Chapter 1
Chapter 1
By
Shikshya Tandan
TU Reg.No.7-2-0109-0103-2015
Submitted to:
Faculty of Management
Tribhuwan University
Kathmandu
May, 2019
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CHAPTER - I
INTRODUCTION
revenue a business generates after it pays all expenses directly related to the generation of
the revenue, such as producing a product, and other expenses related to the conduct of the
business activities. There are many different ways for you to analyze profitability. Which
are a measure of the business's ability to generate revenue compared to the amount of
expenses it incurs. Let's look at a few of the primary analytical approaches. Profitability
and revenue of the firm which determines whether or not the firm is profiting is known as
Profitability Analysis measures the amount of profit earned due to the efficiency of any
helps in analyzing this available information to evaluate and improve the profits in an
organization. These help in decision making and internal accounting in the fields of sales,
the form of profitability analysis that groups costs and revenues according to the
available values and costing-based valuation approaches are followed for the analysis.
This method essentially plots the revenues against the expenses for given items. Hence
this becomes redundant when products are transferred out of the company. Hence this
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method essentially gives a short term profitability report for the company to analyze the
This accounting method plots the revenues against expenses that have been incurred
during a certain given period of time. In this process, the changes in stock values, goods,
ongoing work and capitalized activities are taken into consideration for the given time
period. Hence, this gives a long term profitability report which can be used with financial
accounting. The cost and revenue elements involved give a broader analysis of the
district in Nepal, which is 133 km north of Kathmandu. Its headworks are located near
Chilime, whereas the underground power plant is located about 4.5 km (2.8 mi) to the
southwest in Syafrubesi on the banks of the local Bhotekoshi river. Water from a weir is
diverted into a reservoir before it can be used at the power plant. The difference in
elevation between the reservoir and power station affords a gross hydraulic head (water
drop) of 351.5 m (1,153 ft). The plant has an installed capacity of 22.1 MW. The
generated electricity is fed into the national grid via a 38 km 66 kV single circuit
transmission line. Most of the power house facilities are underground, with the
switchyard the only feature that remains on the surface. The plant employs two horizontal
axis Peloton turbines each of 11.28 MW. Nepal Electricity Authority (NEA) holds
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majority ownership with 51% share holding. Remaining 49% shareholding is from
general public including 10% equity ownership of local people. Chilime owns and
operates 22.1 MW power plant commissioned on August 25, 2003 and located in Rasuwa
district, 133 km north of capital city Kathmandu. It sales bulk electricity to NEA at the
long term PPA price. The annual energy generation from the plant is about 150 GWh.
Company Limited and Chilime Engineering and Services Company Limited. Chilime,
through its three subsidiaries, is developing four hydropower projects with aggregate
of Nepal Electricity Authority. The plant started its commercial generation from August
2003. Chilime is the brainchild of Dr. Damber Bahadur Nepali, a prominent hydropower
expert in Nepal, who founded the company and worked as its first Managing Director.
powerplant, largely the result of Dr. Nepali, has become a living proof that the paradigm
specific, concrete, measurable, and achievable . As we know that object of every firm is
to make profit or plan profit. The main objective of this study is also to identify the
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profitability position of chimlime hydropower ltd. The main specific objective of the
To examine the ROA and ROE of the company over the last five years.
To analyze the earning per share of the Chilime hydropower limited over the last
five years.
This research help to policy maker to make the policy about hydropower company. This
research may help to the company manager to evaluate the overall profit of the company.
It provides literature to the researcher who wants to carry out further research in the
related field and this research work may also provide recommendation to related
organization. The management of the firm is naturally eager to measure its operating
efficiency. Similarly, the owners invest their funds in the expectation of reasonable
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returns. The operating efficiency of a firm and its ability to ensure adequate returns to its
organization. It helps the management of the firm, shareholders, creditors etc. of the
organization. Apart from these, general public may also be interested in the profitability
profitability ratios. The important profitability ratios are; profitability ratios related to
Khatri (2015) Conduct a thesis on " A study on cost volume and profit analysis of Butwal
power company limited " . The researcher used the secondary data in her research which
is collect from the secondary sources. The researcher's main objective are follows
What are components of cost volume and profit and the BPC is able to satisfy the
The main finding are her research are The BPC cannot generate the generate the
The components of cost volume is variable cost and fixed cost she found the both
cost are in increasing trend and the company satisfy the need of local are
consumer.
inherently situational. Both of these issues are problematic for researchers, since theory
building involves making and testing assertions that explain or predict a particular
holds true across a broad range of specific instances. While it is possible to develop a
multiple constituencies becomes problematic, since each group may have contradictory
chapters, I argue that this perspective typically equates value creation with organizational
In general, the concept of organizational performance is based upon the idea that an
and capital resources, for the purpose of achieving a shared purpose. Those providing the
assets will only commit them to the organization so long as they are satisfied with the
consequence, the essence of performance is the creation of value. So long as the value
created by the use of the contributed assets is equal to or greater than the value expected
by those contributing the assets, the assets will continue to be made available to the
organization and the organization will continue to exist. Therefore, value creation, as
defined by the resource provider, is the essential overall performance criteria for any
organization.
amount of method aspects which has been used for this study. This projects is developed
on the both exploratory and analytical in nature. This project is developed on the
secondary data basis. In order to collect the data and information, the following two
methods were employed, interview with the senior personnel and other staff of the
company.
Frequency visits were made to the Company and student intensively interacted with
personnel of the various section of the firm. Secondary sources such as important book;
related journal, financial study and procedure of work were consulate to understand the
relevant concept and literature directly and indirectly applicable to the present empirical
study. The relevant data and information were properly integrated, analyzed, interpreted
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and presented in the form of table, charts and diagram through this project work.
Different statistical tools like trend analysis, correlation analysis etc, and mathematical
adopted method of research design is case study method. It is intensive study of one
enterprise. Historical data are collected from Chilime Hydropower over 5 years and
traded actively in stock market. Due to time and resource factors, it is not possible to
study all of them regarding the study topic. Therefore, sampling will be done selecting
research works, the necessary materials are collected from Chilime Hydropower head
Primary Data
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The primary data were personally collected through interviews, direct observation and
questionnaires. I have conducted with the involved staff of the company. The secondary
Secondary Data
The secondary data collected from annual report of Chilime Hydropower and vouchers of
Chilime Hydropower were collected through the internal sources and different books
ratios. The trend line shows the trend of profit and ratios can be calculated through
There are several graphical and pictorial tools that enhance researchers' understanding of
individual variables and the relationships between variables. Graphical and pictorial tools
prevailing direction price. Trend lines are the visual representation of support and
resistance in any timeframe. Trend line are used to show direction and speed of price, and
also describes patterns during periods of price contraction. To create a trend line we must
have at least two points on chart. Profitability trend line shows the net profit trend of the
company over the study period. In the trend line there are minimum to points required to
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analysis the net profit current year with the previous year. The trend line make with help
of excel.
I ) Return on Assets
Return on assets is an indicator of how profitable a company is relative to its total assets.
displayed as a percentage. Return on assets , in basic terms, tells you what earnings were
generated from invested capital (assets). Return on asset for public companies can vary
substantially and will be highly dependent on the industry. This is why when using return
ROA numbers or against a similar company's ROA. The return on asset figure gives
investors an idea of how effective the company is in converting the money it invests into
net income. The higher the ROA number, the better, because the company is earning
measures their ability to earn a return on their equity investments. ROE may increase
dramatically without any equity addition when it can simply benefit from a higher return
helped by a larger asset base. As a company increases its asset size and generates a better
return with higher margins, equity holders can retain much of the return growth when
ROSE = X 100
Share holders' equity
ways. The income of per share is calculated by dividing the earning available to common
The higher earning indicates the better achievements in turns of profitability of the
companyby mobilizing their funds and vice versa. In other words, the Earning per share
it limited only to academic purpose. Time limitation, financial problem, lack of research
materials and experience main elements which put constraints on study . As far as
possible every effort has been made to provide real picture of the study. However , it has
This study is only based on the CHPCL so the result obtained cannot be applied
Limited.
The research most of the based on the secondary data which is collect from the
secondary sources.
The certain financial tools and technique are used to analysis the data.
The study based on the certain assumption related to profitability analysis which
CHAPTER - II
RESULT AND ANALYSIS
data and information on Profitability analysis and its impact on market price of stock of
commercial banks are presented. Presentation and analysis of data is the study. Using the
Before observing the impact of different financial indicators and variables on profit as
well as value of firm, we need to present and analyze them systematically. For this
purpose gross profit margin ratio, net profit margin ratio, ROA, ROE, DPS and EPS
.However these variables show the profit status of the CHPCL as well as their strength.
These variables have been presented by the help of table, figure and analyzed by using
bottom line for a company or the net income. The term net profits is equivalent to net
income on the income statement, and one can use the terms interchangeably. The income
consumers and NEF. Net income is calculated before dividends paid to common
100000
95000
90000
80000
75000
2013/14 2014/15 2015/16 2016/17 2017/18
(Figure: 2.1 )
The above table shows that the profit trend of Chilime Hydropower Company Limited
over the last five years. The profitability trend of the company is in fluctuation trend. The
company net profit is highest in the fiscal year 2015/2016 due to the increase in
electricity produce and sales of the company than other fiscal years and lowest in the
fiscal year 2014/2015 due to the decrease in electricity produce and sales of the company
than other fiscal years. Net profit of the company depended on the electricity produce and
assets. ROA gives a manager, investor, or analyst an idea as to how efficient a company's
percentage. Return on assets (ROA), in basic terms, tells us what earnings were generated
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from invested capital (assets). The ROA figure gives investors an idea of how effective
the company is in converting the money it invests into net income. The higher the ROA
number, the better, because the company is earning more money on less investment.
Return on assets is calculated as a percentage of net profit on the total assets. It’s the
actually calculate the percentage of net profit in the average total assets.
( Rs in 000)
The above table show that the trend of return on assets is in fluctuation .A high ROA
indicates that the assets of the company are being used profitably and there are minimum
losses and wastages of assets. Conversely, a low ROA indicates that the assets of the
company are not being used in a profitable manner and there are losses and wastages of
the assets. If the company could not manage the ROA of the present year, there would be
faced high losses in the future. So, the company should be managed it properly. Return
on Asset is highest o 6.82% during the year 2016/17 while lowest 5.15% during the year
2013/2014 .The company has a fluctuation net profit while the total assets has been in a
increasing trend.
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company’s assets minus its debt, ROSE could be thought of as the return on net assets.
assets to create profits. ROSE is expressed as a percentage and can be calculated for any
company if net income and equity are both positive numbers. Net income is calculated
( Rs in 000)
(Table : 2.3)
Above table show the return on shares holder's equity of the Chilime Hydropower
Company. The ROE of the company increased continuously till fiscal year2015/16 . The
being in the year 2014/15 while the lowest is during the year 2013/14 with the value of
company’s assets to create profits. ROSE can be calculated for any company if net
income and equity are both positive numbers. Net income is calculated before dividends
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paid to common shareholders and after dividends to preferred shareholders and interest to
lenders.
ways. The income of per share is calculated by dividing the earning available to common
shareholders by the total number of common stock outstanding. Thus, The higher earning
indicates the better achievements in turns of profitability of the bank by mobilizing their
funds and vice versa. In other words, the Earning per share indicates the strength and
Table 2.4
The table 2.6 shows the earnings per share of Chilime Hydropower Company Limited.
Highest earning per share is better its shows the earning ability of each of the share. The
company earning per share is in the fluctuation trend it is highest in the fiscal year
2015/16 i.e Rs 35.45 and lowest in the fiscal year 2017/2018 i,e Rs 23.05.
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This section includes the key findings of the study obtained from the analysis of data.
Conclusion
derived from the findings are presented in the next chapter. The forgoing analysis of
2.2.1 The profitability trend of the company is in fluctuation trend. The company net
profit is highest in the fiscal year 2015/2016 due to the increase in electricity
produce and sales of the company than other fiscal years and lowest in the fiscal
year 2014/2015 due to the decrease in electricity produce and sales of electricity
2.2.2 Return on Asset is highest o 6.82% during the year 2016/17 while lowest 5.15%
during the year 2013/2014 .The company has a fluctuation net profit while the
2.2.3 The return on shares holder's equity of the Chilime Hydropower was increased
continuously till fiscal year 2015/16 . The company return on shareholder’s equity
is in a fluctuating trend. The highest 7.30% being in the year 2015/16 while the
2.2.4 The company earning per share is also in the fluctuation trend it is highest in the
fiscal year 2015/16 i.e Rs 35.45 and lowest in the fiscal year 2017/2018 i ,e Rs
23.05.
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CHAPTER- III
SUMMARY AND CONCLUSION
This chapter focuses on summarizing the study held with the conclusions and some
recommendation on the basis of findings. For this purpose, the chapter has been divided
into two parts as summary and conclusion.
3.1 Summary
Nepal is a country with a high potentiality of hydroelectricity. It is second richest country
Currently, Nepal is producing 613 MW electricity in both private and public sector taken
private sector.
The study was conducted with the objectives to analyze the profitability position of
Chilime Hydropower Company Ltd over the study period 2014/15 to 2017/18 following a
descriptive and analytical research design. To make the study more reliable, different
types of analysis have been conducted . Various financial tools and techniques are used to
analysis and evaluate the collected data from different sources which is mention on the
research methodology. To fulfill the this research first I review the previous research
report writing and articles related with the topic. This research has some rational and
limitation which is mention in first chapter. The second chapter includes the data
presentation and analysis and the major finding of the study. The theoretical statement is
to study of the profitability over the last five years. In the first chapter introduce about
hydroelectricity and profile of the Chilime Hydropower Company Ltd and set the specific
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objective of the study. The objective of the study is profitability analysis of the company
with the help of the profitability trend line trend line, ROA and ROE and the earning per
3.2 Conclusions
Based on major findings, this study concludes that there is strong profitability position of
company. All the profitability ratios are positive. at last he following conclusions are
made; The company cannot produce the electricity to the hydropower capacity so the net
profit of the company is in fluctuation trend. The company net profit directly affect the
profitability ratios and EPS. Return on Asset is highest o 6.82% during the year 2016/17
while lowest 5.15% during the year 2013/2014 .The company has a fluctuation net profit
while the total assets has been in a increasing trend. The return on shares holder's equity
of the Chilime Hydropower was increased continuously till fiscal year 2015/16. The
its debt, ROE could be thought of as the return on net assets. ROE is considered a
ROE is expressed as a percentage and can be calculated for any company if net income
and equity are both positive numbers. The highest 7.30% being in the year 2015/16 while
the lowest is during the year 2013/14 with the value of 6.11%. The higher earning
indicates the better achievements in turns of profitability of the bank by mobilizing their
funds and vice versa. In other words, the Earning per share indicates the strength and
weakness of the company. The company earning per share is also in the fluctuation trend
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it is highest in the fiscal year 2015/16 i.e Rs 35.45 and lowest in the fiscal year
2017/2018 i ,e Rs 23.05.The
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BIBLIOGRAPHY
Brigham, E. F. (1982). Financial Management Theory & Practice. New York: The
Dryden Press.
Cook, J.W. and Hatt k. Paul (1976) "methods in Social Research", Tokyo: Magraw-Hill
hogahuska Limited
Gupta, S.P. (1994) "Essay Approach to Statistics, New", Delhi: Chand & Company Ltd
Khatri, Sabita (2015) "A study on cost volume and profit analysis of Butwal power
company limited " .
Van Horne, J. C. (2000). Financial Management and Policy. New Delhi: Prentice Hall
of India Private Limited.
www.chilime.com.np
www.investopedia.com
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APPENDIXES
Appendix no. I
(Rs in 000)
2013/2014 93968
2014/2015 85353
2015/2016 98246
2016/2017 93402
2017/2018 91407