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CHAPTER I
INTRODUCTION

1.1 Background of the Study

Financial Analysis is an evaluation of both a firm’s past financial performance and its
prospectus for the future. Financial statement analysis involves the calculation of various ratios.
In mathematics, a ratio is the relationship between two quantitative figures. The ratio analysis
is the financial tool by which the financial strength and weakness are measured by relating two
accounting data. Financial statement analysis is helpful to the decision maker for finding out
favorable or unfavorable situation of a business concern.

Financial sector is the backbone of economy of a country. It works as a facilitator for achieving
sustainable economic growth through providing efficient monetary intermediation. A strong
financial system promotes investment by financing productive business opportunities,
mobilizing savings, efficiently allocating resources and makes easy the trade of goods and
services. Banking system is considered as the heart of an economy because of its contribution
toward the mobilization of savings and thus to the utilization of this country’s resources.
Commercial banks play important role for the development of the countries through the
resource mobilization. They channel funds from savers to borrowers continuously. They should
generate sufficient income to cover their operational cost they incur in the due course. The
financial performance of banks has critical implications for economic growth of countries. How
well a financial institution is performing is of great importance for the resource providers for
making correct investment decisions. Good financial performance rewards the shareholders for
their investment. This, in turn, encourages additional investment and brings about economic
growth. On the other hand, poor banking performance can lead to banking failure and crisis
which have negative repercussions on the economic growth. Profitability of financial
institution is one of the important parameters from which funds providers can understand
performance of the institutions. Financial performance depends on various factors. Some of
them are Capital Adequacy, Asset Quality, Management Efficiency, Liquidity, Gross Domestic
Product etc. Therefore, in order to ensure sound financial performance banks should focus on
the factors likely to affect profitability and the extent of their influence.(www.nea.com.np)

Financial performance is the achievement of the company's financial performance for a certain
period covering the collection and allocation of finance measured by capital adequacy,
liquidity, solvency, efficiency, leverage and profitability. Financial performance, the
company's ability to manage and control its own resources. Cash flow, balance sheet, profit-
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loss, capital change can be the basis of information for corporate managers to make decisions.
It is important to understand fundamental analysis and technical analysis, it is necessary to
learn finance to understand the company's financial behavior through economics, financial
management and accounting.

Financial ratios must be healthy. One healthy size-not a company is to look at financial
performance. How big the company is able to create profit, the ability to pay the debt, control
the debts, capital turnover, etc. Therefore, the financial statements that are subject to the study.
In fact the scale of the company is different, there are small, medium, and large. Starting from
individual businesses, families, joint ventures, corporations to conglomerates. If the business
scale is different, then the measurement of financial performance is also different, cannot be
equated. Theories with practice in the field are sometimes different. Indeed, the theory is an
ideal size, but sometimes empirical readings are not the same as the theory desires. At least this
empirical can approach that should be according to the will of the theory. The study of actual
financial performance is to understand the ideal criteria provided with input data from the
empirical reality of the firm.

1.2 Profile of NEA

Nepal Electricity Authority (NEA) changed into created on August 16, 1985 (Bhadra 1, 2042)
below the Nepal Electricity Authority Act. 1984, via the merger of the Department of
Electricity of Ministry of Water Resources, Nepal Electricity Corporation and associated
Development Boards. To treatment the inherent weak point related to those fragmented
strength agencies with overlapping and duplication of works, merger of this character employer
have become important to obtain performance and dependable service.

In recent years, the NEA has made good progress. Prior to 2018, Nepal Electricity Authority
faced huge losses, but since 2018, NEA has made good progress. In late 2017, NEA lost NR.
8.89 billion. However, at the end of 2018, NEA was able to reduce its deficit and turn NR's
$1.502 billion profitable. Similarly, his 2019 profit for the NEA increased from NR1.502
billion to NR2.975 billion. Over the last five years of 2020, the NEA has performed well in the
financial sector. Profit before tax for 2020 was NRs 13,720 million. However, his NEA
performance in 2021 has decreased compared to the previous year. Net profit before tax fell
54.72% in 2020/21, reaching NR. 6,008 million from NR (provisional). 13,794 million in
2019/20. The Expected profit for FY2021/22 was NR. 10.9 billion. However, reduced power
generation from NEA plants due to low water levels in the dry season, increased system losses
from 15.27% in FY2019/020 to 17.18% in FY2020/021, and expensive power imports from
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India due to reduced profits2020 /21 Another major reason for the decline in revenue is the
COVID-19 pandemic. Due to COVID-19, many industries have shut down and electricity
consumption has decreased. This has a direct impact on NEA sales.

1.3 Objectives of the Study

The general objectives of the field report are to fulfill the partial requirement of BBS program
and to get information of financial performance of Nepal Electricity Authority. The specific
objectives are listed below:

• To analyze the organization’s operating efficiency.

• To analyze the profitability ratios of the sample company.
• To analyze the liquidity position of the sample company.
• To evaluation the financial performance of sample company.

1.4 Rationale

The results of this study will provide financial guidance to board members, business
consultants and investors to maximize performance. The Followings Points shows the
Rationale of the Study.

• Researchers can use these results of this study as a reference and for further research.
• Information in this study will help encourage investors to invest in the development of
other projects under her NEA.
• The research also helps investors make financial decisions

1.5 Review of Literature

A literature review is a search and evaluation of the available literature in your given subject
or chosen topic area. It documents the state of the art with respect to the subject or topic you
are writing about. A literature review has four main objectives surveys synthesizes, critically
analyses and presents. A literature review is generally conducted to review the present status
of a particular research topic. From the survey of literature, a researcher is able to know the
quantum of work already done on his/her new research topic so far not touched, or yet to be
undertaken. The objective of the study is to analysis the Financial Performance of Nepal
Electricity Authority. And to achieve that objective and prepare this report mainly secondary
data were used but some extent, primary data were also based. Secondary source are books,
annual report, Financial Statement, review and reports, and website. And primary source are
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interview questionnaire, and telecommunications etc. The studies have focused on financial
position, and the profit and loss of NEA.

1.5.1 Review on financial Performance.

Performance term has been derived from term ‘performed’ which means ‘to do’, ‘to carry out’
or ‘to render’. Numerous economists consider establishments and organizations, such as an
engine in determining economic, social and, political progress. Continuous performance of the
organizations is useful in the development and growth of the state.

Financial position and performance information in the past often used as a basis for forecasting
the financial position and forthcoming performance and other matters that directly attracted the
attention of users such as the payment of dividends, wages, the price movement of safeties and
the banks' capability to meet its promises as they fall due. Performance is a significant purpose
to be accomplished by any banks' everywhere, for the reason that the performance is a
reflection of the banks capability to manage and allocate resources (Sintha,2017).

According to Nyathira (2018) bank's performance is an obviously a multidimensional concept

including four components: financial and market performance, human resource performance,
organizational efficiency, and customer concentrated performance.

The presence of returns in a bank is predictable to get the care of savers and creditors in
assessing a management performance of a bank and can forecast bank incomes in the future.
Earning is also an element in the financial declarations which are very worried, for the reason
that the bank incomes are probable to be a reference for the banks in offering the performance
in a bank as a whole in accomplishing business objectives. One way that management does
when preparing financial statements that impact the level of return is earnings management
which expectation can raise the value of the bank itself (Prihastomo & Khafid,2018).

Organizational performance is one of the most significant factors in the management research
and debatable the important indicator of organizational performance Melwani,(2019). The
financial performance of influence subdivision companies the central objective was to ascertain
if any changes happen in financial performance among the different energy manufacturers, he
was found that the firms using fossil fuel to produce electricity were performing better (Rai &
Prakash,(2019). The performance of banks has been of countless interest in academic research.
To assess the structural performance, one has to study the countryside of the banks and the
causes for which its performance is being assessed to properly select the applied measurement
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or component when determining the performance of those banks Mugo et al.(2019). Using
economic ratios, investors can determine the performance of a bank. This is reliable with the
statement that the comparison in the form of ratios products statistics that are more objective,
for the reason that the performance dimensions can be compared with other banks' or with the
prior period. The banks' performance can be seen through a wide range of variables or
indicators. Variable or indicator as the source of valuation is the economic reports of the bank
concerned. If the performance of the banks growth its value will be higher. In any kind of
commercial bank, profitability is a significant factor. Banking firms similarly measure their
commercial events undertaken to be familiar with their profitability performance. CAMEL
(Capital Adequacy, Asset Quality, Management, Earning and Liquidity) the analysis is used
by the banks to analyses economic performance. Banks adopt CAMEL model analysis to
evaluate several types of risks and managing them efficiently. Financial ratios have been long
practiced by academics to assess the bank’s financial performance. Banks use CAMELS ratings
to investigate their financial health and performance (Ali & Dhiman,2019). In today’s
marketing era, organizations that successfully achieve their customers enjoy advanced
retention stages and better profitability due to improved clients’ loyalty. This is why it is
essential to save clients satisfied. Consumer satisfaction is supposed to be tightly linked with
understanding customer behavior. Particularly, customer satisfaction is an important
component in the formation of customer needs for future buy. In addition, satisfied customers
will probably recommend and talk to others about their good capabilities.

According to the Indonesia Organization of Accountants, the banks' performance can be

measured by evaluating financial statements. Developing customer value is important to
increase financial performance; also Salespeople have an important part in creating customer
value through their encounters and strategic relational interactions with clientele (Schwepker
& Schultz,2020).

1.6 Research Methods

A research methodology refers to a series of different steps that a researcher must follow in
investigating a problem with a specific goal. It is a method of systematically solving research
problems, and can be understood as the science of scientifically studying how research is
conducted. It describes the various steps researchers commonly take when investigating a
research question, and the logic behind them. It would be appropriate to mention here that
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research projects are not important to anyone unless they are carried out in a determined order.
It is an object.

1.6.1 Research Design

Research design is the task of defining a research question. In other words, “study design is the
adjustment of the conditions for the collection and analysis of data in a manner aimed at
combining relevance to research objectives and economics of procedure. , is the conceptual
structure in which the study is conducted. The general purpose of this study is to study and
evaluate the financial performance of the Nepal Electricity Authority in order to achieve its
objectives. is changed. The reasons for choosing a descriptive study design to evaluate the data,
especially the data, are of a secondary nature.

1.6.2 Population and Sample

Only financial performance analysis of Nepal Electricity Authority was conducted under many
subsidiaries of Nepal Electricity Authority.

1.6.3 Sources of Data

We mainly use secondary data, to gather the information we needed for our reporting work.
All necessary data was collected from the NEA's annual reports, financial statements, reports
and reports, journals, articles in various journals, statistical reports, previous papers and
homepages, as well as interview questionnaires and primary sources. We also consult the data
subject in order to collect the necessary data and information. Secondary data was obtained
through website also.

1.6.4 Data collection method

Secondary data was collected from annual reports, financial statements, company reviews and
reports, magazines, magazine articles, statistical reports, homepages, etc.

1.6.5 Methods of Data presentation and Analysis

After the relevant data about the NEA will be collected or obtained, researchers calculate
various financial metrics that researchers believe measure the NEA's financial performance.
Financial indicators as measures of financial performance are grouped and presented under
four performance criteria as follows:

• Profitability performance
• Liquidity performance
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In addition, the researcher reports findings based on analysis of five years of financial
statements and unstructured interviews with selected her NEA officials.

Gathered information will also be processed through statistical tools.

• Mean
• Standard deviation
• Coefficient of Variation

Collected secondary data values were processed, summarized, classified and possible
generalizations and conclusions are drawn by researchers.

1.7 Limitations of the Study

This study has the following methodological and conceptual limitations:

• This study was limited with only one sample with reference to the Nepal Electricity
Authority.
• The study was based on secondary data.
• This survey has data up to the last 5 years
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CHAPTER II
RESULTS AND FINDINGS
This chapter presents the results of the data analysis and the findings from the study in relation
to the research objectives and in consistence with the literature reviewed in chapter One. The
analyses are based on secondary data obtained from annual reports of the NEA and from the
financial reports of the company under review. The relationship between the variables was
ascertained by correlation and multiple regression analysis. The findings were interpreted in
relation to the research objectives.

2.1 Data Presentation

Data Presentation is necessary to make use of collected data which is considered to be raw data
which must be processed to put for any use. Processed data helps in obtaining information form
it as the raw data is non comprehensive in nature. Presenting the data includes the pictorial
representation of the data by using graphs, charts maps and other methods. These methods help
in adding visual aspect to data which makes it much easier and quick to understand.

Current Assets & Current Liabilities

Current Assets
Current Assets include Inventories, trade receivables, prepaid advances and deposits, Cash and
Cash equivalents and Current tax assets. The current assets of NEA from 2017/18 to 2021/22
are present below.
Current Assets= Inventories + trade receivables+ prepaid advances and deposits+ Cash and
Cash equivalents + Current tax assets
Table 1.
Current Assets
Fiscal Year Current Assets (NRs. In million)
2017/18 48,309
2018/19 63,405
2019/20 71,423
2020/21 96,428
2021/22 98,304
Source: Annual reports of NEA from 2017/18 to 2021/22)
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Current Assets (NRs. In million)

120,000

100,000

80,000

60,000

40,000

20,000

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

Figure no. 1 Current Assets

Nepal Electricity Authority have current assets of Inventory, Trade Receivable, Prepaid
Advance and deposits, Cash and Cash equivalents and current assets. If we analysis last five
year data of Nepal Electricity Authority it increased by 103.49 %. In the Fiscal year 2017/18
NEA have a current assets of NRs 48,309 million, in FY the total current liabilities was NRs
63,405 million, for FY 2019/20 was NRs 71,423 million, for the FY 2020/21 it was NRs.
96,428 million. At last FY 2021/22 the total current assets of Nepal Electricity Authority was
NRs. 98,304 million

Current Liabilities
Current liabilities include trade & other liabilities and short-term borrowings. Loan repayment
within next 12 months has been presented under short-term borrowing as per the requirement
of NFRS. NEA have trade and other liabilities of NRs. 66,979 million, Short term borrowing
of NRs. 3,617 million.

Table 2.
Current Liabilities
Fiscal Year Current Liabilities (NRs. In Million)

2017/18 65,102

2018/19 70,003

2019/20 58,910

2020/21 63,451

2021/22 70,596

(Source: Annual reports of NEA from 2017/18 to 2021/22)

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Current Liabilities (NRs. In Million)

75,000

70,000

65,000

60,000

55,000

50,000
2017/18 2018/19 2019/20 2020/21 2021/22

Figure 2. Current Liabilities

Nepal Electricity Authority have a current liabilities included trade and other liabilities and
short term borrowings. According to the annual report of Nepal Electricity Authority in present
the current liabilities of NEA was NRs 70,596 million it increased from NRs 63,451 million in
last fiscal year 2020/21. The current liabilities of NEA in FY 2017/18 was NRs 65,102 million,
in 2018/19 was NRs. 70,003 million, and in FY 2019/20 it was NRs 58,910 million.

Current Ratio& Quick Ratio

Current Ratio
Current ratio is a liquidity ratio that helps you understand whether the business can pay its
short-term obligations that is, obligations due within one year with its current assets and
liabilities.
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑠𝑡𝑠
Current Ratio =𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Table 3.
Current Ratio
Fiscal Year Current Ratio

2017/18 0.742
2018/19 0.905

2019/20 1.212

2020/21 1.219
2021/22 1.392
Source: Annual reports of NEA from 2017/18 to 2021/22)
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Current Ratio
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2017/18 2018/19 2019/20 2020/21 2021/22

Figure 3. Current Ratio

From Current Ratio we can understand whether the business can pay its short-term obligations
that is, obligations due within one year with its current assets and liabilities. The Current Ratio
of NEA in FY 2017/18 was 0.742, in FY 2018/19 was 0.905, in FY 2019/20 was 1.212, in FY
2020/21 was 1.219, and FY 2021/22 was 1.392.

Quick Ratio
The quick ratio, also known as an acid test ratio, is another type of liquidity ratio that measures
a business’s ability to handle short-term obligations. The quick ratio uses only highly liquid
current assets, such as cash, marketable securities, and accounts receivables, in its numerator.

𝑄𝑢𝑖𝑐𝑘 𝐴𝑠𝑠𝑒𝑠𝑡𝑠
Quick Ratio=𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Table 4.
Quick Ratio
Fiscal Year Quick Ratio

2017/18 0.678

2018/19 0.798

2019/20 1.051

2020/21 1.34

2021/22 1.17

(Source: Annual reports of NEA from 2017/18 to 2021/22)

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Quick Ratio
0.035
0.03
0.025
0.02
0.015
0.01
0.005
0
2017/18 2018/19 2019/20 2020/21 2021/22

Figure 4. Quick Ratio

From the Quick Ratio we can measures a business’s ability to handle short-term obligations.
The Quick Ratio of NEA in FY 2017/18 was 0.678, in FY 2018/19 was 0.798, in FY 2019/20
was 1.051, in FY 2020/21 was 1.34, and FY 2021/22 was 1.17.

Working Capital

Working capital, also known as net working capital (NWC), is the difference between a
company’s current assets such as cash, accounts receivable/customers’ unpaid bills, and
inventories of raw materials and finished goods and its current liabilities, such as accounts
payable and debts. Working capital is a measure of the business’s available operating liquidity,
which can be used to fund day-to-day operations.

Working Capital= Current Assests – Current Liabilities

Table 5.
Working Capital
Fiscal Year Working Capital (NRs. In Million)

2017/18 (16,793)

2018/19 4,495

2019/20 12,513

2020/21 32,977

2021/22 27,708

(Source: Annual reports of NEA from 2017/18 to 2021/22)

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0.035
0.03
0.025
0.02
0.015
0.01
0.005
0
2017/18 2018/19 2019/20 2020/21 2021/22

Figure 5. Working Capital

In Fiscal Year 2018/19 NEA have a negative working capital of NRs. (16,793) million because
the current assets is less than current liabilities. In FY 2019/20 the working capital of NEA was
NRs 4,495 million. Respectively 2019/20, 2020/21 it increased and reached NRs 12,513
million, NRs 32,977 million and it decreased by NRs 5269 million on FY 2021/22 and reached
at NRs 27,708 million.

Revenue & Cost of Sales

Revenue
The energy demand during this fiscal year was slightly less than the target. However, NEA
maintained optimum level of regular and reliable energy supply to bring about positive impact
in its overall financial performance. The nationwide lockdown from May 30 to July 2021 due
to second variant of COVID pandemic seriously hampered various loss reduction activities
such as timely meter reading, monitoring meter tempering and hooking wires to overhead
distribution lines.
Table 6.
Sales
Fiscal Year Sales (NRS. In Million)
2017/18 46,796
2018/19 55,358
2019/20 66,613
2020/21 71,293
2021/22 70,473
(Source: Annual reports of NEA from 2017/18 to 2021/22)
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Sales
80000 71293 70473
66613
70000
60000 55358
46796
50000
40000
30000
20000
10000
0
2016/17 2017/18 2018/19 2019/20 2020/21

Sales

Figure 6. Sales
At the end of fiscal year 2017/18 the total sales from the electricity of NEA was NRS 46,796
million. In the next three fiscal year it increased positively. In FY 2018/19 the sales of NEA
was NRs 55,358 million, in the another FY 2019/20 the sales of NEA was NRs 66,613 million.
At the FY 2020/21 the sales rate of NEA was high during this five year period. The sales from
electricity of NEA in FY 2020/21 was NRs. 71,293 million. In this last fiscal year 2021/22 the
sales of NEA was decreased. The main reason for decreasing in Sales was COVID pandemic.

Cost of Sales
Cost of Sales includes cost of generation, power purchase, royalties to Government of Nepal,
transmission and transmission service charges.
Table 7.
Cost of Sales
Fiscal Year Cost of Sales (NRs. In Million)

2017/18 39,629

2018/19 46,766

2019/20 52,134

2020/21 50,132

2021/22 56,397

(Source: Annual reports of NEA from 2017/18 to 2021/22)

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0.035

0.03

0.025

0.02

0.015

0.01

0.005

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

Figure 7. Cost of Sales

From the above figure we can evaluate the cost of sales in last five years. In the Fiscal Year
2017/18 the Cost of Sales was NRs 39,629 million, in FY 2018/19 it was increased and reached
NRs 46,766 million, in FY 2019/20 it was NRs 52,134 million, in the FY 2020/21 it decreased
and reached at NRs 50,132 million, in the last FY 2021/22 the cost of sales again increased and
reached at NRs 56,397 million.

Gross Profit Margin

Gross profit margin is a profitability ratio that measures what percentage of revenue is left after
subtracting the cost of goods sold.

𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡
Gross Profit= ∗ 100%
𝑠𝑎𝑙𝑒𝑠

Table 8.
Gross Profit Margin
Fiscal Year Gross Profit Margin (%)
2017/18 15.315 %
2018/19 5.823 %
2019/20 21.73 %
2020/21 29.68 %
2021/22 19.97 %
Source: Annual reports of NEA from 2017/18 to 2021/22)
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0.035

0.03

0.025

0.02

0.015

0.01

0.005

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

Figure 8. Gross Profit Margin

In the above chart and table the Gross Profit Margin on NEA is displayed .In the Fiscal Year
2017/18 NEA have a gross profit margin of 15.315 %. In fiscal year 2018/19 in deceased and
reached at 5.823 % of gross margin. In the fiscal year 2019/20 its gross profit margin increased
and reached as 21.73 %.For the period 2020/21 it have a highest gross profit margin rate of
29.68 %, than in 2021/22 it again decreased by 9.71% and reached 19.9736%.

Return on Equity

Return on equity, more commonly displayed as ROE, is a profitability ratio measured by

dividing net profit over shareholders’ equity. It indicates how well the business can utilize
equity investments to earn profit for investors.
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
Return on Equity= 𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦 ∗ 100%

Table 9.
Return on Equity
Fiscal Year Return on Equity
2017/18 0.0341
2018/19 0.0452
2019/20 0.0928
2020/21 0.0835
2021/22 0.0212

(Source: Annual reports of NEA from 2017/18 to 2021/22)

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0.035

0.03

0.025

0.02

0.015

0.01

0.005

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

Figure 9. Return on Equity

From the above table and figure we can evaluate the return of equity of Nepal Electricity
Authority. In the FY 2019/20 NEA have a high return on equity with 9.28 %. As per the data
the lowest return on equity was in 2021/22 of 2.12 %. The main reason difference in return on
equity was net profit and changing in equity position. For the FY 2017/18 NEA return on equity
was 3.41 %, in FY 2018/19 it was 4.52 %, in 2020/21 the return on equity was 8.35 %

Return on Assets

Return on assets, or ROA, is another profitability ratio, similar to ROE, which is measured by
dividing net profit by the company’s average assets.

𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
Return on Assests=𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑠𝑡𝑠 ∗ 100%

Table 10.
Return on Assets
Fiscal Year Return on Assets
2017/18 0.00647
2018/19 0.0125
2019/20 0.0306
2020/21 0.0305
2021/22 0.0079

(Source: Annual reports of NEA from 2017/18 to 2021/22)

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0.035

0.03

0.025

0.02

0.015

0.01

0.005

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

Figure 10. Return on Assets

In the above figure and table the Rate on Assets is measured. From the annual report of Nepal
Electricity Authority data collected. The data present for latest five year data for analyze
return on assets. From the analyze of data found that for FY 2019/20 have a high return on
assets with 3.03 %. Similarly for FY 2017/18 NEA have lowest rate of return with 0.647 %.

Net Profit Margin

Net profit margin is a profitability ratio that measures what percentage of revenue and other
income is left after subtracting all costs for the business, including costs of goods sold,
operating expenses, interest, and taxes.

𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
Net Profit= ∗ 100%
𝑆𝑎𝑙𝑒𝑠

Table 11.
Net Profit Margin
Fiscal Year Net Profit Margin (%)
2017/18 3.211 %
2018/19 6.214 %
2019/20 14.719 %
2020/21 16.380 %
2021/22 4.974 %

(Source: Annual reports of NEA from 2017/18to 2021/22)

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Net Profit Margin

20.00%
15.00%
10.00%
5.00%
0.00%
2017/18 2018/19 2019/20 2020/21 2021/22

Net Profit Margin

Figure 11 Net Profit Margin

Form the above table and figure the net profit margin of NEA is given. From the figure we can
measure the highest net profit margin year. In the FY 2020/21 NEA have a highest net profit
margin and in the FY 2017/18 NEA have a lowest net profit margin. The net profit margin of
FY 2021/22 is decreased than 2020/21, 2019/20 and 2018/19.

2.2 Major Findings

Based on the frame work designed to asses and answer, the following major findings from
analysis and interpretation of data in chapter two is presented.

➢ Maximum ROE is recorded on the fiscal year 2019/20which is 9.28%, and it minimum
ROE is recorded on the fiscal year 2021/22 which is 2.12 %
➢ The Maximum ROA of Nepal Electricity Authority measured on the fiscal year 2019/20
which is 3.03 %, and the minimum ROA is measured on the fiscal year 2017/18 which
is 0.647 %.
➢ NEA have a high Net Profit Margin on fiscal year 2020/21 with 16.380 % and the
lowest Net profit margin on 2017/18 with 3.211 %
➢ The System loss measured in NEA for FY 2021/22 was 17.18 %
➢ The revenue generate from energy sales in the FY 2021/22 decreased by 6.59 % then
FY 2020/21.
➢ For the FY 2021/22 the Current Ratio and the Quick Ratio is measured high with 1.392
and 1.17 respectively.
 20

CHAPTER III
SUMMARY AND CONCLUSION

3.1 Summary
Financial performance is a complete evaluation of a company’s overall standing in categories
such as assets, liabilities, equity, expenses, revenue, and overall profitability. It is measured
through various business-related formulas that allow users to calculate exact details regarding
a company’s potential effectiveness. This study examined the Financial Performance of Nepal
Electricity Authority. The study revealed that the finance performance is measured based on
profitability Performance. The profitability is decreased with compared with previous years it
indicates that financial performance of NEA is not stronger than previous year. But if we look
after current global situation and global economy the financial performance of Nepal
Electricity Authority is appreciate able. From deep study on the financial performance of Nepal
Electricity Authority the profit was decreased by 54.72 %. The main reason behind decreased
in profit is global pandemic of COVID-19. It affect the global economy, as well as the next
reason for decrease in profitability of NEA is system loss, restriction in the mobility in the loss
prone areas, reduced NEA generation, increased import, increase in operating expenses etc.

3.2 Conclusion
Based on major findings in the previous section the researchers conclude the following points
regarding financial performance of Nepal Electricity Authority in previous five year
performance measurement areas.

➢ NEA measured highest profitability on fiscal year 2020/21 which was 40.22 % more
than fiscal year 2019/20. Net profit before tax for the year 2020/21 increased by 40.22%
and reach at NRs. 13,794 million from NRs. 9,838 million in FY 2019/20.
➢ NEA experienced reduction in its operating performance as compared to last financial
year. Net profit before tax for the year 2021/22 decreased by 54.72% to reach at NRs.
6,008 million (Provisional) from NRs. 13,794 million in FY 2020/21
However, the reduction in the power generation by NEA plants due to low water discharge in
the dry season, increased in system loss from 15.27% in FY 2020/021 to 17.18% in FY
2021/022, power import at expensive rate from India, global pandemic of COVID-19 also
contributed to the decline in the profit of FY 2021/22.