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
