American Apparel

As I reviewed the available financial statements from 2007-present, the company began to decline in the late 2008.  However, the causes of the decline began with American Apparel CEO, Dov Charney, being involved in several sexual harassment in the mid 2008s. Since lawsuits have yet to be proven, their sales were still decent, which resulted in American Apparel beginning to stockpile their inventories during 2009. However, more sexual harassment cases popped out later in 2009, which could possibly be why many customers lost trust in American Apparel’s image, causing its downfall. Also Dov Charney has been sued from sexual harassment therefore it caused the company to have suffered a massive loss in cash on court. However the critical point of its downfall seems to be American Apparel being involved in illegal immigration issues.  American Apparel has been hiring experienced illegal immigrants. As a result they terminated 1500 experienced workers which is around 10% of their workforce. Therefore their sales went down because of the loss of workers to provide services.  Since sales went down therefore the amount of money coming into the company decreased. At the same time, the deadline of other accounts payable came up therefore they began paying their creditors. As a result they were running short on money and began to borrow huge long term debts. Their long term debt has risen from $6.35 million, 2009, to $138.48 million, 2010. They almost went into bankruptcy in 2010 however they borrowed $80 million loan just to escape a looming bankruptcy. Also American Apparel has the image of semi- pornographic because all of their advertisements are very disturbing. It is like sex advertisement on television which resulted in many people to turn away from American Apparel.

I believe before any money is used for investing activities partial of the money should be used to pay off the debt for American Apparel. Paying off the debt would establish trust with your creditors. As a result they may not pressure you that often, since there is a well establish connection. Also you can guarantee them that American Apparel would have money, because a Canadian investor would be investing more money to the company. The other portion of the cash should be used in investing activities such as advertising because American Apparel must refresh their image of semi-pornographic into a healthier image which could be accepted more easily by the public. The advertisement from American Apparel has been stepping past the border line therefore receiving many critics.  Also advertisement can send a message to the public that American Apparel is still a powerful company and continuing to operate. Some money could be used into R&D to grab the attention of new customers and previous customers who have left American Apparel. After revenue comes in, money would be used to clear off debt again to provide creditors an image that American Apparel is very competitive and a trust worthy company.  With a new image American Apparel would be able to gain back its original popularity and a healthier reputation. Once the company is back on track, revenue would be coming in and expansion could happen in the future.

American Apparel

http://www.sec.gov/Archives/edgar/data/1336545/000119312509174404/d10ka.htm http://www.sec.gov/Archives/edgar/data/1336545/000119312509230187/d10q.htm http://www.sec.gov/Archives/edgar/data/1336545/000144530510001313/app0930201010q.htm

Part 1:

As I reviewed the available financial statements from 2007-present, the company began to decline in the late 2008.  However, the causes of the decline began with American Apparel CEO, Dov Charney, being involved in several sexual harassment in the mid 2008s. Since lawsuits have yet to be proven, their sales were still decent, which resulted in American Apparel beginning to stockpile their inventories during 2009. However, more sexual harassment cases popped out later in 2009, which could possibly be why many customers lost trust in American Apparel’s image, causing its downfall. However the critical point of its downfall seems to be American Apparel being involved in illegal immigration issues.  American Apparel has been hiring experienced illegal immigrants, which has been discovered in 2010. As a result they terminated 1500 experienced workers causing its downfall in sales. They weren’t doing so well in 2009 and survived until 2010 where they almost got into bankruptcy. However they borrowed an $80 million loan just to escape a looming bankruptcy.

Part 2:

I personally think the $14 million cash should be used in investing activities such as advertising because American Apparel must refresh their image of semi-pornographic into a healthier image which could be accepted more easily by the public. The advertisement from American Apparel has been stepping past the border line therefore receiving many critics.  Also advertisement can send a message to the public that American Apparel is still a powerful company and continuing to operate. Some money could be used into R&D to grab the attention of new customers and previous customers who have left American Apparel. With a new image American Apparel would be able to gain back its original popularity and a healthier reputation. Once the company is back on track, revenue would be coming in and expansion could happen in the future.

Apple First Quarter Results

http://www.nzmac.com/news/apple/apple-reports-first-quarter-results-2011.html

Summary:

It was announced on January 19, 2011 that Apple has earned a net income of $6 billion in the 1^st quarter period. The results are fascinating compared to previous quarter results of revenue with only $15.68 billion and net quarterly income of $3.38 billion. It was also reported that the sales of Mac, iPhone and iPad established the highest revenue and earnings ever. Revenue grew by 71% and earnings grew by 78%. It was announced that Apple sold 4.13 million Macs, 16.24 million iPhones, 19.45 million iPods, and 7.33 million iPads during the 1^st quarter period.  The iPhones sold in this quarter represents an 86% unit growth compared to previous quarter results. Also the Macs sold this quarter represent a 23% unit increase over the year-ago quarter. Steve Job, Apples CEO, announced “We are firing on all cylinders and we’ve got some exciting things in the pipeline for this year including iPhone 4 on Verizon which customers can’t wait to get their hands on. Apple’s CFO, Peter Oppenheimer said, “Looking ahead to the second fiscal quarter of 2011, we expect revenue of about $22 billion and we expect diluted earnings per share of about $4.90.

Connection:

In chapter 5 it mainly discusses about cash flow statements and the importance of this financial statement in a company.  Cash flow statement is a financial statement that summarizes the cash flows of the company, categorized into operating, financing and investing activities.  It was reported Apple has a net income of $6 billion in 1^st quarter period. Apple could use the indirect approach method from using the $6billion as a starting point to determine the cash flow from operating activities. Indirect approach is a method of calculating a company’s cash from operations in which the net income is adjusted for non-cash revenues or expenses. This article also connects into the cash-to-cash cycle of Apple. Cash-to-cash cycle is the period of time when cash is used to purchase inventory and when cash is received from the sale of inventory. The cycle reflects Apple purchased a lot of inventories, cash outflow, and as a result, they made a net profit of $6 billion, cash inflow, from the sale of iPods, iPads, Macs and iPhones in the 1^st quarter period. Steve Jobs, Apples CEO, said “We had a phenomenal holiday quarter with record Mac, iPhone and iPad sales.” Apple sold 16.24 million iPhones, 4.13 million Macs and 7.33 million iPads. As a result, inventories for iPhone, iPads and Macs would decrease. Therefore it would represent an increase in cash flow in the operating activities. Dividends for Apple could also be calculated from the formula Beginning Retained Earnings- Ending Retained Earnings+ Net Income= Dividends. Previously, it was announced from Steve Jobs, CEO of Apple, that he prefers a giant cash stash in the company. 

Reflection:

In my opinion I think Apple is a very competitive and successful company, therefore great results were achieved from them with a $6 billion net profit for the 1^st quarter period. However iPod sales this quarter represented a 7% drop compared to previous quarter. Therefore I believe partial of the money earned this quarter should be used on advertisement on iPods and iPhones. However the rest of the money earned should be kept in the company for strategic purpose or incase of mistakes. Previously, Steve Jobs, CEO of Apple, announced he prefers a giant cash stash in the company, and I support his decision. Therefore I believe Apple would not give out too much dividends to shareholders for this quarter. It would be an advantage having cash stash left in the company since problems can be solved immediately and easily without needing to borrow money from the bank. Also with a strong cash flow it can attract potential investors into investing into Apple. As a result shares would rise from the investment. Money generated from potential investors could be then spent on advertisement and R&D because of high competition. As a result, Marketing and R&D would be the major roles of attracting customers into buying Apple products. Therefore huge amount of cash should be spent in those areas in order to generate a high revenue and cash.

Intel Best 4th Quarter In Company History

http://money.cnn.com/2011/01/13/technology/rnings/index.htm

Summary:

On Thursday January 13, 2011 it was reported that Intel Corporation had the best fourth-quarter earnings in company history. Both the Revenue and profit have set new records. Intel has earned revenue of $43.6 billion, operating income of $15.9 billion, and a net income of $11.7 billion. Paul Otellini, Intel president and CEO, said “2010 was the best year in Intel’s history. We believe that 2011 will be even better.” Intel has recently posted its earning per share of 59 cents which was higher than forecasted of 53 cents per share. On Monday Intel has announced a $1.5 billion, six-year contract with Nvidia, graphics chip-maker, which will allow Intel to access for graphic chips.

Connection:

In chapter 3 it mainly discusses about the accounting cycle which describes how transactions are measured, recorded, and communicated to users in the form of financial statements. Transaction analysis is when a transaction occurs and accountants would decide which accounts would be affected. It was announced that Intel Corporation had the best fourth-quarter earnings in company history with revenue of $43.6 billion. This transaction would affect the accounts revenue and cash. T accounts are devices used to represent a ledger account. If this transaction were to be recorded on T accounts, revenue would be a credited $43.6 billion on right hand side of the T account, and the corresponding account, cash, debited $43.6 billion on the left hand side of the T account. Temporary accounts such as expenses and revenues would be closed in the Income summary accounts. Intel has revenue of $43.6 billion and expenses approximately $31.9 billion. An Income Summary balance can be calculated by $43.6billion-31.9billion= $11.7 billion. Income summary accounts would then be closed in the retained earnings account. Assume Intel have retained earnings of $60 billion and $5 billion of dividends declared. An updated balance for the retained earnings account can be calculated $60 billion+$11.7 billion-$5 billion=$66.7 billion. This article also relates to the Multi-step income statement. Multi-step income statement is an income statement which revenues and expenses from different sources are shown in different sections of the statement. It was reported Intel have an operating income of $15.9 billion. Therefore this income would be the total income from Intel operations such as Sales or service, cost of good or from other operating revenues and expenses.

Reflection:

In my opinion I think Intel is a very strong and successful company therefore it was able to have such an extraordinary result for the year. However I disagree Intel to have a $1.5 billion, six-year agreement with Nvidia, graphic chip-maker, that will allow Intel access to patents for graphic chips. I believe spending $1.5 billion would be too much since deficit is happening to many companies around the world. I suggest Intel should keep its money incase of mistakes that occurs. It would be an advantage to have a strong cash flow, and cash stash left in the company since problems can be solved more quickly and easily.  With a strong cash flow it would give Intel an opportunity to attract potential investors to invest into Intel. Therefore there could be a huge possibility for shares of Intel to rise from investments. After a huge cash stash have been generated from potential investor’s investment, a portion of the money can then be thought to be spent into marketing or R&D because of high competitions.  Intel’s chief rival, chip maker AMD(AMD,Fortune 500) have recently announced the immediate resignation of CEO Dirk Meyer. Therefore I strongly believe $1.5 billion should not be spent, and instead to wait for AMD’s next decision. 

Apple Sales Top $20 Billion

http://money.cnn.com/2010/10/18/technology/apple_earnings/index.htm

Daniel Hui

Summary:

On Monday October 18, 2010 Apple announced a new-all time sales record of $20 billion on the fourth-quarter results from the popular gadget lineup. The company sold 14.1 million iPhones, 3.9 million Macintosh computers and 250000 Apple TV devices in this quarter. Apple also stated that $2.7 billion of its sales came from iPads. However, investors of Apple were disappointed in the sales of only 4.2 million iPads which many analysts would have predicted more. However, Apple overall have established a profit of $4.3 billion which exceeds the Wall Street forecasts. Apple CEO, Steve Jobs, started to talk about competitions. Apple has outsold Research in Motion’s (RIMM) Blackberry devices in this quarter. He said “We don’t see them passing us near the future.” He also stated that Google’s mobile business is too fragmented to compete. However, the increasing competitions have caused Apple to stop its restrictions on apps for iPhones, iPads and iPod Touch devices. He also announced that Apple have a giant cash stash of $40 billion, but will not buybacks or pay a dividend. He concluded that Apple will keep its money incase of a mistake or an upcoming strategic opportunity.

Connection:

In chapter 2 it mainly analyzes different types of transactions and determines what accounts are affected. Transactions are an exchange of resources with another company or internal activities that affects the ledger. It was announced that Apple established revenue of $20 billion in the fourth quarter period. This transaction would affect the accounts revenue and cash. If this transaction were to be recorded, the revenue account would be credited $20 billion and the corresponding asset account, cash, debit $20 billion. Another connection of this article to chapter 2 is profit margin ratio. Profit margin ratio is a ratio that compares the net income over the revenues during an accounting period. It was reported that Apple acquired a profit of $4.3 billion during this accounting period. A profit margin ratio could be calculated by $4.3billion/$20billion= 21.5%. This indicates apple earned 21.5% of the amount of its revenues. Financial statements would also be another important factor in this article. When Apple obtained the $20 billion revenue, the financial statements would be affected by this transaction. Therefore this would have affect on the financial position and cash flow of Apple. Dividends declared are also related to this article since Apple CEO, Steve Jobs, announced they would not pay dividends. Instead Apple attempts to keep its money for a strategic opportunity.

Reflection:

In my opinion I support the decision of Apple to not pay a dividend or buybacks because there could be great opportunities for investments anytime. It would also be an advantage to have giant cash stash left in the company because if mistakes do occur it can be solved quickly and efficiently with money. Also with sufficient amount of cash in the company it could attract potential investors to invest into Apple. Therefore Apple will have more cash for  business activities in the future.Apple is one of the largest and strongest companies in the world. However, Apple gave me a feeling of over confidence as CEO, Steve Job, announced that he doesn’t see BlackBerry devices passing us in the near future. He also began criticizing that Google’s (GOOG, Fortune 500) mobile business is too fragmented to compete. I disagree with what CEO,Steve Jobs, statement because BlackBerry and Google have great potential of growing and would be one of Apple's greatest rival.  The increase in competitions caused Apple to stop restrictions on apps for iPhones, iPads, and iPod touch devices. I believe Apple made a correct decision because restrictions on apps are factor that causes many not to use Apple devices. I believe in future Apple will have many rivals for the competition on the sales of gadget devices. Therefore Marketing skills would take the major role in attracting customers to buy their products. Skills such as advertising and commercials will be very important on whether the company can earn a profit or not. 

Scotia Bank Expanding into Latin American Market

Daniel Hui

http://www.cbc.ca/money/story/2010/09/16/scotiabank-brazil.html

Summary:

On Thursday, September 16^th, 2010 Scotia bank announced to purchase a Brazilian bank, Dresdner Bank Brazil, located at Sao Paulo. The Scotia Bank is branching out to the South American Market and establishing a presence first at Brazil. Dresdner Bank owns several banking license which allows the user to provide ranges of banking services around the community. They expect to be the only Canadian Bank in Brazil owning several banking licenses. It was reported at the end of 2009 the Dresdner Bank holds an asset of about $400 million US and approximately 50 employees. They decide to expand its power in key oil and gas, power and mining sectors. However, Mike Durland, co-CEO of Scotia Bank, announced the purchase “was not financially material.” The Scotia bank sees huge potential growth in the Latin American markets and looks forward about the future progress in Brazil. 

Connection:

This article connects to the concept of materiality. According to Chapter 1, the materiality concept allows information to be omitted if the information excluded wouldn’t mislead readers or affect the results significantly. In this article Scotia Bank stated it will purchase Dresdner Bank which holds an asset of $400 million. However, Mike Durland, co- CEO of Scotia Bank announced the purchase “was not financially material.” This article also connects to another major idea in Chapter 1 such as investing activities. Investing activities are company activities which involve the purchase and sales of properties, equipments and shares. Scotia Bank decided to expand into the Latin American markets by trying to acquire Dresdner Bank Brazil. The expansion of Scotia Bank is considered an investing activity since revenues could be established from this long-term investment. Financial statements are also an important factor in this article since they are essential information during an investment. Scotia Bank must provide shareholders with financial statements on whether they are capable of expansion in the Latin American market.

Reflection:

In my opinion I think Scotia Bank deciding to purchase Dresdner Bank, a Brazilian bank, and branching out to the Latin American markets is a good decision. Banking is very competitive around the world especially in Asia, Europe and Northern America. It’s a great opportunity for Scotia Bank to establish their power in Brazil, Sao Paolo, where Banking is less competitive and have great potential growth in the future. I believe Scotia Bank to be the only Canadian bank holding several banking licenses will give it a great advantage over other banks in Brazil, such as their reputation and image. However I argue about one thing. How is the purchase of Dresdner Bank not going to be considered financially material? Dresdner Bank owns an asset of $400 million which is significant enough to affect decisions. If financial statements were created after the purchase of Dresdner Bank, then the information produced would lack credibility since information can be omitted. Potential investors would be affected from the information they were informed from Scotia Bank. For example, informing investors that Scotia Bank has sufficient amount of cash left in the company would attract many investors. Then there would be a possible of potential growth in the shares of Scotia Bank.