Ratio Analysis

Presented by: Nikesh Aryal

Fusion of Fundamental and Technical Analysis

Introduction of Ratio Analysis

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 balance sheet, income statement and cash flow statement. Ratio analysis is used to analyze the various aspects of the company such as liquidity, efficiency and solvency.

Cross Sectional Analysis

Cross sectional analysis is the comparison of actual ratios of one firm with similar types of firms belonging to the same industry.

Time Series AnalysisTime series analysis is the

comparison of ratios of same enterprise over a period of time.

Classification of Ratios

Liquidity SolvencyProfitabilityMarket Value Ratios

Liquidity Ratio

It measures the ability of business to meet it’s short term financial obligations.

Liquidity indicators are current ratio and quick ratio.

These ratios deals with the firm’s working capital.

Solvency Ratio

Solvency ratio measures the ability of the company to meet its long term debts.Indicators of solvency ratio are debt equity ratio, equity multiplier.Lower the solvency ratio better the company.

Profitability Ratio

Profitability ratio shows the effect of liquidity, asset management and debt management on operating results.

Indicators of profitability ratios are gross profit margin, net profit margin, return on total assets, return on equity, etc.

Market Value Ratios

Market value ratios give the management an indication of what investors think of the company’s past performance and future prospects.

Indicators of market value ratios are price earnings ratios, price to book value ratio, earning per share, dividend payout ratio, dividend yield ratio, book value per share, etc.

Comparison of ratiosRatios Nabil Everest Remarks

G.P. Margin 73.79% 64.98% Higher the better so Nabil is favorable.

N.P. margin 46.39% 36.63% Higher the better so Nabil is favorable.

Book Value Per Share 200.39 342.73 Higher the better so Everest is favorable.

Market Price Per Share

1432 1740 Higher the better in view of seller/owner.

Earning Per Share 51.64 77.1 Higher the better so Everest is favorable.

Return on Equity(TTM)

25.92% 23% Higher the better so Nabil is favorable.

Return on Assets(TTM)

2.66% 1.86% Higher the better so Nabil is favorable.

Price Earning Ratio 27.73 22.57 Lower the better so Everest is favorable.

MY OPINION

NABIL Bank Limited has already made their paid up capital of 8 arabs according to the new monitory policy made by Nepal Rastra Bank however Everest Bank limited hasn’t made their paid up capital of 8 arabs.

Although we can see gross profit margin, net profit margin, return on equity, return of assets of NABIL bank is higher and better than that of Everest Bank Limited Earning Per Share (EPS) of NABIL bank is lower because paid up capital of NABIL Bank is higher than that of Everest Bank and EPS is directly proportional to the paid up capital of the company.

So, as an investor after analyzing the fundamental analysis, I would recommend other investors who are new to the share markets to invest in NABIL Bank Limited rather than Everest Bank Limited.

Thank You Sharechart team for unique class for like us new investor about nepalese stock market both

fundamental and technical analysis with nepal’s first software based study.