American Apparel Case Study

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.

Personally, I think the $14 million cash should be used in investing activities such as advertising because American Apparel must refresh their semi-pornographic image into a healthier image which could be accepted more easily by the public. The advertisement from American Apparel has occasionally passed the border line which brought to them much criticism.  Also advertisement can send a message to the public that American Apparel is still a powerful company and will continue 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 reaches a new record high

Summary:

Apple has announced that they have reached a new all-time sales record of $20 billion in the fourth quarter results on Monday, October 18, 2010. In this quarter alone, they have sold 14.1 million iPhones, 3.9 million Macintosh computers, and 250,000 Apple TV devices. The iPhone sales have increased 91% since last year, and Macintosh have increased 27%. Apple did disappoint investors when they broke out the news that they did not reach the estimated 5 million sales of the iPads, when they only sold 4.2 million. However, the big picture of Apple have surpassed Wall Street forecasts and earned a total profit of $4.3 billion, which is a 70% increase from last year. Apple CEO, Steve Jobs stated that Apple did, in fact, outsell Research in Motion, and argues that RIM needs to improve their software to be able to keep up with Apple. Steve Jobs continues to acknowledge that Google’s mobile business is too “fragmented” to compete with Apple, and that Apple makes products that just work. Even after Steve Jobs’ speech regarding other companies, the increased amount of competition has caused Apple to stop its restrictions on apps for iPhones, iPads, and iPod Touch devices. Steve Jobs also stated that Apple has a giant cash stash of $40 billion, and is unlikely for Apple to do share paybacks, or pay a dividend.

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

Connection:

We learned in chapter two that profit margin ratio is a ratio that compares the net income over the revenues during an accounting period. Apple reported that they have earned a total of 4.3 billion within this single account period. The equation to figure out the profit margin ratio would be $4.3 billion / $20 billion = 21.5%. This shows that Apple has earned 21.5% of their total revenue within this account period. In this chapter, we also study different types of transactions and which accounts will be affected. Apple has accounts that they have accumulated a total revenue amount of $20 billion in the fourth quarter period. This transaction will affect the revenue and cash accounts, where the revenue account will credit $20 billion and cash will debit $20 billion. This article also connects with chapter 2 regarding financial statements. Since Apple earned this large sum of revenue of $20 billion, the financial statements would obviously have been affected by this transaction. With this amount of revenue, cash flow of Apple will definitely be affected, but dividends declared will not be affected since Apple CEO, Steve Jobs stated that they would not pay any dividends, and would rather keep this amount of money in case of mistakes, or strategical opportunities.

Reflection:

I believe that it might be a good idea to keep some extra cash, in case of some incident that was not planned, but I think that Apple should give some back towards the investors. Since Apple has broken a new sales record, they should use some of the cash to increase the trust between Apple and investors. This will result in investors believing in Apple more, and possibly invest even more money into the company. Even if the investors don’t invest more, they can still spread positive comments regarding Apple with their high dividend paybacks. The amount of money that Apple should keep and what should be distributed towards the investors is something that requires calculations from experts of Apple, since they are the people that know how much money would be required, in case Apple does go into some trouble.

Rogers Communications Buying Atria Networks

 Summary:
The company said on Tuesday that Rogers Communications Inc. has acquired Ontario telecom operator Atria Networks LP for $425-million in cash. This deal brings Rogers, the giant, Toronto-based communications, fiber-optic cables that they can use to transmit data over longer distances and at faster speeds. This means that they now can reach the country's most populous province and a group of clients that consists of a wide range of customers from enterprises, public-sectors to small or medium-sized business customers. Rogers is currently buying Atria from Birch Hill Equity Partners, which has bought the operator in 2006. At first, analysts predicted Atria’s value to be near $300-million, but it turned out to be worth $425-million. This acquisition has brought intensification in competition for telecom services in Canada, but specifically in Ontario, as more competitors are entering the wireless market, as well as old rivals creating more product offerings to maintain and expand their market share. In order for Rogers to raise enough money for this transaction, they have raised another $900-million in debt to refinance their long-term debt. This with their cash on hand will leave them with around $600-million which is more than enough money for Rogers to complete this deal for Atria.

http://www.canadianbusiness.com/markets/headline_news/article.jsp?content=b4746638

http://www.cbc.ca/fp/story/2010/09/24/3576002.html

Connections:
This piece of news can be connected to what we have learned from our textbook’s chapter one.  This article connects to the concepts of investment and financial activities. Rogers Communications Inc. plans to invest their finances into the Atria Networks to further ensure that their customers will be able to transmit and receive data at a much faster speed and at a farther range. Rogers decided to invest into Atria because this will enhance their abilities to transmit data by a lot. This article also connects to finance activities because in order for Rogers Communications to acquire enough money for this deal, they have to increase their long-term debt, which will allow Rogers to obtain more than enough money for this deal.

Reflections:
In my opinion, I believe that the fact that Rogers is increasing their abilities to transmit data globally will help the entire country is connecting with each other. This deal will increase Rogers’ number of clients, but in order to do so, they needed to increase their debt to obtain the money for the deal. I think that this is the only bad point within this deal. Increasing their debt for the only reason of purchasing Atria Networks is something that I believe to be not a smart choice. Although having Atria Networks within Rogers will increase their data transmitting capabilities, Rogers now has an even larger amount of debt that they will have to eventually repay.