Question 1:

American Apparel almost declared bankruptcy in summer of 2010.  It actually started declining since 2007.  Their net income dropped from 15.48 million to 14.11 million in 2008.  It is not quite a significantly drop compare to what happen the following two years.  During 2008 to 2010, the drop was more significantly and it dropped from 14.11 million all the way to -86.32 million, they were having a net loss.  If we refer to the financial statement from 2006 until present, we will see that the revenue of the company is rising but they had huge amount of expenses.  They don’t have any expense on research and development, depreciation, interest expense and so on.  Their expenses are mainly from selling and administrative expense.   The growth of revenue couldn’t overcome the rapid growth of expenses.  In this case, as the revenue increases, the expenses increase correspondingly.  This is the reason why American Apparel had such a huge amount of debt.

Question 2:

In my opinion, the company should allocate the money into the research and development and marketing because American Apparel already lost most of the creditability from people and other company.  They need to come up with some new design of clothing which is in the trend now to grab more people attentions.  On the other hand, putting money into marketing can assist to advertise their new design of clothing in order to boost the sell.  By the time they are selling new product which can also help the company to sell the inventory that is left during declining. 

http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=app

http://news.cnet.com/8301-10784_3-9896609-7.html

Summary:

The article I read mentions that Microsoft was planning to acquire Yahoo.  Yahoo underscored the contents of the presentation said that Microsoft's unsolicited the acquisition and it has undervalued Yahoo.  Yahoo hopes to double its operating cash flow from $1.9 billion to $3.7 billion for the next three years and Yahoo aims to meet $8.8 billion in revenue.  Yahoo anticipates that its growth will outpace in the market, it projected $1.9 billion in revenue from display and video advertising over the last three years.  Yahoo is behind Google with 425 million users versus 305 million users for Yahoo.  In the last quarter of 2007, Yahoo got 27 percent share and Google got 53 percent of share.  However, Yahoo focuses on the position in Asia because of the dull U.S. economy since 2007, it especially focuses on the dominance in Japan.  Yahoo is working on some social-media projects, such as Yahoo Buzz and Yahoo OneConnect.

Connection:

The connection to chapter five is the effect of cash flow in financing activities, investing activities and operating activities.  as I mentioned before, Microsoft is planning to acquire Yahoo but Yahoo said Microsoft has undervalued Yahoo.  Yahoo said they will double their cash flow in order to prevent Microsoft's acquisition.  Acquistion requires large amount of cash, Microsoft needs to take out many cash if they wants to acquire Yahoo.  It would have a negative effect on cash flow of investing activities.  On the other hand, Yahoo doubled their cash flow also increase the amount that Microsoft needs to take out to acquire Yahoo.  Microsoft might change their decision because of that.  Doubling cash flow is also a strategy to prevent acquisition.

Reflection:

Cash management is one of the really big issues in operating a company.  Having a good cash flow is really important.  If a company has too little cash on hand would result obstacles in operation of company such as incapable to pay the liabilities and expenses which may affect the credibility of the company or even lead the company goes bankrupt, because other companies worry that it might not be able to pay the debt.  On the other hand, having too much cash in the company will definitely reduce the profit that a company can actually make.  Company can use the excess cash to invest in order to get a higher return.  In my opinion, putting appropriate amount of money in company can highly increase the profit, so proper money management is prior issue in every company.

FA 12 - Ch 3 - Small retailers using Facebook to boost sales

http://www.vancouversun.com/business/smallbusiness/Small+retailers+using+Facebook+boost+sales/4097982/story.html

Summary:
The article I read mentions that many small retailers use facebook to boost their sales.  Many large business have been on facebook and have millions of followers, but small business just need a bit of time to adopt to that.  Last summer, the percentage of small businesses with a social media presence jumped from 12 percent to 20 percent from the survey of University of Maryland business school in 2009.  Facebook is the most popular site of small businesses setting up their own page.  Janet Holt set up a facebook page for her 5-year-old business in August.  She does a lot of promotion on Facebook.  For example, she credits social media with helping to drive turnout at her annual holiday sale, she gives additional discount to the shoppers who replied to this invitation.  Nowadays, facebook has almost replaced the position of e-mail because facebook is much more effective than email.

Connection:
The connection to chapter three is the production margin and the use of socials media.  Before you start your business, you need to choose the right price for the customers.  First, you need to know which type of customer that you are dealing with.  If you want to set it as a high price product, your attention need to focus on qualities of the the product. Otherwise, the rich people will not buy your product because the quality is so poor.  On the contrary, if you set it as a low price product, your customers will be more because the price is not high and everyone can afford it, but you need to sale a large quantity of your product.  Today, everything is relied on internet, so if you can use it wisely you will benefit a lot.  The study found, facebook is the most popular site now.  Setting up a page of your business is better than making your own website.  In addition to that,  using facebook appropriately can actually expand your business and make more money.

Reflection:
Today, socials media still have a really big potential to business. Facebook will replace the position of e-mail because facebook is more efficient than e-mail.  E-mail become an old thing now.  Using facebook to advertise your product is actually doable because it is not complicated and it is a good media to use.  You need to let people know your product so choosing the right media to use is so important.  Beside media, there is also some strategy that you may use in facebook.  As I mentioned before, you need to know which type of customers that you are dealing with.  After that, you choose to do high price or low price.  Even if it is high price or low price, there is also a strategy that you can use when you sale your product.  In my opinion,  when you chose a price that you want to sale for the product, you raise the price a little bit higher because you can give discount and stimulate customer's purchase sentiment.  I think this might be a effective method.  However, setting up the price and choosing the right media for advertisement are really important.  These might lead your business to success or fail.