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“Fashionista” here at my fabulous local library again.

That’s right, I took another test and completed Lesson 3 on consumer behaviour.  I am on a roll… 

It was another informative chapter on the consumer buying habits—the “why, when, and where” of it all. This lesson really gave me a better understanding for and a direction of who I want my target consumer to be. I already had a good idea, but this lesson REALLY helped me to better understand my target consumer.

So, what are my dreams, goals, and aspirations?

I WILL become the successful owner of a small specialty store that caters to the more curvacious women in the nation. Yes, I said the NATION.  

Starting with one store here in my new home city, I plan to make waves that will eventually lead to a tsunami.  I’d like to open chain stores in not only the major cities like Atlanta, Miami and New York, but smaller cities too.  

Even small towns have divas…

My chain stores will carry clothing that I purchase carefully as a buyer for my target market.  Once my chains are up and running, I will then open up a few boutiques featuring custom designs by myself and other fashion minded designers.

I want to be a Brand. Clothing, shoes, accessories—the works!  

Fashion week! Global recognition!  Non profit organizations for the empowerment of young women!

I guess you could say I want it all. But hey, why want less if I can strive for much more? 

Evita a.k.a. “Fashionista”
Student
Ashworth Fashion Retailing Program

 
               Thanks to Chris Metcalf for permission to use this Photo.

In the hyper-competitive business environment of today, there are millions of dollars invested and mistakenly often wasted by companies looking for the “next big thing,” the elusive innovation that will electrify the marketplace.  When most people think of innovation, they automatically consider it in the technological sense, but innovation means much more than producing a faster computer or a telephone that doubles as a home entertainment system; innovation is ultimately about ideas.  In the following video, innovation expert Charles Leadbeater discusses how innovation isn’t just reserved for the corporate giants with infinite capital, but rather how independent thinking entities, people like you and me with a vision, are now empowered like never before to compete in the marketplace on our own terms.  I found this presentation both informative and inspiring.  I hope you feel the same way after viewing it and approach your next lesson with a sense of enthusiasm.  Click on the image above to watch this video. 

Ryan Rode
Interactive Services Manager
Ashworth University

              Thanks to Mzelle Biscotte for permission to use this Photo. 

Any organization in which you find employment will have a variety of managers who have a variety of responsibilities.  A typical business will have sales, operations, financial, and other types of managers, each with a different viewpoint on what it takes for the company to succeed.  In smaller enterprises a manager may wear several of these hats.  In a large corporation managers tend to be more specialized, either as to their duties or their geographic area or product line. 

These managers speak different “languages” and sometimes the result can be a virtual Tower of Babel.  For an example of this, you might try sometime asking an accountant, a plant supervisor, and an engineer what it costs the company to make a particular product.  Having completed this course you should now be able to communicate effectively with a financial manager, and you should also know how to read and interpret financial statements, determining what they’re telling you and what they aren’t.  Armed with these skills you now have the ability to ask the right questions to make better decisions both as a manager and as an investor.  And you can appreciate why the accountant, the plant supervisor, and the engineer would look at “cost” differently.  You needn’t expect them to all agree, so long as you recognize how you need to view the cost of a product. 

Whatever profession you choose, if you’re not already tied to one, you’ll need to master its language and those of professions tied to individual departments, as well.  These could include production, purchasing, materials management, human resources, sales and marketing, and even corporate legal disciplines.  This is the purpose of a general business education such as the one you are pursuing at Ashworth University. (more…)

                 Thanks to jean poole for permission to use this Photo. 

I’d like to discuss the challenges of accounting for stock options used as compensation.  Stock options are very popular with start-ups and firms expecting high growth.  The reasoning is simple.  Both types of firms have huge cash flow needs today.  If they had to rely on salaries to attract employees, they most likely would not be able to afford the talent they really need to grow the business.  By awarding their employees stock options, the right to buy stock in the future, they delay part of their compensation expense.  Stock options give their holders the right to buy stock in the future at a specified exercise price.  Typically, the exercise price is higher than the current market price of the stock.  This gives employees incentives to take actions that will raise stock prices, including actions that favorably distort earnings.   

The problem with stock options is that the company records no compensation expense for them.  When an employee exercises an option, the firm must have a share to sell to the employee at the exercise price.  Usually employees do not exercise their options until they are “in the money,” meaning the market price is higher than the exercise price.  At this point, the company has to buy back stock at the higher market price to sell to employees at the lower exercise price or issue new shares or issue shares from treasury stock.  In any event, this is a real cost to the firm.  Currently, this expense does not appear on the income statement.  It has only recently become a requirement to disclose the expense in the footnotes to the financial statements.  For a company like Microsoft that makes extensive use of stock options, this severely overstates reported earnings. 

I discuss a couple of increasingly popular tricks used by struggling companies to boost reported earnings in your lesson reading assignments.  The first is stock buybacks for the purpose of reducing the number of shares outstanding.  By reducing the shares, the EPS rises.  This causes the stock price to rise.  The important point is that no value is created in this transaction.  The same earnings are now concentrated in fewer hands, so price per share will go up even though total market value is constant. 

Another troubling development is the creation of earnings definitions other than net income.  In order to distract attention from earnings reported according to GAAP, companies will often present alternative definitions of earnings such as pro forma earnings, core earnings, or EBIDTA.  Their argument is that GAAP earnings are not representative and the firm is trying to present a more accurate figure for its true earnings potential. The problem with this is twofold.  There are no accepted definitions for any of these alternative earnings measures.  Second, in practice, the items excluded from these earnings calculations tend to be ones that lower the firm’s earnings in that accounting period.  Beware of the firm that presents “pro forma” earnings.  The correct use of that term means forecasted earnings in the future.  Firms today are increasingly using the term to mean, “This is what our earnings would have been if all these bad, non recurring things had not happened to us.”  Often these things include depreciation and interest—I certainly don’t think these are non-recurring expenses!

Lee Woodward, CPA
Financial Statements Instructor
Ashworth University School of Business

Consumer confidence (the term used by the Conference Board) and consumer sentiment (the label used by the University of Michigan) are not quite at their all-time lows, but they are very close to them.

This seems a little odd because two of the biggest elements of consumer attitudes, unemployment and inflation, are quite benign.

Unemployment, at 5.5 percent, is a hair below its long-run average (5.6 percent).  Inflation (all items) is 4.1 percent, only a little above its long-run average of 3.7 percent.

Why the doom and gloom? (more…)

                          Image courtesy of Mike Maddaloni.

There’s that store over on the corner.  It is one of your favorite stores or you just go there once in a while.  But the next time you go by, it’s closed.  Not just closed for the day, but closed for good.  You feel bad as you liked going in there, but you may not have gone in there that often.  You think to yourself if you only knew that they were near that point you could have done something – blogged on them, told your friends or simply went in there more.

For me there were 2 such places, an awesome Vietnamese/fusion restaurant and a coffee shop.  Now a jeweler and a check-cashing store stand in each respectively.  But what if each owner reached out to its customer base for help, would I have responded?  I asked myself as I read about Toscanini’s, an ice cream shop I have visited in Cambridge, MA in a recent issue of Inc. magazine.  In this case, getting behind on paying their taxes resulted in the store closing, and after an Internet appeal they were able to raise enough money to reopen.

As I said before, you can’t mess with the numbers.  However, they did and paid the price for it, literally.  Had they reached out earlier to their customers, how would they have reacted?  How would I have reacted? (more…)