The financial health of the selected three finance companies Nepal Merchant

Bank & Fin. Ltd, Kist Merchant Bank & Finance, National Finance Ltd. can be
found out for the investments are as follow:

1. Return on assets: - It measures the profitability from a given level of

investment.

ROA= Net profit after tax/ total assets

Profit after tax Total assets ROA

Nepal Merchant 73110000 9031980000 0.81
Bank & Fin. Ltd.
Kist Merchant Bank 45700000 4022420000 1.13
& Finance
National finance 16500000 820270000 2.01
Ltd.

2. Return on equity:- It measures the profitability on shareholders funds

ROE= Net profit after tax/total equity

Profit after tax Total equity ROE

Nepal Merchant 73110000 1254690000 5.83
Bank & Fin. Ltd.
Kist Merchant Bank 45700000 864750000 5.28
& Finance
National finance 16500000 - -
Ltd.

3. Debt to equity:- It measures the relationship between borrowed capital to

own capital.

=\Total liabilities / shareholder’s equity

Total liabilities Total equity Debt to equity ratio

Nepal Merchant 9031980000 1254690000 7.19
Bank & Fin. Ltd.
Kist Merchant Bank 4022420000 864750000 4.65
& Finance
National finance 820270000 - -
Ltd.

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 4. Interest coverage ratio:- It measure of protection to creditors for payment
of interest.

=Profit before interest and tax/ Interest expenses

Profit before Interest expenses Interest coverage

interest and tax ratio
Nepal Merchant 106730000 139100000 0.77
Bank & Fin. Ltd.
Kist Merchant 66720000 139860000 0.48
Bank & Finance
National finance 26780000 339800000 0.08
Ltd.

5. Price earning ratio:- Price earning ratio measures of the amount investors
are willing to play for a rupee of earnings.

=Market price per share/ Earning per share

Market price per Earning per share P/E Ratio

share
Nepal Merchant 930 7.31 127.22
Bank & Fin. Ltd.
Kist Merchant 998 5.71 174.78
Bank & Finance
National finance - - -
Ltd.

6. Investment to total deposits:-It measure that the company is capable in

mobilizing deposit into investment.

= Investment/ total deposit

Investment Total deposits Ratio

Nepal Merchant 1184460000 1661350000 0.71
Bank & Fin. Ltd.
Kist Merchant 282780000 2745750000 0.10
Bank & Finance
National finance 148450000 621830000 0.24
Ltd.

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 7. Loans and advances to total deposits: - It measure the lending ability of
the bank.

=Loans and advances/ total deposits

Loans and Total deposits Ratio

advances
Nepal Merchant 2009930000 1661350000 1.21
Bank & Fin. Ltd.
Kist Merchant 2488290000 2745750000 0.42
Bank & Finance
National finance 454540000 621830000 0.73
Ltd.

8. Net profit to total deposit:- It measures that the bank is how much
efficiency to mobilize and utilize deposits in generating profit.

= Net profit/ total deposits

Net profit Total deposits Ratio

Nepal Merchant 73110000 1661350000 4.4%
Bank & Fin. Ltd.
Kist Merchant 45700000 2745750000 1.6%
Bank & Finance
National finance 16500000 621830000 2.65%
Ltd.

9. Return on investment:- It measures the return made by bank with respect

to its investment.

= Net profit/ Investment

Net profit Investment Ratio

Nepal Merchant 73110000 1184460000 6.17%
Bank & Fin. Ltd.
Kist Merchant 45700000 282780000 16.16%
Bank & Finance
National finance 16500000 148450000 11.11%
Ltd.

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Decision:-

I will invest my fund which is one third (1/3) of Rs.10 million in Nepal
Merchant Bank & Finance Ltd. because when I go through the analysis stage of
the financial statement of all three Finance companies I found that Nepal
Merchant Bank & Finance Ltd. is more efficient to mobilize it funds in different
sectors than other two finance companies. Since, its interest coverage ratio is
higher than other remaining two finance companies it is more preferable. Its
Return on Equity & Debt to equity is higher than Kist Merchant Finance
Company. Net profit to total deposits of Nepal Merchant Bank & Fin Ltd. is
higher than other two Finance companies. Return on Equity & Debt to Equity is
also more than rest of two Finance companies. It is more capable to mobilize its
investment fund than the other finance companies. So, I would like to invest my
money in Nepal Merchant Bank & Fin Ltd.

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