accounting system of emco industries limited

8/8/2019 Accounting System of EMCO Industries Limited

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Accounting System of EMCO

Industries Limited

Prepared by: Munawar Zaheer

Bilal AmjadM.Usman Ijaz


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AGENDA

INTRODUCTION

ACCOUNTING SYSTEM

FINANCIAL STATEMENTSRATIOS ANALYSIS

CONCLUSION


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INTRODUCTION

The company is incorporated in Pakistan

and listed on Karachi, Lahore and

Islamabad Stock ExchangesThe company is principally engage in

manufacture and sale of high/low tension

electric porcelain insulators, switchgear

and ceramic tiles.


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ACCOUNTING SYSTEM

EMCO is using an accounting system that

is designed by their IT Department to

maintain books of accountsThey generally called this software an

ERP (Enterprise Resource Planning)

system


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PERPETUAL INVENTORY SYSTEM

EMCO industry is a large company with

professional management and its employees

and management needs information about

their goods in inventory and quantities ofproducts that are selling so they are using

perpetual inventory system which means that

they record all transactions involving cost of

the merchandize are recorded immediately as

they occur. They are continuously updating

their accounting record after every transaction.


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ACCOUNTS DEPARTMENT

SALE DEPARTMENT PURCHASE DEPARMENT


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RATIOS ANALYSIS

RATIOS 2009 2008

Current ratio 0.88 0.83

Quick ratio 0.46 0.45Inventory

turnover

2.93 2.75

DSO 66 65

F.A.T 1.27 1.096

T.A.T 0.72 0.65

Debt ratio 75% 74%


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CURRENT RATIO:

Current ratio indicates the extent to which currentliabilities are covered by assets expected to beconverted into cash in the near future. Emco current ratio

in 2009 is than 2008 which means that Emcos liquidityposition is stronger so in the near future it will not faceany problem in meeting its current liabilities

QUICK RATIO:

Quick ratio is a variation of current ratio. It measuresthe company ability to use its cash or assets to retirecurrent liabilities. So the companys quick ratio is higherthan the previous year which shows that the companycan easily pay-off its current liabilities without liquidatingits inventory


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INVENTORY TURNOVER:

Inventory turnover ratio is high. It indicatesthat company is not holding excessive stock.Stocks are immediately used in manufacturingprocesses after its purchase. This shows thatcompany management is efficiently handlingstocks of the company.

TOTAL ASSET TURNOVER:

Total asset turnover ratio is higher than theprevious year which indicates that all assets areworking at full capacity and efficientlyparticipating in the production process.


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DEBT RATIO:

Companys debt ratio this year is 75% which

is slightly higher than previous year ratio. This

indicates that its creditors have supplied a majorportion in the firm total financing. The company

might find it difficult to borrow additional funds

without first raising equity capital through a stock

issue. Creditor might be reluctant to lend firm

more money.


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CONCLUSION

After the severe economic recessionaround the globe and poor marketsituation the company beard some serious

loss but now things are looking up forEMCO corp.

Talking of their accounting system, with

the right acct.system the company ismoving on the right track and in the rightdirection.

accounting system of emco industries limited

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