American Apparel

Question 1:
After examining the financial statements, it appears that the company is starting to decline in 2010 in the very first quarter. They were already having a lost from operations in the first three months of the year 2010. (http://investors.americanapparel.net/releasedetail.cfm?ReleaseID=471395) As you can see, although their net sales increased, their cost of goods sold and selling expense increased. They need to figure a way to solve that. Luckily, they made quite a lot of money in 2008 and 2009. The main reason why they are losing money is because their operating expenses increased a lot throughout the year. As you can see in the balance sheet (http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?lstStatement=Balance&stmtView=Qtr&symbol=US%3aAPP) there is a lot of left over inventory. Their gross profit, and total revenue dropped, therefore unable to cover the expenses occurring in the year. You can also see that their liabilities increased and there is an increase in "Accrued Expenses" in the liability section. "Current Portion of Long Term Debt/ Capital Leases" increased too, this is most likely because they tried to expand or purchased inventory.

Question 2:
I think the company should spend money mainly on Operating Acitvities to repay loans, interests, other expenses, and then try to sell off the left-over inventory. At the moment, they don't need to buy inventory since they have an excess amount. Another thing they could do is to expand. With all this money, they can take a risk and open a new store somewhere in the Asian countries, somewhere in the east. It doesn't seem like they need to invest in Investing Activities maybe purchasing new equipment to replace their old ones. I also disagree investing in Finance because it is not a good idea to take an extra risk when you are not making a steady profit. To improve the company, they need to find a way to lower their expenses and advertise their products. They should also do some research and development to attract new customers and make the old customers come back to shop again.

http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?symbol=app
http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?lstStatement=Balance&stmtView=Qtr&symbol=US%3aAPP
http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?lstStatement=CashFlow&stmtView=Qtr&symbol=US%3aAPP
http://www.marketwatch.com/story/american-apparel-reports-fourth-quarter-and-full-year-2010-financial-results-and-provides-business-update-2011-04-01

http://investors.americanapparel.net/releasedetail.cfm?ReleaseID=471395

Prince Rupert Property Sales, Value Down in the First Quarter of 2011

http://www.bclocalnews.com/bc_north/thenorthernview/news/119271759.html#


Summary:
On April 5, 2011, the BC Northern Real Estate Board released their first quarter results. After a close examination, it seems that the property sales have decreased compared to the first three months of 2010. By the end of March, they managed to sell 25 properties worth $4.3 million. But in 2011, they sold 35 properties for $6.3 million dollars. Not only did they sell less property than they did in 2010, the average selling price dropped from $207 893, to $171 909. As a result, they currently have 240 properties ready for sale, 9 more than last year.

Connection:
In the first quarter of 2011, real estate companies in Prince Rupert managed to sell 25 properties for a worth of $4.3 million, compared to last year, their sales dropped by 10 properties. A decrease in sales would mean that there would be a less inflow of cash from the operating activities because the operating activities section typically includes the cash flows that result directly from the sale of goods and services to customers. In addition to that, the average selling price of the homes this year in Prince Rupert has dropped by about twenty- thousand dollars, which means there would be decrease in their net income, consequently, they earned less money.

Reflection:
The real estate companies need to invest more money on advertising. They need to show the world the pros of living in Prince Rupert. This was how Canada attracted so many people back in the 1800s and 1900s. Personally, I would hate moving to Prince Rupert right now because I know nothing about it. All I know is that Prince Rupert is somewhere north of Vancouver, and not a lot of people live there. A factor that may have contributed to more people buying properties last year is because the economy improved since 2009. People wanted to buy houses before prices go up again. Another factor that could have contributed to the decrease in sales is because of the unstable weather we endured in the first two months. I remember where one day it was about nine degrees, and the next day, it was snowing and below zero.

CAE simulator sales expected to take off with sale of five units for $65 million

Summary
A global manufacturer has just sold another five aircraft simulators for $65 million dollars. The five CAE 7000 Series Level D full-flight simulators were sold to Qantas Airways, Shanghai Eastern Flight Training Centre, and to an unknown customer in India lifting its sale number to 22 for this fiscal year that ends in March 31. It is said in this article that the sale of aircraft simulators is going to take off in the coming year or so. The sale of aircraft simulators is a support of the statement that suggests air traffic is growing. Each simulator sold increases $13 million dollars to the revenue, which is about half a cent per share in net earnings. Industry analysts believe that CAE is heading in the right direction of selling over 25, their anticipated number, simulators this year. Cameron Doerksen of National Bank Financial believes that in the next cycle peak, CAE can exceed its last full flight simulator order peak of 37 in a fiscal period of 2008. CAE is also currently, a world leader in providing simulation and training services to the civilian and defense forces around the world. They earn revenues exceeding $1.5 billion a year, employing more than 7500 people at more than 100 sites and training locations in more than 20 countries.

Connection
This article connects to chapter three because of the gross profit and the earnings per share. Because their revenue is so high, in my opinion, it is the company’s major source of income; it is enough to cover the others costs to operate the business. As I have stated in the summary, their income of $13 million dollars per simulator increases about half a cent per share. To calculate the earnings per share, you need to divide the income by the number of common shares prominent during the period. If the number of common shares that show up changes, a weighted average number of shares must be used. The earnings per share figure expresses the amount of income earned during the period in relation to the number of common shares held by the owner.

Reflection
I am glad that airliners are buying new simulators. This gives me a sense of relief when I am on an airplane because I will know that pilots are training with up-to-date equipment. In the future, I think I would feel secure if I invested in this company because of its continuous development of aircraft stimulators such as helicopters, commercial airlines and etc. Although CAE is making a lot of money from the simulators, then again, they are doing a good deed by producing advanced aircraft simulators for pilots in training.

Public sector accounting system to be adopted by 2011

http://www.thejakartapost.com/news/2010/11/03/public-sector-accounting-system-be-adopted-2011.html

Summary
Andreas Bergmann, Chairman of the International Public Sector Accounting Standards (IPSAS) said to The Jakarta Post of after the four-day IPSAS board meeting, “Countries around the world should adopt a conceptual framework on public sector accounting by 2011 to allow more transparent and reliable public sector accounting on a global scale.” A meeting was held on November 2, 2010, its goal was to create the outlines for public sector accounting standards. The objective of The Public Sector of Accounting Standards is to meet the needs of users of financial statements by providing the information needed for accountability and decision making. Indonesia has made the exclusive decision of adapting to accrual accounting by 2015 on November 1, 2010. According to Andreas Bergmann, in the past, accrual accounting was uncommon for the public sector, but now many countries are planning to switch to it because of its extensive advantages. He also said that reliable information provided by accrual accounting would assist “crisis management”. For now, only five countries actualized the full accrual accounting standard: Australia, Iceland, New Zealand, Switzerland and the United Kingdom.

Connection
In our financial accounting textbook, it talks about the accrual accounting method briefly on page 80. As stated in the textbook, transactions are recorded when it happens. The article talks about the near development of accrual accounting. Although it may take a while for the country to fully adapt to it, the government is going to have a five-year transition period to phase out “cash-in and cash-out bookkeeping” according to Andreas Bergmann. It would also be easier for people to analyze the financial statements if it is kept up to date at all times.This article also connects to the importance of timeliness and reliability.

Reflection
Accrual basis accounting is a great example of an accounting method that keeps financial accounting up to date. It is most commonly used with keeping up with income and expenses. Unlike most standard accounting, accrual basis accounting requires accountants to post as income and expenses occur, rather than postponing until a later date. Accrual basis accounting can also make it possible to take a snapshot of the financial health of a company at any given time. You can pull it out anytime you want. With this information, it is extremely helpful when it comes to making short term goals for the company, applying for a business loan, or making plans for a long term project.

Thousands of Kentucky Companies in Danger of Missing Annual Report Deadline

http://www.chevychaser.com/Articles-c-2010-10-12-95554.113117_Thousands_of__Ky_Companies_in_Danger_of_Missing_Annual_Report_Deadline.html

 Summary            

Tens of thousands of companies doing business in Kentucky face a threatening deadline either to file their annual reports to the Office of the Secretary of State or disappear. This includes all corporations that have been registered with the state such as the following: Limited Liability Companies (LLCs), Professional Services Corporations (PSCs), Partnerships, Limited Liability Partnerships (LLPs), Business Trusts. Any of these companies that have failed to file their annual report by June 30 of this year are now listed as “bad standing”.  Failing to file their annual report by October 31, 2010 11:59 p.m. ET will consequently considered as “entity being administratively dissolved or being revoked” according to Secretary of State, Trey Grayson. He is currently encouraging businesses to save time and file online.  In a matter of minutes, they can make any necessary changes, view your information, and then file it. This new service allows accountants to access either offline or on the web.

Connection

This article informs us the new way Kentucky accountants are able to hand in their annual reports. In addition to the book, we also learn what happens to companies if they fail to submit their annual reports. An annual report is a document that is prepared and published by a corporation within the year. It includes the business’ annual financial statements. Allowing accountants to update information quickly, accurately, and frequently, timeliness would be achieved easily. As mentioned in our textbook, timeliness is important because the old information loses its relevance to users. Reliable information is essential for decision making.

Reflection

With this newly improved method, people can access a business’ financial information effortlessly. Important people such as owners or very event filled people can look it up online anytime, at home, or in their offices under their own convenience.  One of the intentions for this is to reduce the processing time in the office and can help save taxpayer money. Also, businesses can access these forms at the beginning of the year, they no longer have to wait until they had received a mail from the Office of the Secretary of State. Instead of mailing sheets and sheets of paper, this is also a good way for saving paper. Saving thousands sheet of paper every year is, in truth be told, a good start for being environmentally friendly.