16:83 14:28 17:27 19:16 21:80

 24

Source: Annual Report of NTC (2017/2018 – 2021/2022)

We can see that in2017/2018, Return on equity is 16.83 that Mean. Higher ROE reflect the
most efficient of management and the more profitability enjoyed by the shareholder.

In 2021/2022, return on equity is maximum that is 21.80.

Figure 7.

Return on equity
30

20

10

0
2017/2018 2018/2019 2019/2020 2020/2021 2021/2022
Year

Source: Table 7.

From the above Figure -7 there has represented the return on equity of NTC for different
past five years from FY 2017/2018 to FY 2021/2022. It clearly shows that ROE is
increasing for last three years.

2.1.4. Market value ratio

Market value ratios evaluate the economic status of publicly traded company in the wider
marketplace - in other words, whether your company's stock is overvalued, undervalued or
priced fairly although there are a wide variety of market value ratios in others include the
price /cash ratio ' dividend yield, market per share.

Potential and current investors use market value ratios to see how a company's current share
price stacks up to its various metrics. In addition, market values ratios give management an
idea of what the firm's investors think of the firm's performance and future prospects.

Earnings per share

Earnings per share or EPS are an important financial measure, which indicates the
profitability of a company. it is calculated by dividing the company's net income with its
total number of outstanding shares. It is a tool that market participants use frequently to
gauge the profitability of a company before buying its shares .EPS is the portion of a
 25

company's profit that is allocated to every individual share of the stock. It is a term that is
of much importance to investors and people who trade in the stock market.

Table 8.
Earnings per share

Fiscal year 2017/2018 2018/2019 2019/2020 2020/2021 2021/2022

EPS 102:49 120:12 135:54 140:36 145:19

Source: Annual Report of NTC (2017/2018 – 2021/2022)

It is calculated by dividing the company's net income with its total number of outstanding
shares. It is a tool that market participants use frequently to gauge the profitability of a
company before buying its shares. Highest earning per share is Rs. 145:19 in 2021/2022.
Lowest earning per share is Rs.102:49 in fiscal year 2017/2018. Hence, NTC EPS is in
increasing continuously.

Figure 8.

Earning Per Share

200
150
100
50
0
2018/2019 2019/2020 2020/2021 2021/2022
Year

Source: Table No.8

There has represented earning per share of NTC for different past five years from F.Y.
2017/2018 – 2021/2022. The picture has clearly showed that, EPS is increasing
continuously. The higher EPS show that better for firm for better earning.

2.2.Major finding

• Taking in to consideration the current ratio. Higher the current ratio better is the
liquidity position of company. If there is less than standard ratio, it shows the solvency
position and vice versa for many company standard ratio is 2:1. NTC Company is
 26

meeting the standard ratio in all year. In year 2021/2022 current ratio is 3:12 which meet
standard position. So, NTC is in better position.

• More or less standard ratio is not favorable for NTC. The liquid ration of 1:1 is consider
to be an adequate ratio. During the study period it has recorded the highest ratio is 2.71
times in FY2019/20 and lowest ratio of 1.50 times in FY2021/2022. It shows that NTC
has maintained some liquidity position to meet its short term obligation for given time
period.

• Debt Asset ratio is used to measure the financial risk of the NTC and creditor. A higher
debt equity ratio shows the large share of financing by the creditors. A low debt ratio
implies larger safety margin for creditors. Low debt ratio provider a cushion protection
to the creditors against lower. Higher risk is in 2018/19 that is

29.86 and lower risk is 2017/18 that is 24.80.

Debt on equity ratio is used to measure the financial risk of the NTC and creditor. A higher
debt equity ratio shows the large share of financing by the creditors. A low debt equity ratio
implies larger safety margin for creditors. Low debt equity ratio provider a cushion
protection to the creditors against lower. Higher risk is in 2018/19 that is 4.21 and lower
risk is 2017/2018 that is 3.33 times.

The profit margin ratio measures the relationship between net profit and sales of the firm.
It indicates the ability of the management in running the business efficiently in terms of
revenue generation, costs of producing goods and services, operating and selling expenses.
There has represented the ratio of net profit margin of NTC for difference 5 year of F.Y
2017/18 to 2021/22

It is a tool that market participants use frequently to gauge the profitability of a company
before buying its shares. Highest earning per share is Rs. 145.19 in 2021/2022. Lowest
earning per share is Rs.102.49 in fiscal year 2017/2018. Hence, NTC EPS is in increasing
continuously,
 27

Return on equity is 16.83 that Mean. Higher ROE reflect the most efficient of management
and the more profitability enjoyed by the shareholder. In 2021/2022, return on equity is
maximum that is 21.80, Higher ratio implies that the available source and tool are employed
efficiently. NTC company have more return on 2021/22 i.e. 18.44. In 2017/18 Return on
asset is less i.e. 12:64 on 2017/2018.
 28

CHAPTER III

SUMMARY AND CONCLUSION

2.1.Summary

Telecommunication is an inevitable infrastructure of development of all countries. It is

considered as prerequisite for the other dimension of development. In Nepal the need of
telecommunication services is primarily fulfilled by Nepal Telecom introduction of
liberalized economic policy in Nepal gradually facilitated the private sector investment as
a result multinational companies also showed their presence. Further- more public
enterprises started to be privatized. Such trend couldn't also remain intact without
influencing Nepal Telecommunications Corporation has been changed to Nepal Dursanchar
Company limited in 2061 BS under the Company act. It's popularly known commercial
name is "Nepal Telecom". Although Nepal Telecom has been recently established under
the company act and its 100% ownership has been held by Nepal Government by receiving
the entire investment from government.

As financial health is the key indicator of the success and failure of the organization.
Different Financial indicator show to what extent would the organization is capable to meet
the expectations of various stakeholders of the Company. In the light of this main issue of
the study has focused to evaluate the financial performance of Nepal Telecom on the basis
of latest available information. Financial Analysis and planning function is not a decision-
making in itself rather it is an ancillary service, which helped in planning for those two
decisions and evaluating the outcome of those two decisions and recommending necessary
rectifying measures.

To make the study significant, ratio analysis and tabulating analysis have been carried out
regarding the major variable of NTC. Before the analysis of such financial and statistical
tools the details of the same has been explained in chapter namely literature review and for
the mathematical calculations research methodology has been carried out. On basis of the
analysis we will conclude our findings and try to provide some relevant recommendations
to the management of NTC so that they apply those recommendations if they deem
appropriate Nepal Telecom as a state owned enterprise has involved in providing the cost
 29

effective and people friendly telecom services in the nation since long time. The
organization has enjoyed in competition the telecom market and got policy privilege from
some year ago. Even thought, with the upcoming of private sectors telecom, Nepal Telecom
has been able to maintain its profit growth. Nepal Telecom is financially performing well.
It has able to use its assets in an effective manner providing a huge return to the government.

2.2.Conclusion

The financial condition through various financial ratio analysis made in this report suggest
a conclusion that the company NTC is fetching a good financial condition for a healthy
business. Although some ratios are not lying under the standard limit, they have considered
as a satisfactory level. As a whole, NTC has efficient financial environment with good
management.

Nepal Telecom, a leading company in the telecommunication sector working restlessly for
decades has been providing world class services in Nepal throughout the country covering
all the districts. It has been providing best services regarding telephony and internet access
to the willing customers. It has completed successful seven years of privatization. The
organization is working for the social service and has been continuing the joint venture with
the traffic police and working for the awareness in the road accidents and helping the needy
during the natural calamities. It is providing services as telephony (GSM, CDMA, PSTN,
SIP, PPP,) and internet as (Dial-up, ADSL/FTTH, EVDO, GPRS,3G/4G LTE, WiMAX)
other entertaining services as CRBT and free ten web SMS provided. It covers about 4.06%
of the national revenue and is playing major role in the infrastructure development by
revenue. It has been recognizing itself as the largest tax payer increasing by 0.82% to the
government and has been leading the nation by revenue (NTC also got prize on as the largest
tax payer of the entire industries).

Being a service provider it is facing a lot of challenges. The monopoly market has no longer
existed between the organizations. The competitors are giving a heavy challenge to them;
the competitors mainly Spice Nepal working under the management of Talia Sonora, a
famous European multinational company, united telecom (UTL), Smart telecom and Nepal
Satellite company limited are too involved in the race. Beyond these Services it has been
implementing new technologies for fulfilling the desire of the customers.
 30

• The organizing and top-level managers are highly responsible for the company's
financial part. They must maintain the financial ratios to meet the standard for a healthy
business. For this, they should properly scan and evaluate the environment regularly,
often evaluate the financial statements that the comparative analysis would give a good
decision at right time. The clear and transparent financial reports are the key for the
company NTC.

• Managerial environment includes the circulation of the internal commands, decisions,

it is very important to cope up with the environment.

• Customers are not properly satisfied themselves on the provided service as they want a
complete and versatile service. So, Nepal telecom should always keep flexibility of the
services in majority to hold the existing customers and to attract new customers from
the competitive market.

• The decision making and policy formulation is found to be not expected in the
organization. Decisions based on the improvement and establishment of the new
technology has not been properly respected. ‘Right work in the right time’ must to keep
in the prior consideration.

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 31

from http://rameshtalks.wordpress.com/2012/07/23/environmental-analysis-of-nepal-
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