A SUMMER PROJECT REPORT
ON RATIO ANALYSIS OF
NEPAL TELECOM CORPORATION (NTC)
Submitted By: Ram Kumar Shah
Pokhara University Regd. Number: 2012-2-03-2257
Exam Symbol Number: 13031196
Submitted To:
Office Dean, Faculty of Management, Pokhara University
In partial fulfillment of the requirement for the Degree of Bachelor in
Business Administration (BBA)
November, 2014: Kathmandu, Nepal
Recommendations
This is to certify that the summer project report submitted by Ram Kumar Shah,
P.U. Registration No: 2012-2-03-2257, Symbol No: 13031196 Entitled "The
Summer Project Report on Ratio Analysis of Nepal Telecom Corporation (NTC)" was
prepared as approved by Quest International College in the prescribed format of the
faculty of Management. This report is forwarded for examination.
……………………..
……………………
Mr.Udaya Raj Paudel
Mrs. Banira Dhakal
Program Director (BBA)
Project Coordinator
(Quest International College)
(Quest International College)
ii
Declaration
Hereby the researcher declares that this report was prepared for summer project on
"Ratio Analysis of Nepal Telecom Corporation (NTC)" and submitted to Quest Int'l
College affiliated to Pokhara University. This report was prepared as a requirement
for the completion of Bachelor Degree in Business Administration (BBA) under the
supervision and guidance of Mrs. Banira Dhakal (Summer Project Coordinator) and
Mr. Udaya Raj Paudel (BBA- Program Director) of Quest International College,
Gwarkoo Lalitpur.
……………………………………
Ram Kumar Shah
P.U Registration No: 2012-2-03-2257
Symbol No: 13031196
Quest International College
Gwarkoo, Lalitpur, Nepal
iii
Acknowledgements
With deep concession, the researcher would like to thank Pokhara University- Faculty
of Management for providing the opportunity to prepare this summer project report
entitled "Ratio Analysis of Nepal Telecom Corporation (NTC)". This sort of crucial
effort for BBA student gives an opportunity to get more familiar with practical
knowledge on the subject of concern.
The researcher would like to provide my heartfelt thanks to Quest Int'l College
Management team; the Principal Mr. Kashi Nath Khanal, the BBA program
Director Mr. Udaya Raj Paudel and Project Co-coordinator Mrs. Banira Dhakal
for their honorable help-cum-guidance for preparing this report. And with warm
regards, thanks to the staffs of Nepal Telecom Corporation (NTC), Pulchowk branch
for their guidelines to collect financial data which helped to accomplish this report.
At the end, the researcher would also like to thank my senior brothers- Mr. Dev
Anjaan Shah, Santosh Tiwari and Mr. Milan Poudel; interacting mutual friends;
and family members for their mutual support and encouragement which helped
directly cum indirectly to prepare this report successfully.
…………………………
Ram Kumar Shah
November, 2014
iv
List of Figures and Tables
Figure – 1: Current Ratio (CR)
Figure – 2: Quick Ratio (QR)
Figure – 3: Net working Capital to Total Assets Ratio (NWCTAR)
Figure – 4: Cash Ratio
Figure – 5: Debt-Asset Ratio (DA Ratio)
Figure – 6: Debt-Equity Ratio (DE Ratio)
Figure – 7: Long-term Debt Ratio and EM Ratio
Figure – 8: Net profit margin, Returns on capital employed and Returns on
shareholders Equity
Figure – 9: Book value per share (Rs.) and Earning per Share
Figure – 10: Quarterly-based PE ratio
Figure – 11: Quarterly-based Current Ratios
Figure – 12: Quarterly based earning per share
Appendix – 1: Liquidity Ratio Analysis
Appendix – 2: Debt Management Ratio Analysis
Appendix – 3: Past Trend Analysis with major financial Indicators of past 5 Years
Appendix – 4: Quarterly based Ratio Analysis of FY 2069/70 and FY 2070/71
v
List of Abbreviations
ADSL
Asymmetric direct subscriber line
BTS
Base Transceiver Station
CA
Current Assets
CC
Conference Calling CC
CDMA
Code Division Multiple Access
CL
Current Liabilities
CLIP
Calling Line Identification Presentation
CMPOS
Closing Market Price of Share
CMPS
Closing Market Price of Share
CR
Current Ratio
DA Ratio
Debt- Assets Ratio
DE Ratio
Debt- Equity Ratio
EBIT
Earnings before interest and Tax
EDGE
Enhanced Data rates for GSM Evolution
EM Ratio
Equity Multiplier Ratio
EPS
Earnings per Share
FY
Fiscal Year
GPRS
General Packet Radio Service
GPRS
General Packet Radio Service
IN
Intelligence Network
vi
MMS
Multimedia Messaging Service
NPAT
Net profit after Tax
NT
Nepal Telecom
NTC
Nepal Telecom Corporation
NWCTAR
Net working Capital to Total Assets Ratio
NWPS
Net Worth per Share
NWPS
Net worth per Share
P/E ratio
Price Earnings Ratio
PRBT
Personal Ring Back Tone
PRBT
Pre-define-specific Ring Back Tone
PSTN
Public switch telephone network
QR
Quick Ratio
ROA
Return on Assets
ROE
Return on Equity
SLA
Selective Line Access
SWOT
Strengths, weakness, Opportunities and Threats Analysis
TWC
Three Way Call
UTL
United Telecom Limited
VMS
Voice Mail Service
WLL
Wireless Local Loop
vii
Executive Summary
Broadly speaking, this report was collected on the basis of available data from the
specific field of study, and was analyzed-cum-presented systematically that followed
the scientific research method.
The first chapter entitled 'Introduction' part was the description about the study that
answered about the questions of general background, area, fields, objectives, and
limitations of the entire report during study.
The second chapter entitled 'Organizational Profile' supported the ideas about the
company- NT. This chapter belonged to the information about the general background
of the company, history of the organization, mission, vision, and objectives of the
organization, its products and services, etc. in a specific sense.
The third chapter entitled 'Research Methodology' provided the information about
how the report was prepared relating to data. The research & plan design, data
collection procedures, data analysis plan and, data analysis tools etc. was included as
the general subject matter under this heading of chapter.
The chapter four supported all about the information of the title of the report. The
collected data was represented systematically with its diagrams to make clearer the
readers. Basically with the help of Liquidity Ratios, Debt Management Ratios, to past
trend analysis of financial condition with major financial indicators of five years, and
also to make even clear financial ratio analysis with quarterly based analysis of data
suggest the report would perform its broad objective efficiently. Another section of
SWOT analysis was about the major competitors' analysis of the market and mainly
about the market conditions to the present situation. The financial statements and their
respective ratio analysis was the essence part of this section.
The last one chapter entitled 'Findings and Recommendation' was about the major
findings from the study of report preparation; conclusion of the entire report and the
recommendation as per conclusion supported the ideas to be followed by the finance
department management team of the company- NT in order to be succeed in its
ultimate vision cum meeting the objectives with greater success.
viii
Table of Content
Page No:
Recommendation Letter ……………………………………………...……………… ii
Declaration……………………………………………………………...…………….iii
Acknowledgement ……………………………………………………..……………..iv
List of Figures …………………………………………………………..………........ v
List of Abbreviations ………..……………………………………..…………… vi- vii
Executive Summary …………………………………………………..…………… viii
Chapter-1 Introduction
1.1 Background of the Study …………………………………………………….. … 1
1.2 Area of the Study .…………..……………………………………………….. ... ...2
1.3 Need of the Study…. ………………………………………............................... .. 3
1.4 Objective of the Study ……………………………………… …………………... 3
1.5 Limitations of the Study ……………………………………………………..... ... 4
Chapter 2
Organizational Profile
2.1 General Background ……………………………………………………………... 5
2.2 History of the Organization ………………………………................................... .6
2.3 Brief Introduction of Organization …………………………………………….. ...7
2.4 Vision, Mission and Objectives of Organization………………..………… .…….7
ix
2.5 Product and Services ………………………………………………………… .8-10
Chapter 3
Research Methodology
3.1 Research Plan and Design ……………… ……….......................................... ….11
3.2 Selection of Site . ………………………………………………………………...11
3.3 Data Collection Procedures ……………………………………………………...11
3.4 Data Analysis Plan ………………………………………………………………12
3.5 Data Analysis Tools ……………………………………………………………..12
Chapter 4
Data Analysis And Presentation
4.1 Liquidity Ratio Analysis……………………………………….. …...…………..13
4.1.1 Current Ratio …………………………………………………………..13
4.1.2 Quick Ratio …………………………………………………………….14
4.1.3 Net working Capital to total Assets Ratio ……………………………..15
4.1.4 Cash Ratio ……………………………………………………………..16
4.2 Debt Management Ratio …………………………………………………………17
4.2.1 Debt-Assets Ratio …………………………………………………...…18
4.2.2 Debt-Equity Ratio ……………………………………………………...19
4.2.3 Long-term Debt Ratio and Equity Multiplier ……………………...…..20
4.3 Past Trend Analysis - with major Financial Indicators ……………………..…...21
4.4 Quarterly Based Ratio Analysis with major Financial Indicators …………….…23
x
4.4.1 Price Earning Ratio ……………………………………………..……..23
4.4.2 Current Ratio ………………………………………………..…………24
4.4.3 Earning Per Share …………………………………………….………..25
4.5 SWOT Analysis …………………………………………………………...…26-28
Chapter 5
Findings And Recommendation
5.1 Major Findings …………………………………………………………………..29
5.2 Conclusion …………………………………………………………..…………. 30
5.3 Recommendations ……………………………………………………...………. 31
References / Bibliography…………………………………………………...……... 33
Appendix ………………………………………………………………….……. 35- 36
xi
Chapter 1
Introduction
1.1Background of the Study
Investors review important factors in a company's economic status by analyzing
financial statements. These elements include solvency, liquidity, risk management and
profitability. A financial statement is an accounting document summarizing an
organization's economic events and their impacts on the firm's competitive position.
There are four types of economic data summaries: balance sheets or statements of
financial position, statements of profit and loss, statements of cash flows and reports
on shareholders' equity, also known as statements of retained earnings.
The objective of financial statements is to provide information about the financial
position, performance and changes in financial position of an enterprise that is useful
to a wide range of users in making economic decisions (IASB Framework).
Financial Statements provide useful information to a wide range of users as following:
A) Managers require Financial Statements to manage the affairs of the company by
assessing its financial performance and position and taking important business
decisions.
B) Shareholders use Financial Statements to assess the risk & return of their
investment in the company and take investment decisions based on their analysis.
C) Prospective Investors need Financial Statements to assess the viability of investing
in a company. Investors may predict future dividends based on the profits disclosed in
the Financial Statements. Furthermore, risks associated with the investment may be
gauged from the Financial Statements. For instance, fluctuating profits indicate higher
risk. Therefore, Financial Statements provide a basis for the investment decisions of
potential investors.
1
D) Financial Institutions (e.g. banks) use Financial Statements to decide whether to
grant a loan or credit to a business. Financial institutions assess the financial health of
a business to determine the probability of a bad loan. Any decision to lend must be
supported by a sufficient asset base and liquidity.
E) Suppliers need Financial Statements to assess the credit worthiness of a business
and ascertain whether to supply goods on credit. Suppliers need to know if they will
be repaid. Terms of credit are set according to the assessment of their customers'
financial health.
F) Customers use Financial Statements to assess whether a supplier has the resources
to ensure the steady supply of goods in the future. This is especially vital where a
customer is dependent on a supplier for a specialized component.
G) Employees use Financial Statements for assessing the company's profitability and
its consequence on their future remuneration and job security.
H) Competitors compare their performance with rival companies to learn and develop
strategies to improve their competitiveness.
I) General Public may be interested in the effects of a company on the economy,
Environment and the local community.
J) Governments require Financial Statements to determine the correctness of tax
declared in the tax returns. Government also keeps track of economic progress
through analysis of Financial Statements of businesses from different sectors of the
economy.
To this report the researcher tried to analyze the financial condition with the
comparative ratio analysis of Nepal Telecom Corporation (NTC) regarding with
different fiscal years on yearly and quarterly basis of data presentation. This report
reveled a significant base of evaluating the financially health circumstances of NTC
since last 10 fiscal years.
1.2 Area of the Study
2
This research report covered the essential sector of financial department of the
company- NT. Moreover, this report also allocated the space for description about to
explain the managerial performance evaluation and the market strategies with the help
of SWOT analysis. Mainly the report was about the analysis of financial statements of
NTC- a leading company of the Telecommunication sector in Nepal. This report
included the Liquidity Ratio Analysis and the Debt Management Ratio Analysis of the
Financial Data of NTC from FY 2064/65 to FY 2069/71 with effective comparison to
the past Six Years in detailed form. Additionally, this report also represented with a
proper analysis including major financial indicators of Business Company with the
data of past Five years from FY 2060/61 to FY 6064/65. Not only this but also to
make the additional analysis of NTC, there was represented the major ratio indicators
analyzed Quarterly of two fiscal Years from FY 2069/70 and FY 2070/71 (Current
FY), too. Thus, it would be appropriate to say the report supported the subject matter
of the field of financial sector of Business Company. As the most important sector,
the telecommunication has bounded the entire nation with sharing of love, parental
relations, Business Cooperation, etc. and the entire world through communication.
Thus, the report merely was about the past, present, and future outlook of the
company- NT regarding the financial position on the competitive market. This report
also addressed the various services that NT has been providing to its customers.
1.3 Need of the Study
The report was prepared for in a specific format under the requirement of course of
degree of BBA for Pokhara University. It has a parcel importance for improving the
proficiency of making the research reports, field trip reports, Annual reports, daily
sales reports, etc. to the practical field whenever the people are self- employed to the
business organization as a manager. Most of the applying for job vacancy required to
show the self-prepared reports to show the practical capabilities of the candidate.
Besides, personal life of people for studying in general to the particular field of study
has greater significance. To sum up, this report covered these all essentials reasons
for studying on the title 'Ratio Analysis of Nepal Telecom Corporation (NTC)'.
3
1.4 Objectives of the Study
Objectives of the study are guidelines by which the study can be conducted in a
systematic manner. The main objective of this report was to assess the strengths and
weakness and to analyze its financial positions of Nepal Telecom. The specific
objectives were as following:
1. To examine/ proper evaluation of the financial position with the help of different
ratios calculation and their interpretation of the company NTC
2. To make SWOT analysis of the company NTC
1.5 Limitations of the Study
Regarding the data collection procedures, time management, Source reliability etc.
the following limitation of this report 'A Summer Project Research Report on
Financial Analysis of Nepal Telecom Corporation (NTC)' were revealed as the
limitation part to the researcher as pointed below:
1. The required time period to complete this summer project research report was
limited.
2. As it was the researcher's first financials study of an organization, how far the
researcher did but was unable to cover all financial information.
3. Unable to interview with top managers of NTC.
4. Due to the secrecy of the performance evaluation of NTC, the exact data is not
available. While shorting out the Quarterly based data analysis were based on the
un-edited Financial Statements published by NTC.
5. Some of the information was extracted from the website, magazines so that data
might not be accurate and updated.
4
Chapter 2
Organizational Profile
2.1 General Background
NEPAL TELECOM was registered on 2060-10-22 under Company Act, 2053. Then
Nepal Telecommunications Corporation (NTC) was dissolved and all assets and
liabilities were transferred to Nepal Telecom effective from 2061-01-01 (i.e. 13th
April 2004). The company with its long history is on the way of customer service and
nation building.
Nepal Telecom has always put its endeavors in providing its valued customers a
quality service since its inception. To achieve this goal, technologies best meeting the
interest of its customers has always been selected. The nationwide reach of the
organization, from urban areas to the economically non- viable most remote locations,
is the result of all these efforts that makes this organization different from others.
Definitely Nepal Telecom's widespread reach will assist in the socio-economic
development of the urban as well as rural areas, as telecommunications is one of the
most important infrastructures required for development. Accordingly, in the era of
globalization, it is felt that milestones and achievements of the past are not adequate
enough to catch up with the global trend in the development of telecommunication
sector. And the growth of telecommunication services in the country will be guided
by Technology, Declining equipment prices, market growth due to increase in
standards of life and finally by healthy competition.
Converting NT from government owned Monopoly Company to private owned,
business oriented, customer focused company in a competitive environment, Nepal
Telecom invites its all-probable shareholders in the sacred work of nation building.
5
2.2 History of Organization
In Nepal, operating any form of telecommunication service dates back to 94 years in
B.S. 1970. But formally telecom service was provided mainly after the establishment
of MOHAN AKASHWANI in B.S. 2005. Later as per the plan formulated in First
National Five year plan (2012-2017); Telecommunication Department was
established in B.S.2016. To modernize the telecommunications services and to
expand the services, during third five-year plan (2023-2028), Telecommunication
Department was converted into Telecommunications Development Board in
B.S.2026. After the enactment of Communications Corporation Act 2028, it was
formally established as fully owned Government Corporation called Nepal
Telecommunications Corporation in B.S. 2032 for the purpose of providing
telecommunications services to Nepalese People. After serving the nation for 29 years
with great pride and a sense of accomplishment, Nepal Telecommunication
Corporation was transformed into Nepal Doorsanchar Company Limited from
Baisakh 1, 2061. Nepal Doorsanchar Company Limited is a company registered under
the companies Act 2053. However the company is known to the general public by the
brand name Nepal Telecom as registered trademark. Nepal Telecom has always put
its endeavors in providing its valued customers a quality service since its inception.
To achieve this goal, technologies best meeting the interest of its customers has
always been selected. The nationwide reach of the organization, from urban areas to
the economically non- viable most remote locations, is the result of all these efforts
that makes this organization different from others. Definitely Nepal Telecom’s
widespread reach will assist in the socio-economic development of the urban as well
as rural areas, as telecommunications is one of the most important infrastructures
required for development. Accordingly in the era of globalization, it is felt that
milestones and achievements of the past are not adequate enough to catch up with the
global trend in the development of telecommunication sector and the growth of
telecommunication services in the country will be guided by Technology, Declining
equipment prices, market growth due to increase in standard of life and finally by
healthy competition. Converting NT from government owned Monopoly Company to
private owned, business oriented, customer focused company in a competitive
environment, Nepal Telecom invites its all-probable shareholders in the sacred work
of nation building.
6
2.3 Brief Introduction of Organization
Nepal Doorsanchar Company Limited (NEPAL TELECOM) was registered on 5th
February 2004 under the existing Companies Act, 2053 (1997) and the then Nepal
Telecommunications Corporation (NTC) was converted into Nepal Doorsanchar
Company Limited (NEPAL TELECOM) on 13th April 2004. Nepal Telecom is the
incumbent service provider and has been providing basic PSTN (Public Switched
Telephone Network) telephone service to the general public. Presently the service is
available in all 75 districts via 466 Telephone Exchanges located at 250 different
locations, expanding the reach of telecommunication services to even extremely
remote areas NT’s services have contributed greatly to the social, cultural, economic
and educational spheres of the nation. Globally, wireless services have greatly
affected the demand of wireline services; however, in Nepal its demand is still
considerable due to attraction of the general public to its data services like ADSL.
With the onset of triple play and other value added services, wireline services are
expected to stay longer. The company plans to provide broadband triple play (voice,
data and video) throughout the nation by installing state-of-the-art IP based soft
switch, Media Gateway and MSAN (Multi Service Access Node). This will replace
TDM based switching exchanges that have been providing narrowband voice and data
services.
2.4 Vision, mission and objectives of organization
The major objectives of the company- NTC were in past decades and are still for
future periods to come as follows:
2.4.1 Mission
“Nepal Telecom, as a progressive, customer spirited and consumer responsive entity,
is committed to provide nation-wide reliable telecommunication services to serve as
an impetus to the social, political and economic development of the country.”
2.4.2 Vision
7
“NT vision is to remain a market leader in information and technology sector in the
country while also extending reliable and cost effective services to all.”
2.4.3 Goal “NT goal is to provide cost effective telecommunication services to every
nook and corner of the country.”
2.5 Products and Services
Nepal Telecom is the key market player as it holds about 60.30% of totals no. mobile
phones and 91 % of total no of Fixed Telephones. (NTC-MIS-2067, Aswin). It has
221 Public Switch Telephone Network (PSTN) exchanges in 72 districts and has
covered all 2915 VDC with Basic Telephone service. It offers various products like
Basic telephone, Mobile telephone, Internet, ISDN, PSTN, Leased line, CDMA
phone, sky data card, etc. It has starred SIP telephony service for the Nepalese lying
beyond the country to call Nepal from round the world in its own tariff through
internet.
The main sales and services provided by the communication companies categorized
and described as follows:
2.5.1 PSTN
2.5.1.1 Public switch telephone network (PSTN) PSTN is a wired telephony service
where a wire in the field of Telecommunications, Nepal Telecom has been the trusted
partner of the people of Nepal since 2032. In order to make life of a Nepali easier,
Nepal Telecom makes continuous effort to introduce the latest technology of
communications. As always, Nepal Telecom is devoted towards our customer
satisfaction and national development with all communicational prospect and
technologies.
2.5.1.2 ADSL (Asymmetric direct subscriber line) It is the broad band internet
service provided by Nepal telecom where a single PSTN line is capable of providing
the internet and voice data at a time.
8
2.5.1.3 Dial-Up Dial-Up is the narrow band internet service where a modem is to be
connected to the computer. Laptop computer is unable of using dial-up connection.
Using dial-up only one task can be done.
2.5.2 GSM
2.5.2.1 3G Service (WCDMA Service) To fulfill the ever growing demands and to
browse and access the web pages like video based programs (Live TV browsing) NT
installed WCDMA based 3G system which offers 384 kbps of downloading and
64kbps of uploading data speed. This 3G 1X (Third Generation Technology) allows
the subscribers to have the instant data transfer/connectivity with high speeds up. This
technology enables easier/smooth migration to other higher EVDO/EVDV systems
(i.e. data only and /or data with voice systems).
2.5.2.2 GPRS (General packet radio service) It is the mobile internet service
provided by NTC and is most famous amongst the users. It is the cheapest internet
charge amongst the service providers. The charge costs 15paisa per 100kb data
transfer.
2.5.2.3 Post-paid and Pre-Paid service This is the service where a GSM user can
switch into a prepaid and postpaid tariff.
2.5.2.4 WI-MAX service Nepal Telecom (NT) launched the 4G WI-MAX IEEE
802.16e service first time in Nepal. This service is available throughout the country.
WI-MAX enables broadband wireless anytime; anywhere using any WI-MAX
enabled devices, whether it is a laptop, desktop modem, digital phone or even a game
device. Mobile WI-MAX creates a seamless broadband environment at home, in the
office and on the move.
2.5.3 CDMA Service
2.5.3.1 CDMA phone It is the service provided by NTC where the priority is given to
the remote costumers. The foremost application of CDMA is the digital cellular phone
technology from QUALCOMM that operates in the 800MHz band and 1.9GHz PCS
band. CDMA phones are noted for their call quality
9
2.5.3.2 Sky Data Card It is the volume based internet service. It is focused for the
researchers and visitors exploring new places and connecting from there.
2.5.3.3 SIP PPP It is the internet phone provided by the organization where a
costumer around the globe can log in the website and can download the software and
can call Nepal as per the tariff. It requires broadband internet.
10
Chapter 3
Research Methodology
Research methodology implies the basic research method to be carried out through the
entire study. Methodology is the most important part for the study. It describes the site
selection, research design, population and sample, sources of data, method of data
collection, data analysis tools, analysis model and limitation of the methodology.
3.1 Research Plan and Design
This report basically was prepared through the descriptive and Analytical method of
research design. The task began with the collection of necessary data and information
concerning the study. The data and information collected were studied carefully and
presented them systematically and get them analyzed so as to meet the objective of
the report. All data provided were thoroughly studied and then search design was to
plan systematically.
3.2 Selection of Site
Different web sites were visited in order to accomplish this report. To collect the
secondary data from source such the major sites of NTC, UTL, NTA, MIC, Search
engines like Google, Wikipedia, Britannica etc. were taken to the selection. Most of
the information had adopted from the site of NTC' as it is a trustable and authoritative
source with reference to this report.
3.3 Data Collection Procedures
The data had collected from various booklets, E-reports, pamphlets, magazines and
websites, and reports submitted by seniors and colleagues to the SMART team during
SMART report making and presentation.
11
3.4 Data Analysis Plan
According to research planning and design, the data was represented systematically
with the help of Table, Excel, Graphs and Figures. To make the report more clear and
scientific the data was analyzed with the comparative analysis of Financial Ratios of
six years, trend analysis of five years & quarterly ratio analysis of 8 different quarters.
3.5 Data Analysis Tools
This report entitled financial analysis of NTC took the help of different tools and
techniques of data analysis that are Liquidity Ratio, Profitability Ratio, and Debt
Management Ratios. Observation through sites and reports was used for collection of
data. Technique of data collection in this report was based on inferential and
statistical. Further those data was tabulated, coded, graphs, figures was used for the
data presentation.
12
Chapter 4
Data Analysis And Presentation
4.1 Liquidity Ratio Analysis
Liquidity ratio measures the firm's ability to satisfy its short-term commitments 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.
4.1.1 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. It is expressed as follows:
Current Ratio =
Current Assets
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. If a company's current ratio is in
this range, then it generally indicates good short-term financial strength. If current
liabilities exceed current assets (the current ratio is below 1), then the company may
have problems meeting its short-term obligations. If the current ratio is too high, then
the company may not be efficiently using its current assets or its short-term financing
facilities. This may also indicate problems in working capital management.
13
Figure – 1: Current Ratio (CR)
Current Ratio (CR)
6.00
5.00
4.00
3.00
2.00
1.00
0.00
F.Y.
2064/65
F.Y.
2065/66
F.Y.
2066/67
F.Y.
2067/68
F.Y.
2068/69
F.Y.
2069/70
3.86
4.29
4.84
3.87
4.96
4.88
Current Ratio (CR)
Source: Appendix - 1
From the above Figure – 1 there has represented the current ratios of financial
statement of NTC for different past six years from FY 2064/65 to FY 2069/70. It is
clear that current ratio was increased for two years from FY 2064/65 and was
decreased thereafter at FY 2067/68. Similarly CR is about equal for two years as
compared to FY 2066/67. The increasing CR indicated good financial position.
However range of CR crossed over 3.0 indicates the company NTC is not being able
to efficiently use of its current assets or its short-term financial facilities. This shows
there is problem with working capital management mechanism.
4.1.2 Quick Ratio
In finance, the Acid-test or quick ratio or liquid ratio measures the ability of a
company to use its near cash or quick assets to extinguish or retire its current
liabilities immediately. Quick assets include those current assets that presumably can
be quickly converted to cash at close to their book values. A company with a Quick
Ratio of less than 1 cannot currently fully pay back its current liabilities.
Generally, the acid test ratio should be 1:1 or higher, however this varies widely by
industry. In general, the higher the ratio, the greater the company's liquidity (i.e., the
better able to meet current obligations using liquid assets).Very often "Acid test"
refers to Cash ratio, instead of Quick ratio:
14
Quick Ratio =
Current Assets−Inventory
Current Liabilities
Figure – 2: Quick Ratio (QR)
Quick Ratio (QR)
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
F.Y.
2064/65
Quick Ratio (QR)
3.16
F.Y.
2065/66
3.42
F.Y.
F.Y.
2066/67 2067/68
3.74
2.63
F.Y.
2068/69
2.74
F.Y.
2069/70
2.58
Source: Appendix - 1
From the above Figure – 2 there has represented the Quick Ratios of financial
statement of NTC for different past six years from FY 2064/65 to FY 2069/70. It is
clear that QR has increased for last two years up to FY 2066/67 and has been
decreasing till FY 069/70. For current fiscal year, NTC's Liquidity has decreased than
previous fiscal years. 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. So far NTC has able
to pay back its current liabilities on time so it is satisfactory level in financial
management.
4.1.3 Net working Capital to Total Assets Ratio
Net working capital to total assets ratio (NWCTAR) represents the long-term funds
tied up in current assets as a proportion of total assets. It measures the firm's
potentiality of maintaining reservation of cash to satisfy short-term obligations. It is
measured as:
15
NWCTAR =
Net working capital
Total Assets
Figure – 3: Net working Capital to Total Assets Ratio (NWCTAR)
Net working capital to Total Assets Ratio
(NWCTAR)
0.500
0.400
0.377
0.369
0.398
0.402
0.411
F.Y.
2068/69
F.Y.
2069/70
0.296
0.300
0.200
0.100
0.000
F.Y. 2064/65
F.Y.
2065/66
F.Y.
2066/67
F.Y.
2067/68
Source: Appendix – 1
From the above Figure – 3 there has represented the Net working capital to total
assets ratio (NWCTAR) of financial statement of NTC for different past six years
from FY 2064/65 to FY 2069/70. It is clear that NWCTAR has been increasing from
last five years except at FY 2067/68. The NWCTAR was 0.369 at FY 2064/65 and
thereafter 0.377 at FY 2065/66, 0.398 at FY 2066/67, 0.296 at FY 2067/68, and 0.402
at FY 2068/69 and at last it has increased at most 0.411 at FY 2069/70. It shows
clearly that NTC is able to potentially maintain reservation of cash to satisfy its shortterm obligations.
4.1.4 Cash Ratio (Absolute Liquidity Ratio)
Cash ratio is the measure of firms liquidity based on most liquid assets. The most
liquid assets of the firm include cash and near cash items such as investment in
marketable securities. Therefore, cash ratio represents the proportion of cash and
marketable securities on current liabilities of the firm. It is measures as:
Cash Ratio =
Cash+Marketable Securities
Current Liabilities
16
Figure – 4: Cash Ratio
Cash Ratio
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
Cash Ratio
F.Y.
2064/65
F.Y.
2065/66
F.Y.
2066/67
F.Y.
2067/68
F.Y.
2068/69
F.Y.
2069/70
2.49
2.71
3.12
2.13
2.35
2.22
Source: Appendix – 1
From the above Figure – 4 there has represented the Cash Ratios of financial
statement of NTC for different past six years from FY 2064/65 to FY 2069/70. It
clearly shows that cash ratio was increasing for last two fiscal years from FY 2064/65
and thereafter it was decreased at FY 2067/68. Cash ratio was even decreasing in
comparison to initial ratio 2.49. There was maintained cash ratio as 2.49 at FY
2064/65, 2.71 at FY 2065/66, 3.12 (the most) at FY 2066/67, 2.13 at FY 2067/68,
2.35 at FY 2068/69 and 2.22 at FY 2069/70. Thus it shows the absolute liquidity ratio
as per financial statements of NTC, has not problem because it can borrow at very
short notice. But, as cash ratios are preferred better of being higher, for this condition,
the company NTC has less most liquidity in terms of assets. It may hamper the daily
cash requirement areas and management, too.
4.2 Debt Management Ratio Analysis
The debt management ratios, also known as leverage ratios, indicate the extent to
which debt financing is being used by a firm. It is the measure of long-term solvency
of a firm. In relation to financial ratio analysis, it is important to analyze the Leverage
position from two aspects: first, how firm is using the borrowed funds to finance its
assets; second, how far the firm is able to serve its debts in terms of satisfying regular
fixed charges. The basic tools used in measuring the debt management ratios are
17
Debt-Asset ratio, Debt-Equity ratio, Long-term debt to total assets ratio, equity
multiplier, interest coverage ratio, and cash coverage ratio.
4.2.1 Deb-Asset Ratio
The debt-asset ratio (DA), simply known as debt ratio, shows the proportion of total
debts used in financing total assets of a firm. It is calculated as follows:
DA Ratio =
Total Debt
Total Assets
Figure – 5: Debt-Asset Ratio (DA Ratio)
Debt-Asset ratio (DA Ratio)
0.400
0.350
0.300
0.250
0.200
0.150
0.100
0.050
0.000
F.Y. 2064/65
F.Y. 2065/66
F.Y. 2066/67
F.Y. 2067/68
F.Y. 2068/69
F.Y. 2069/70
Debt-Asset ratio (DA Ratio)
0.199
0.194
0.184
0.198
0.343
0.316
Source: Appendix – 2
From the above Figure – 5 there has represented the Quick Ratios of financial
statement of NTC for different past six years from FY 2064/65 to FY 2069/70. 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 increasing gradually and was reached at
most at FY 2068/69. As a whole, DA ratio was increasing with satisfactory level. It
18
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.
4.2.2 Debt-Equity Ratio
Debt-equity tatio (DE) is the most widely used leverage ratio to evaluate the longterm solvency of a firm. This ratio expresses the relationship between debt capital and
equity capital, and reflects the relative claim of them on the assets of the firm. It is
simply calculated by dividing total debt by total equity:
DE Ratio =
Total Debt
Total Equity
Figure – 6: Debt-Equity Ratio (DE Ratio)
Debt-Equity Ratio (DE Ratio)
0.284
0.735
0.273
0.257
F.Y.
F.Y.
2064/65 2065/66
F.Y.
2066/67
0.332
F.Y.
2067/68
F.Y.
2068/69
0.673
F.Y.
2069/70
Source: Appendix – 2
From the above Figure – 6 there has represented the Quick Ratios of financial
statement of NTC for different past six years from FY 2064/65 to FY 2069/70. Here
debt to equity ratio was increased at last two fiscal years. DE ratio was maintained at
lower rates at FY 2064/65, 65/66, 66/67 and FY 67/68 with their respective DE ratios
0.284, 0.273, 0.257 and 0.332. It indicates there was a wider safety cushion (i.e.
Creditors feel the owner's funds can help absorb possible losses of income and
capital). But, as DE ratio was increased for two years at FY 2068/69 and FY 2069/70
19
by their respective DE ratios of 0.735 and 0.673 indicate there was less protection for
its creditors. The company NTC should cut down DE ratio for good financial mgmt.
4.2.3 Long-term Debt Ratio and Equity Multiplier
Long-term debt to total assets ratio represents the relationship between long-term
debts to total assets of a firm. It is another way to express the use of long-term debt
capital in comparison to total assets of the firm. The equity multiplier (EM), also
referred to as the leverage factor, simply states the relationship of total assets to equity
of a firm. It measures the extent to which the total asset of a firm is greater than the
firm's equity capital.
Figure – 7: Long-term Debt and EM Ratio
2.500
2.000
1.500
1.000
0.500
0.000
F.Y.
F.Y. F.Y. F.Y. F.Y. F.Y.
2064/ 2065/ 2066/ 2067/ 2068/ 2069/
65
66
67
68
69
70
Long-term Debt Ratio 0.024 0.000 0.000 0.000 0.000 0.000
Equity Multiplier
1.43
1.41
1.40
1.68
2.14
2.13
Long-term
Debt Ratio
Equity
Multiplier
Equity Multiplier
Source: Appendix – 2
From the above Figure – 7 there has represented collectively the long-term debt ratio
and Equity multiplier ratios of financial statement of NTC for different past six years
from FY 2064/65 to FY 2069/70. It shows that the long term debt at FY 2064/65 was
maintained at 0.024 times at FY 2064/65 and thereafter it is zero because there was no
taken any long term debt for the Corporation NTC. Also, equity multiplier ratio was
increasing from the beginning FY 2064/65 continuously. Here equity multiplier 2.13
at FY 2069/70 denotes 2.13 times of the equity or 53.25% of the total assets are
financed with equity. With the similar way of meaning, the EM ratio for FY 2068/69,
2067/68, 2066/67, 2065/66 and FY 2064/65 was 2.14, 1.68, 1.40, 1.41 and 1.43
20
respectively. This figure shows NTC was less protection for its creditors. The
company NTC should cut down EM ratio for good financial mgmt.
4.3 Past Trend Analysis—With Major Financial Indicators
In this section the major financial indicators of a corporate business company has
analyzed. From the annual reports of NTC, the following data have abstracted as
following for the past five years from FY 2060/61 to FY 2064/65:
Table – 3: Summary: Past Trend Analysis with major financial indicators *
Past Trend Analysis with Major Financial Indicators
Heads of Account and Ratios
Net Profit Margin (%)
Returns on Capital Employed (%)
Returns on Shareholders Equity (%)
Book Value Per Share (Rs.)
Earning Per Share (EPS)
F.Y.
F.Y.
F.Y.
F.Y.
F.Y.
2060/61 2061/62 2062/63 2063/64 2064/65
42.60
5.06
5.07
137.20
6.95
38.53
17.10
17.11
138.84
23.62
44.64
22.17
22.18
157.91
32.91
38.32
21.88
22.40
178.63
37.68
44.40
25.12
25.57
235.63
52.95
*Note: This report is not comparable with other fiscal years because for the report of
FY 2060/61 is only covered the financial information of Baisakh 2061 to Asadh 2061.
From this table it is cleared that the total income has increased gradually in
comparison to the F.Y. 2062/63 by 20.28%, at F.Y. 63/64 by 33.39% and at F.Y.
2064/65 by 21.27%. It is cleared that the company NTC's total income has increased
around by triple in 5 years from FY 2061/62 to FY 2064/65.
Similarly to the total expenses, for the FY 2062/063 has been decreased by 1.35 %
than the previous fiscal Year. Hither for the next FY 2063/064 has increased by 60.57
% because of heavy purchase on Telephone sets and equipments and also due to
decrement in foreign exchange rate of currency. For the fiscal year 2064/065 there is
only increment in total expenses by 3.69 % than previous FY.
21
With respect to profit after tax in comparison to previous year, for the FY 2062/063 it
has been increased by 39.36 %, similarly for FY 2063/064 by 14.50 % and for FY
2064/065 by 40.52 %. As a whole, the company NTC's profit after tax has increased
by 124 % during 5 years at FY 2064/65 than FY 2061/62.
While analyzing the earning before income, tax, depreciation and amortization
(EBITDA) is only 65.38% in FY 2061/62, whereas there is 69.53 % at FY 2064/65 so
it seems to take as considerable condition because this proportion is also less than
other Telecom companies in the world.
The earning per share (EPS) has maintained at Rs. 52.95 but there was only Rs. 23.62
in FY 2061/62. So, this shows that there is increment in aggregate Assets of the
company NTC.
The following figures are the actual representation according to Table – 3. As
described above they are presented as following for their more clear meaning on
analysis:
Figure – 8: Net profit margin, Returns on capital employed and Returns on
shareholders Equity
Returns on Capital
Employed (%)
10.00
10.00
5.00
5.00
-
-
Source: Appendix – 3
22
F.Y. 2064/65
15.00
F.Y. 2063/64
15.00
F.Y. 2062/63
20.00
F.Y. 2061/62
20.00
F.Y. 2064/65
25.00
F.Y. 2063/64
25.00
F.Y. 2062/63
30.00
F.Y. 2061/62
30.00
F.Y. 2060/61
F.Y. 2064/65
F.Y. 2063/64
F.Y. 2062/63
F.Y. 2061/62
F.Y. 2060/61
46.00
45.00
44.00
43.00
42.00
41.00
40.00
39.00
38.00
37.00
36.00
35.00
Returns on Shareholders
Equity (%)
F.Y. 2060/61
Net Profit Margin
Figure – 9: Book value per share (Rs.) and Earning per Share
Earning Per Share (EPS)
Book Value Per Share (Rs.)
60.00
50.00
40.00
30.00
20.00
10.00
-
250.00
200.00
150.00
100.00
50.00
-
Source: Appendix– 3
4.4 Quarterly Based Ratio Analysis with Major Financial Indicators
Appendix – 4: Quarterly based Ratio Analysis (FY 2069/70 to FY 2070/71)
Quarterly Ratio Analysis of NTC (FY 2069/70 to FY 2070/71)
Closing
Earning Market
per Share Price of
Share
As at
Net
Current
Worth
P/E Ratio
Per Share Ratio
(Rs.)
Ashadh 32, 2071
77.87
656
8.42
383.91
1.68
Ashadh 31, 2070
75.33
596
7.91
357.57
1.59
Chaitra 30, 2070
76.50
679
8.88
366.95
1.61
Chaitra 31, 2069
75.54
585
675
7.74
338.48
1.56
9.05
394.86
1.8
Poush
Poush
30, 2070
74.57
29, 2069
74.08
665
8.98
366.87
1.82
Ashwin 31, 2070
65.55
607
9.26
373.64
1.47
Ashwin 31, 2069
96.83
647
6.68
429.95
2.18
Source: Annual Report (FY 2069/70 to FY 2070/71)
4.4.1 Price Earning (P/E) Ratio
The PE is simply the ratio between market price per share and earnings per share. It
represents the amount which investors are willing to pay for each rupee of the firm's
23
earnings. The higher PE ratio indicates the greater confidence of investor in the firm's
future. It is calculated as follows:
P/E Ratio =
MPS
EPS
where, MPS= Market price per share and EPS= Earning per Share
Figure – 10: Quarterly-based PE ratio
P/E Ratio
2.50
2.00
1.50
1.00
0.50
0.00
2.18
1.68
1.59
1.61
1.56
1.80
1.82
1.47
As at
As at
As at
As at
As at
As at
As at
As at
Ashadh 32, Ashadh 31, Chaitra 30, Chaitra 31, Poush 30, Poush 29, Ashwin 31, Ashwin 31,
2071
2070
2070
2069
2070
2069
2070
2069
Source: Appendix – 4
From the above Figure – 10 there has represented collectively the Price Earning ratio
of financial statement of NTC for different eight years within FY 2069/70 and FY
2070/71. It clearly shows that P/E ratio has decreased by 23% as at quarter Ashadh,
32 2071. It denotes a bad financial condition on which there is very lower confidence
of investors to the NTC's future as financial growth. For the beginning of four
quarters starting from Asadh,32 2071 was not good for NTC because at that time PE
ratio was continuously decreasing and only thereafter there seemed to be increasing
for further two quarters. Finally there was the best financial condition at quarter of
Ashbin 31, 2069.
4.4.2 Current Ratio (CR)
Current ratio measures the ability of the firm to meet obligations due within one year.
This measures a regular cash flow and both account receivable and inventory can be
readily converted into cash. It is the proportion of current assets and current liabilities.
24
Figure – 11: Quarterly-based Current Ratios
Current Ratio (CR)
2.50
2.00
1.50
1.00
0.50
0.00
1.68
1.61
1.59
1.56
1.80
2.18
1.82
1.47
As at
As at
As at
As at
As at
As at
As at
As at
Ashadh 32, Ashadh 31, Chaitra 30, Chaitra 31, Poush 30, Poush 29, Ashwin 31, Ashwin 31,
2071
2070
2070
2069
2070
2069
2070
2069
Source: Appendix – 4
From the above Figure – 11 there has represented collectively the Current Ratio of
financial statement of NTC for different eight years within FY 2069/70 and current
FY 2070/71. Here the CR during two fiscal years is collectively good in short-term
financial strength because it lies between 1.5 and 3 for healthy business. So this
represents that now NTC is able to effectively use of its current assets or the shortterm financing facilities.
4.4.3 Earning Per Share
Figure – 12: Quarterly based earning per share
Earning Per Share (EPS)
96.83
100.00
77.87
80.00
75.33
76.50
75.54
74.57
74.08
65.55
60.00
40.00
20.00
0.00
As at
As at
As at
As at
As at
As at
As at
As at
Ashadh Ashadh Chaitra Chaitra Poush Poush Ashwin Ashwin
32, 2071 31, 2070 30, 2070 31, 2069 30, 2070 29, 2069 31, 2070 31, 2069
Source: Appendix – 4
25
From the above Figure – 12 there has represented collectively the Earning per Share
(EPS) Ratio of financial statement of NTC for different eight years within FY
2069/70 and current FY 2070/71. Earning per share (EPS) is the monetary value of
earnings per each outstanding share of a company's common stock. It is calculated as:
(Net Earnings / No. of Shares). Higher EPS are preferred. This figure also shows a
good condition for healthy business.
4.3 SWOT Analysis
Broadly evaluating the internal, external cum competitive Environmental analysis of
Nepal Telecom Corporation (NTC) has been summarized as following the point-wise:
4.3.1 Strengths

Economies of scale- It is easier to create economies of scale thereby increasing
return on investment. The Nepali telecom market especially Kathmandu is a
high-density area, which means more population per tower. This means lower
capital expenditure cost.

Active management team- Active management is a big strength to the telecom
industry because it is due to the effective management team; the telecom
industry is able to make consistent profit over a long period of time.

Manipulate price- NTC has loyal customer base. Even though the comparative
prices are higher for its services, customers are ready pay for it.

Strong brand name-Due to the strong brand name of the company, people have
trust and are loyal towards the company. It will not have any problem in
introducing its products and technologies in the new market.

Sustainable business modeling-It is able to sustain itself with the profit it has
made over a long period of time even though if there is some kind of
hindrance.
4.3.2 Weaknesses
26

Low signal strength-Large number of call drops and quality of connection is
not good.

Late adaptation of new technology- Nepal is probably one of the last countries
to adopt new technology. Example 3g technology, some estimate suggests that
nearly 133 countries across the world already had 3G technology and mobile
services in one form or the other.

High overhead cost: NTC is compiled with large number of staffs. NTC is
facing hard time to recruit and assign the employees in right place and in right
time.

Low quality customer care services-If there is any problem in the product that
you buy, the customer care service in not that efficient to solve the problem
immediately. It will probably take days to cater the customer. Companies
don’t give priority in the maintenance.
4.3.3 Opportunities:

Technological
advancement-The
technology
has
been
getting
more
sophisticated and advanced. The telecom firms can use such technology in
their operation to improve the overall performance and customer satisfaction.
This provides the firm the competitive advantage in the market.

Expansion of territory: Still huge amount of people are there who are far from
any or some of the telecommunication services. This is one of NTC’s
opportunities to reach the customer and expand its business.

Creation of new business opportunities- Development of telecom industry can
result to creation of new business opportunities in other sectors such as hydro
power, man power, import, export etc.
4.3.4 Threats:

Competition- Private Telecom Company entering the industry with new and
advance technology to satisfy the consumer need and overtake the one or some
market segments.
27

Shrinking economy-Due to the unhealthy and shrinking economic condition,
new telecom companies are not able to enter and the ones who are already
established are not able to expand.

Increasing rules and regulations-Due to the frequent change in the government
and change in the rules and regulations, telecom industry is not able to take
risk, explore new technology and market.

Health related problems-According to studies, there are also many health
related diseases like cancer which is caused due to the excessive use of mobile
phones.
28
Chapter 5
Findings and Recommendations
5.1 Major Findings
Taking in to consideration the Gross Revenue of NTC was Rs. 38.85 billion in F.Y.
2069/70 (2012/13) and Rs. 36.79 billion in F.Y. 2068/69 (2011/12). Within first 6
months of current financial year, F.Y. 2070/71 (2012/13), company has already
earned Rs. 18.43 billion. Due to this, company is confident enough that the target will
be achieved over par.
The performance of the company has improved substantially in last 5 years. In F.Y.
2068/69 (2011/12), company has been successful in earning revenue of Rs. 36.79
billion with a net profit of Rs. 11.60 billion. In comparison with previous financial
year, F.Y. 2010/11, the revenue for F.Y. 2011/12 has increased by 15.22%. The net
profit ratio in F.Y. 2010/11 was 37.95% and in F.Y. 2011/12 is 31.54%. Such
decrement in net profit ratio is due to adjustment of GSM license renewal fee in F.Y.
2011/12. Thus, the decrease in net profit ratio should not be considered as a demotivating factor.
In addition to the above financial indicators, liquidity ratio has also increased from
1.68 times in F.Y. 2012/13, by 1.63 times in F.Y. 2010/11 to 1.69 times in F.Y.
2011/12. This indicates that the company is comfortable with its present liquidity
position and foreseeable liquidity needs. It has adequate facilities in place and robust
cash flows to meet its liquidity requirements for executing its business plans and
meeting with any evolving requirements.
The total expenditure for F.Y. 2012/13 is Rs. 23.72 billion, for F.Y. 2011/12 is Rs.
21.17 billion which is 36.23% more than that of previous financial year 2010/11. Out
of total expenditure, there is an increment of 33.86% in Maintenance and Operation
Expense and for F.Y. 2012/13 it is by 16.75%. With respect to Other Expenses and
Depreciation Expense, there is an increment of 125.06% and 1.53% respectively. Due
29
to decrease in expense for Defined Benefit Plan to Employees, total Personnel
Expenditure has decreased by 4.67% in comparison to previous financial year.
Personnel Expenditure and Maintenance & Operation Expenditure comprise major
portion of Total Expenditure with 20.29% and 27.01% respectively.
EPS for F.Y. 2012/13 has been Rs. 77.87, for F.Y. 2011/12 was Rs. 77.37 and
similarly EPS for F.Y. 2010/11 was Rs. 80.80. Due to percentage increment in
expenditure being more than that of increment in revenue with respect to previous
financial year, EPS for concerned financial year has decreased. With respect to Book
Value of Share, there has been increment by 9.22%, Book value per share for F.Y.
2011/12 and 2010/11 being Rs. 329.83 and Rs. 301.97 respectively.
Through the market analysis and SWOT analysis, currently NTC has most fetching
the competitive environment with its competitors. It has able to spread over its' newly
advance services to its customers. It is going forward with better management and
investment that shows it brighter future.
5.2 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 75 districts and covering all the VDC’s. 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,EVDO,GPRS) other entertaining services as
30
CRBT and free ten web SMS provided. It covers about 4.5% 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 to the government and has been leading the
nation by revenue (This year 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 Telaia Sonera, 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.
As a Conclusion the services provided to the customers are satisfactory till now but a
lot of improvement and a regular cope-up is to be made to hold the existing customers
and to attract new customers from the competitive market as well.
5.3 Recommendations
a) Improvement in Financial Ratios 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.
b) Improvement in the managerial environment Managerial environment includes
the circulation of the internal commands, decisions,
it is very important to cope up
with the environment.
c) Improvement in the customer care Any organization, usually the service based
should always give first priority to the customers. Holding the existing customer is
31
more important than planning for inviting new ones because an unsatisfied customer
can stop ten new willing customers from joining the organization.
d) Distribution of versatile services 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.
e) Improvement in the decision making and policy The decision making and policy
formulation is found to be worst 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.
f) Relations between the trade unions and management The current cooperation
between the trade unions and management is quite unsatisfactory, if the organization
wants proper survival in the competitive environment it should always cope-up with
the workers unions.
7
32
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34
Appendixes
Appendix – 1: Liquidity Ratio Analysis
Liquidity Ratio Analysis of NTC
S.N.
1
2
3
4
5
6
7
8
9
10
11
12
Heads of Account and Ratios
Current Assets
Current Liabilities
Current Ratio
Prepayments
Inventories
Quick Assets
Quick Ratio
Net working capital
Total Assets
Net working capital to Total
Cash & Cash Equivalents
Cash Ratio
From FY 2065 to FY 2070
F.Y. 2064/65 F.Y. 2065/66 F.Y. 2066/67 F.Y. 2067/68 F.Y. 2068/69 F.Y. 2069/70
25,000,473,815 28,837,295,203 33,555,576,522 30,379,035,840 53,309,732,666 58,984,268,977
6,478,044,962 6,718,054,667 6,929,335,416 7,858,019,367 10,757,853,131 12,077,703,351
3.86
4.29
4.84
3.87
4.96
4.88
4,143,958,221 5,699,165,581 6,805,636,259 8,747,035,494 22,421,596,092 26,822,422,498
416,424,150
180,131,603
842,405,822
958,052,566 1,385,963,902 1,049,688,996
20,440,091,444 22,957,998,019 25,907,534,441 20,673,947,780 29,502,172,672 31,112,157,483
3.16
3.42
3.74
2.63
2.74
2.58
18,522,428,853 22,119,240,536 26,626,241,106 22,521,016,473 42,551,879,535 46,906,565,626
50,194,186,870 58,686,692,120 66,835,844,174 76,021,558,762 105,971,908,828 114,225,129,445
0.369
0.377
0.398
0.296
0.402
0.411
16,134,516,743 18,191,058,076 21,611,536,437 16,769,204,878 25,274,204,651 26,774,785,622
2.49
2.71
3.12
2.13
2.35
2.22
Source: Annual Report of NTC, FY 2064/65 to FY 2069/70
Appendix – 2: Debt Management Ratio Analysis
Debt Management Ratio Analysis of NTC
S.N.
Heads of Account and Ratios
1
2
3
4
5
6
7
8
9
10
11
Total Debt
Total Assets
Debt-Asset ratio (DA Ratio)
Total Equity
Debt-Equity Ratio (DE Ratio)
Long-term Debt
Long-term Debt Ratio
Equity Multiplier
EBIT
Interest Payment
Interest Coverage Ratio (TIE Ratio)
F.Y. 2064/65
9,973,771,283
50,194,186,870
0.199
35,179,747,445
0.284
1,191,680,000
0.024
1.43
10,871,456,130
10,303,949
1,055
Fiscal Year (F.Y.)F.Y. 2065/66
F.Y. 2066/67
11,369,659,169 12,284,382,800
58,686,692,120 66,835,844,174
0.194
0.184
41,629,021,574 47,819,733,327
0.273
0.257
0
0
0.000
0.000
1.41
1.40
13,633,989,872 14,441,095,208
0
0
0
0
From FY 2065--2070
F.Y. 2067/68
F.Y. 2068/69
F.Y. 2069/70
15,044,036,025 36,356,411,945 36,097,906,374
76,021,558,762 105,971,908,828 114,225,129,445
0.198
0.343
0.316
45,296,455,752 49,474,560,053 53,635,694,828
0.332
0.735
0.673
0
0
0
0.000
0.000
0.000
1.68
2.14
2.13
16,389,639,364 15,670,770,448 15,131,032,565
0
0
0
0
0
0
Source: Annual Report of NTC, FY 2064/65 to FY 2069/70
35
Appendix – 3: Past Trend Analysis with major financial Indicators of past 5 Years
Major Financial Indicator's Analysis of 5 years from Annual Reports of NTC
Heads of Account and Ratios
Total Income
Depreciation
Profit before tax
Profit after tax
Net Profit Margin (%)
Total Shareholders Equity
Total Capital Emloyed
Returns on Capital Employed (%)
Returns on Shareholders Equity (%)
EBITDA
Book Value Per Share
Total Shares Number
Earning Per Share (EPS)
F.Y. 2060/61
2,448,110,871
260,731,297
1,454,819,079
1,042,815,662
42.60
20,580,386,441
20,591,636,026
5.06
5.07
70.32
137.20
150,000,000
6.95
Fiscal Year (F.Y.)- From FY 2061--2065
F.Y. 2061/62
F.Y. 2062/63
F.Y. 2063/64
F.Y. 2064/65
9,194,297,192
11,058,914,824
14,751,623,805
17,889,310,266
1,048,435,966
1,195,081,001
1,366,504,461
1,486,129,221
4,921,528,988
6,843,726,817
7,983,321,923
10,871,456,130
3,542,461,326
4,936,647,252
5,652,688,491
7,942,901,598
38.53
44.64
38.32
44.40
20,825,855,017
23,686,026,881
26,794,280,845
35,343,894,199
20,850,093,671
23,686,023,881
27,985,960,845
35,343,894,199
17.10
22.17
21.88
25.12
17.11
22.18
22.40
25.57
65.38
73.07
63.78
69.53
138.84
157.91
178.63
235.63
150,000,000
150,000,000
150,000,000
150,000,000
23.62
32.91
37.68
52.95
Source: Annual Report of NTC, FY 2060/61 to FY 2064/65
Appendix – 4: Quarterly based Ratio Analysis of FY 2069/70 and FY 2070/71
S.N.
Heads of Ratios
1
2
3
4
5
Earning per Share
Closing Market Price of Share
P/E Ratio
Net Worth Per Share (Rs.)
Current Ratio
From FY 2069/70 to 070/71
As at As at As at As at As at
As at As at As at
Ashadh Ashadh Chaitra Chaitra Poush 30, Poush 29, Ashwin Ashwin
2069 31, 2070 31, 2069
32, 2071 31, 2070 30, 2070 31, 2069 2070
77.87 75.33 76.50 75.54 74.57 74.08 65.55 96.83
656
596
679
585
675
665
607
647
8.42
7.91
8.88
7.74
9.05
8.98
9.26
6.68
383.91 357.57 366.95 338.48 394.86 366.87 373.64 429.95
1.68
1.59
1.61
1.56
1.80
1.82
1.47
2.18
Source: Unaudited quarterly financial statements (First to fourth quarter's report) of
NTC.
36