After examining American Apparel’s financial statements it was painfully obvious that they had began declining since 2007, however it wasn’t until 2009 where they showed their first major decline. One of the main reasons for their declines is having a higher amount of expenses in their financial statements every year. Although their gross profits also increased over the year of 2009, their expenses increased much more. This is mainly due to them expanding and opening more new shops that do poorly and as a result earns more revenue but have much more expenses. With expenses overweighting the revenue, they started a declining flow. American Apparel also had a CEO who had several lawsuits of sexual assault. Furthermore, there have been many semi pornographic advertisements causing American Apparel to develop a shameful reputation. Just when things couldn’t have gotten any worse, there turned out to be another incident where they discovered that American Apparel hired 1600 illegal workers out of the 4500 workers in Los Angeles. All this resulted in a major crisis of American Apparel’s reputation and creditability.
As explained above, American Apparel is in a major reputation crisis and the only way for them to keep moving on and surviving is to clean up their image. Personally I believe that they should spend half of the $14million on paying off their debts because they had to borrow a huge loan in order to avoid bankruptcy this year. By doing this, they can reduce loan payable or interest expense and also develop a better credit rating. Next they would have to find some way to increase cash flow and I believe that the best way would be not to expand but the opposite. By closing off a few stores, they can decrease expenses greatly and also raise more money. With this additional money I believe that American Apparel should focus on marketing their way to a more ethical image. As for R&D, I believe that this is only an area they should invest in after they restore their reputation.
Tuesday, May 3, 2011
Friday, April 8, 2011
Sony Ericsson quarterly results lag
Summary:
Sony Ericsson is a mobile phone maker company owned by the Swedish company Ericsson and the Japanese company Sony. This company has recently posted lower than expected profits of 35million euros ($44.7million less than expected), and sales of $1.53billion ($0.29billion less than expected) for the last quarter of 2010. Some say that this was due to the competitive market of the Smartphone industry. Sony Ericsson loss many customers and sales opportunity due to the major success of Apple Inc. and the nimble PC-like handset portfolio of Nokia. Another major issue that Sony Ericsson faced was the lowering of their average selling price and quantity. Their average selling price went down 12% on the third quarter and their shipment of new products lowered 23% on the same period compared to 2009. Due to this disappointing quarter, it is unsure whether or not Sony Ericsson is still ranked the 5th biggest handset maker in the industry.
Connections:
Chapter 5 mainly talks about the importance and roles of cash flow statements towards a company. Cash flow statement is a financial statement that summarizes the cash flows of the company during the accounting period, categorized into operating, financing and investing activities. As shown in this article, Sony Ericsson is recently having troubles keeping up with other companies due to their unexpected low profits. They also had a much higher amount of expenses to pay off this quarter as shown from earning $44.7 million less than expected. With a major decrease in their Operating activities (sales and revenue) and an increase in Financing activities (payables and debts), Sony Ericsson is having a hard time competing with the rest of the companies out there.
Reflection:
Sony Ericsson has always been on top of their game for the last few years. I believe that the main cause of their downfall is the competitive market out there. The main rival for all companies in this market would be Apple. Due to the release of the iPhone 4, Apple has been snatching away many possible customers. I believe that in order for Sony Ericsson to actually recover their sales, it would have to either increase price or quantity. The best way to increase price, quantity or even both would be to invest more in R&D. Sony is well known for its advanced technology; therefore R&D isn’t something that is impossible for Sony Ericsson to accomplish. Sony Ericsson has a chance to compete against the popular iPhone 4, only by releasing new and better products. Sony Ericsson is more alarmed now due to this disheartened quarter, and therefore I believe that they would have a higher sense of urgency to improve their products and will eventually improve R&D.
http://www.ibtimes.com/articles/103021/20110120/sony-ericsson-quarterly-results-lag.htm
Sony Ericsson is a mobile phone maker company owned by the Swedish company Ericsson and the Japanese company Sony. This company has recently posted lower than expected profits of 35million euros ($44.7million less than expected), and sales of $1.53billion ($0.29billion less than expected) for the last quarter of 2010. Some say that this was due to the competitive market of the Smartphone industry. Sony Ericsson loss many customers and sales opportunity due to the major success of Apple Inc. and the nimble PC-like handset portfolio of Nokia. Another major issue that Sony Ericsson faced was the lowering of their average selling price and quantity. Their average selling price went down 12% on the third quarter and their shipment of new products lowered 23% on the same period compared to 2009. Due to this disappointing quarter, it is unsure whether or not Sony Ericsson is still ranked the 5th biggest handset maker in the industry.
Connections:
Chapter 5 mainly talks about the importance and roles of cash flow statements towards a company. Cash flow statement is a financial statement that summarizes the cash flows of the company during the accounting period, categorized into operating, financing and investing activities. As shown in this article, Sony Ericsson is recently having troubles keeping up with other companies due to their unexpected low profits. They also had a much higher amount of expenses to pay off this quarter as shown from earning $44.7 million less than expected. With a major decrease in their Operating activities (sales and revenue) and an increase in Financing activities (payables and debts), Sony Ericsson is having a hard time competing with the rest of the companies out there.
Reflection:
Sony Ericsson has always been on top of their game for the last few years. I believe that the main cause of their downfall is the competitive market out there. The main rival for all companies in this market would be Apple. Due to the release of the iPhone 4, Apple has been snatching away many possible customers. I believe that in order for Sony Ericsson to actually recover their sales, it would have to either increase price or quantity. The best way to increase price, quantity or even both would be to invest more in R&D. Sony is well known for its advanced technology; therefore R&D isn’t something that is impossible for Sony Ericsson to accomplish. Sony Ericsson has a chance to compete against the popular iPhone 4, only by releasing new and better products. Sony Ericsson is more alarmed now due to this disheartened quarter, and therefore I believe that they would have a higher sense of urgency to improve their products and will eventually improve R&D.
http://www.ibtimes.com/articles/103021/20110120/sony-ericsson-quarterly-results-lag.htm
Tuesday, January 18, 2011
Apple posts better-than-expected quarterly results
Summary:
On Tuesday Jan 18th, Apple Inc. reported sales and profits that exceeded their analyst’s expectations. Apple’s previous quarter ended up with revenue of $26.74 billion U.S. (increase of 71% from the same period a year earlier) and net income of $6 billion (increase of 78%). During this quarter, Apple sold 16.24 million units of iPhones (jump of 86% year-on-year) and 4.13 million units of Macs (jump of 23%). Once again exceeding analyst’s expectations, Apple also sold 7.33 million iPad tablets. On the other hand, the sales of iPod media players dropped to 19.45 million units (7% decline). Overall all the positive results helped to partially offset the news of Apple’s chief executive officer taking another medical leave of absence.
Connections:
As mentioned in the textbook, it is important for all users to have a good understanding of how well a company is doing in order to make vital decisions. This article is a reflection of Apple’s success during their last quarter which provides the company users (internal users) with many opportunities to expand. Not only does Apple have much more net income to spend on improvements during the next quarter, but they have also developed a good credit rating on their financial statements. External users such as investors and bank for loans would take a look at Apple’s financial statements to decide whether to invest in Apple or lend Apple money. Due to both external and internal users basing their major decisions on a business’s financial statements, it is safe to assume that this article is related to user relevance.
Reflection:
Apple’s outstanding performance last quarter has given them many opportunities in the future. I believe that this increase in net income will allow Apple to furthermore expand and increase sales throughout the next quarter. Even after exceeding sales of the iPhone 4 during Apple’s last quarter, there is still an incredible amount of demand for this particular item. Not to mention that there are many customers who are eager to buy the white iPhone 4 which is rumored to be released on February 27th. I also believe that releasing the white iPhone 4 a quarter later is a very tactical and smart move played by Apple that allows them to keep the demand high. Whether this is sneaky or smart, it seems unlikely that Apple is only going to fall anytime soon.
http://news.xinhuanet.com/english2010/business/2011-01/19/c_13696750.htm
http://www.gforgames.com/gadgets/news-gadgets/leak-white-iphone-4-release-date-february-27th-3530/
On Tuesday Jan 18th, Apple Inc. reported sales and profits that exceeded their analyst’s expectations. Apple’s previous quarter ended up with revenue of $26.74 billion U.S. (increase of 71% from the same period a year earlier) and net income of $6 billion (increase of 78%). During this quarter, Apple sold 16.24 million units of iPhones (jump of 86% year-on-year) and 4.13 million units of Macs (jump of 23%). Once again exceeding analyst’s expectations, Apple also sold 7.33 million iPad tablets. On the other hand, the sales of iPod media players dropped to 19.45 million units (7% decline). Overall all the positive results helped to partially offset the news of Apple’s chief executive officer taking another medical leave of absence.
Connections:
As mentioned in the textbook, it is important for all users to have a good understanding of how well a company is doing in order to make vital decisions. This article is a reflection of Apple’s success during their last quarter which provides the company users (internal users) with many opportunities to expand. Not only does Apple have much more net income to spend on improvements during the next quarter, but they have also developed a good credit rating on their financial statements. External users such as investors and bank for loans would take a look at Apple’s financial statements to decide whether to invest in Apple or lend Apple money. Due to both external and internal users basing their major decisions on a business’s financial statements, it is safe to assume that this article is related to user relevance.
Reflection:
Apple’s outstanding performance last quarter has given them many opportunities in the future. I believe that this increase in net income will allow Apple to furthermore expand and increase sales throughout the next quarter. Even after exceeding sales of the iPhone 4 during Apple’s last quarter, there is still an incredible amount of demand for this particular item. Not to mention that there are many customers who are eager to buy the white iPhone 4 which is rumored to be released on February 27th. I also believe that releasing the white iPhone 4 a quarter later is a very tactical and smart move played by Apple that allows them to keep the demand high. Whether this is sneaky or smart, it seems unlikely that Apple is only going to fall anytime soon.
http://news.xinhuanet.com/english2010/business/2011-01/19/c_13696750.htm
http://www.gforgames.com/gadgets/news-gadgets/leak-white-iphone-4-release-date-february-27th-3530/
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