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Relationship between cash flow and financial performance of Nepalese commercial banks / Siksha Upadhyaya
Title : Relationship between cash flow and financial performance of Nepalese commercial banks Material Type: printed text Authors: Siksha Upadhyaya, Author Publication Date: 2019 Pagination: 150p. Size: GRP/Thesis Accompanying material: 2nd/Gmba Languages : English Abstract: Cash flow issue raised an alarm in terms of cash management, since it greatly affects day to day operations of the firm cash which is the key engine to financial performance (Klonowski, 2012). According to Petro and Gean (2014), cash flow may be defined as the proportion of money received or paid out by a business enterprise for a given period. Gilchrist & Himmelberg (1995) stated that cash flow is of vital importance to the health of a business. Cash flow statements help financial analysts to comprehend the use of short-term and long-term financial resources of a firm on cash basis (Motlagh, 2013). Sharma and Iselin (2003) found that the cash flow model exhibited better prediction accuracy with respect to solvency assessment than the accrual model. Cash flow analysis uses ratios that focus on cash flow and how solvent, liquid, and viable a company is (Figlewicz and Zeller, 1991).The three categories of the firm’s activities; operating, investing, and financing provide a comprehensive portrait of the financial condition of the firm that cannot be deduced from the balance sheet and income statement alone (Ibarra, 2009, Mautz & Angell, 2009). Sharma et al. (2014) showed that the total assets have positive and significant relation with return on assets but insignificant relation with return on equity. Pradhan & Khadka (2017) found a positive relationship between banks’ profitability and short term debt to total assets, interest coverage ratio and size of the banks. Similarly, Kunwar et al. (2014) revealed that bank performance had negative relationship with bank size. Likewise, Maharjan et al. (2016) found that ROE had positive correlation with debt to equity and ROA had negative correlation with loan to deposit, debt equity.
This study aimed to examine the relationship between of cash flow and financial performance of Nepalese commercial banks. The specific objectives of the study are to analyze the structure and pattern of return on assets and return on equity of Nepalese commercial banks, to examine the structure and pattern of cash flow from operating activities, cash flow from investing activities, cash flow from financing activities, firm size, leverage ratio and liquidity ratio of the Nepalese commercial banks, to determine the relationship between cash flow from operating activities, cash flow from investing activities, cash flow from financing activities, firm size, leverage ratio, liquidity ratio and financial performance in Nepalese commercial banks, to analyze the impact of cash flow from operating activities, cash flow from investing activities, cash flow from financing activities, firm size, leverage ratio and liquidity ratio with the return on assets and return on equity in Nepalese commercial banks.
This study based on the secondary source of data which were gather for a sample of 20 commercial banks of Nepal within the time period from 2008/09 to 2017/18, leading to the total of 200 observations. The secondary data have been obtained from Banking and Financial Statistics and Bank Supervision report published by Nepal Rastra Bank and annual report of selected banks. The research design adopted in this study is descriptive and causal comparative types as it deals with relationship of liquidity management factor like cash flow from operating activities, cash flow from investing activities, cash flow from financing activities, firm size, leverage ratio and liquidity ratio with ROA (return on assets) and ROE (return on equity). The statistical methods used in the analysis are descriptive statistics, correlation analysis and regression analysis.
The correlation matrix of selected commercial banks shows that cash flow from operating activities is positively correlated with return on assets. Similarly, cash flow from investing activities has positive relationship with return on assets. Likewise, the results show that firm size has positive relationship with return on assets. However, liquidity ratio has negative relationship with return on assets and cash flow from financing activities is negatively correlated with return on assets. There is negative relationship of leverage ratio with return on assets. The regression indicate that there is positive impact of cash flow from operating activities, cash flow from investing activities, firm size , leverage ratio and liquidity ratio with return on equity. However, there is negative impact of cash flow from financing activities with return on equity. The regression also indicate that cash flow from operating activities, cash flow from investing activities and firm size has positive impact on return on assets. However, cash flow from financing activities, leverage ratio and liquidity ratio has positive impact on return on assets.
Relationship between cash flow and financial performance of Nepalese commercial banks [printed text] / Siksha Upadhyaya, Author . - 2019 . - 150p. ; GRP/Thesis + 2nd/Gmba.
Languages : English
Abstract: Cash flow issue raised an alarm in terms of cash management, since it greatly affects day to day operations of the firm cash which is the key engine to financial performance (Klonowski, 2012). According to Petro and Gean (2014), cash flow may be defined as the proportion of money received or paid out by a business enterprise for a given period. Gilchrist & Himmelberg (1995) stated that cash flow is of vital importance to the health of a business. Cash flow statements help financial analysts to comprehend the use of short-term and long-term financial resources of a firm on cash basis (Motlagh, 2013). Sharma and Iselin (2003) found that the cash flow model exhibited better prediction accuracy with respect to solvency assessment than the accrual model. Cash flow analysis uses ratios that focus on cash flow and how solvent, liquid, and viable a company is (Figlewicz and Zeller, 1991).The three categories of the firm’s activities; operating, investing, and financing provide a comprehensive portrait of the financial condition of the firm that cannot be deduced from the balance sheet and income statement alone (Ibarra, 2009, Mautz & Angell, 2009). Sharma et al. (2014) showed that the total assets have positive and significant relation with return on assets but insignificant relation with return on equity. Pradhan & Khadka (2017) found a positive relationship between banks’ profitability and short term debt to total assets, interest coverage ratio and size of the banks. Similarly, Kunwar et al. (2014) revealed that bank performance had negative relationship with bank size. Likewise, Maharjan et al. (2016) found that ROE had positive correlation with debt to equity and ROA had negative correlation with loan to deposit, debt equity.
This study aimed to examine the relationship between of cash flow and financial performance of Nepalese commercial banks. The specific objectives of the study are to analyze the structure and pattern of return on assets and return on equity of Nepalese commercial banks, to examine the structure and pattern of cash flow from operating activities, cash flow from investing activities, cash flow from financing activities, firm size, leverage ratio and liquidity ratio of the Nepalese commercial banks, to determine the relationship between cash flow from operating activities, cash flow from investing activities, cash flow from financing activities, firm size, leverage ratio, liquidity ratio and financial performance in Nepalese commercial banks, to analyze the impact of cash flow from operating activities, cash flow from investing activities, cash flow from financing activities, firm size, leverage ratio and liquidity ratio with the return on assets and return on equity in Nepalese commercial banks.
This study based on the secondary source of data which were gather for a sample of 20 commercial banks of Nepal within the time period from 2008/09 to 2017/18, leading to the total of 200 observations. The secondary data have been obtained from Banking and Financial Statistics and Bank Supervision report published by Nepal Rastra Bank and annual report of selected banks. The research design adopted in this study is descriptive and causal comparative types as it deals with relationship of liquidity management factor like cash flow from operating activities, cash flow from investing activities, cash flow from financing activities, firm size, leverage ratio and liquidity ratio with ROA (return on assets) and ROE (return on equity). The statistical methods used in the analysis are descriptive statistics, correlation analysis and regression analysis.
The correlation matrix of selected commercial banks shows that cash flow from operating activities is positively correlated with return on assets. Similarly, cash flow from investing activities has positive relationship with return on assets. Likewise, the results show that firm size has positive relationship with return on assets. However, liquidity ratio has negative relationship with return on assets and cash flow from financing activities is negatively correlated with return on assets. There is negative relationship of leverage ratio with return on assets. The regression indicate that there is positive impact of cash flow from operating activities, cash flow from investing activities, firm size , leverage ratio and liquidity ratio with return on equity. However, there is negative impact of cash flow from financing activities with return on equity. The regression also indicate that cash flow from operating activities, cash flow from investing activities and firm size has positive impact on return on assets. However, cash flow from financing activities, leverage ratio and liquidity ratio has positive impact on return on assets.
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