Accounting & Its Regulatory Framework of Scomi Group Bhd

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KOLEJ LINTON

B.A (Hons) Business Studies assignment

REPORT

Accounting & Its Regulatory Framework of Scomi Group Bhd

Prepared by:

Student 1: U0959729 (UEL ID) / R486374 (Passport ID)

Student 2: U0959731 (UEL ID) / N06273071 (Passport ID)

School of Business & Management

Linton College

12/November/2010

Table of Contents

Acknowledgmentpg.3

Introductionpg.4

Financial Ratio Analysis: Liquidity Ratiospg.5-7

2.1 Cash (working capital) ratio pg.5-6

2.2 Quick asset (acid test) ratio pg.6

2.3 Stock (average inventory) turnover period pg.6

2.4 Average debtors collection period pg.7

2.5 Cash or operating cycle pg.7

Working Capital and Cash Flow Statement pg.8

4.  Scomi Group Bhd. annual report pg.9-10

Concepts, Conventions and Regulation of Scomi annual reportpg.9

4.2 Directors’ report, the auditor’s report and the chairman’s statementpg.9-10

5.  Qualitative & Quantitative point of Scomi Group Bhd.pg.11

Qualitative pointpg.11

5.2 Quantitative point pg.11

6.  Conclusionpg.12

7.  Appendixpg.13-18

8. Bibliographypg.19

Acknowledgment

I would like to thank God for all His blessings. A lot of people have played a very important role in the successful completion of this report. In this section, I would like to express our appreciation for those who help our group directly and indirectly in our work.

I would like to thank our group member for the valuable advice and support he has given me in the writing of this report. I would also like to thank my teachers, Mr. Alfred for his encouragement and guidance. My deepest thanks go to my fellow classmates for their understanding and support.

Introduction

Accounting is defined as financial situation. Accounting report is to show all the costs and profits of the organization in order to manage cash flow. The content of this report is the analysis, comments and evaluation based on accounting report of Scomi Group Bhd Company. The Scomi Group Bhd Company is a representative oil and gas industry. The company was opened on 13 May 2003. The company engaged in the production of oil and oil drilling. In addition, Scomi Group Bhd is also engaged in other activities such as transportion industry, refine crude oil and produce energy (Scomi, 2004-2010). This report will start with financial report analysis of Scomi Group Bhd in order to find the quantitave and qualitative value followed with liquidity ratio. This is done to know the overall progress of the company. At the end of the report, a conclusion will be given.

Financial Ratio Analysis: Liquidity Ratios

“Financial ratio analysis refers to a financial statement analysis technique which involves expressing one financial statement item relative to another financial statement item” (Peirson & Ramsay, 2006, p.860). There are five major area of financial ratio analysis: Liquidity, Activity, Profitability, Stock Market and Leverage. Howeverm this report will only concentrate on the liquidity aspect of financial ratio analysis.

“Liquidity ratios are referring to a total   of  and  divided by . The    the extent to which a  or other  can quickly   and   , and therefore is of  to short-term ” (Investorwords, 2010). To be able to analyze liquidity ratios, three keys of liquidity ratios were calculated, which are: Cash (working capital) ratio, Quick asset (acid test) ratio and Stock (average inventory) turnover period. In addition, two more keys are added: Average debtors collection period and Cash or operating cycle. All calculations, data, charts and graphs of liquidity ratios were attached in this report as appendix to illustrate the financial ratio analysis.

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Cash (working capital) ratio

“The cash ratio refers to a measurement of the amount of current assets to offset current liabilities” (Businessplans, 1994-2010). A cash ratio larger than one shows that the unit can cover its current liabilities from its current assets. In 2005 the cash ratio is 1.49:1 and in 2006 its cash ratio has increased to 1.60:1 (Refer to appendix 1.1 and 2.1). However, from 2006 to 2009 cash ratio always decreased. During this duration, in 2006, Scomi had a cash ratio of RM1.60 of current asset per Ringgit of current liabilities. This amount decreased to RM1.43 of ...

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