http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?lstStatement=Income&symbol=US%3aAPP&stmtView=Ann
Question 1:
American Apparel started declining during 2008 even though their net income has gone up and down for the past 5 years. Their net income in 2006 was a net loss of 1.61 million but the next year they have a net income of 15.48 million. Even after that increase they started going downhill until they have a net loss of 86.3 million in 2011. One reason for the near bankruptcy could be American Apparel’s Current Liabilities in 2011 is 213 million up more than 148.28 million from the previous year 64.88 million. This can cause a lot of problem because American Apparel doesn’t have enough cash to pay that huge amount in a period of time. Another reason could be is they might have expanded their company way too quickly in 2007 they have 162 retail stores and recently they have 280 retail stores a major increase in the past few years. They could have save that money for other purposes but poor management and decision making cost the company. Even though they have to pay off these debts this will lower their cash and making them look bad for potential investors looking to invest and help this company
Question 2:
In my opinion I think American Apparel should invest the 14 million dollars in operating activities because this would help increase sales and the increasing in sales could result in cash coming in and helping American Apparel pay off some of that 213 million in their current liabilities this year. Also they should try to focus on getting a strong cash flow to attract potential investors therefore the price of their shares will go up and more cash for the company. Also American Apparel can improve their clothing style to attract the customers they used to have because it seems like their operating activities have been going down and they need to step it up. Adding new designs and style to their clothing stores would help attract customers.
