Laura Kimberly Company
Autor: jing0000 • October 27, 2017 • Case Study • 1,239 Words (5 Pages) • 466 Views
Assignment #3 Laura Kimberly Company
- Laura Kimberly operates in the women’s retail clothing industry. Assume Laura Kimberly is your client today; what business risks face the retail industry? What would be of most concern to an external auditor.
- Increasing cost of labor.
During the last recent years, the U.S. experienced increasing in the minimum wages, thus increased the cost of labor in garment manufacturing industry. As the cost increased, gross profit decreased during the same time. http://senate.columbia.edu/committees_dan/external/wrc1105.pdf
- Recent and future economic conditions.
The current economic condition has a significant negative impact on the apparel industry, and also the customers. In the garment industry, it is a common rule that manufacturer receive a portion of the full price, and receive the rest after finish the deal. However, during the economic downturn, it become more difficult to collect the account receivables. This also effect manufacturer’s liquidity.
In addition, since the economic downturn also effects customers, the number of orders decreases significantly as well. Thus, decreases the overall income of the manufacturer.
http://www.wikinvest.com/stock/G-III_Apparel_Group_(GIII)/Risk_Factors_Relating_Economy_Apparel_Industry
- Global market risk
- Competition
The apparel business is highly competitive, especially the market is globalized. There are incredible number of competitors. Developing countries tend to have lower labor cost. Many clients shifted oversea for lower cost.
Moreover, the fashion trend is different in each country. It is hard to match up the global fashion trend in a fast path.
- Quality control
Factory nowadays has many suppliers over the world. However, since the geographic distance, it become difficult for manufacturer to track the quality of the raw materials. Also, the distance increased the time and value cost of communication.
https://www.omicsgroup.org/journals/the-garment-manufacturers-risk-assessment-swot-analysis-2165-8064.1000173.pdf
- Examine the results of a) the flux analysis on the balance sheet and income statement for 2000 versus 2001 and b) the ratio analysis (calculate the ratios and compare them to the industry benchmarks provided).
- Account receivable and Cash
Account receivable is a high portion of the total current asset. Also, the amount of account receivable increased 17%. It is risky. It might mean they difficulties to collect account receivables. Also, the total net sale in 2001 is $83,980. However, the change of cash and account from 2000 to 2001 does not reflect this sale amount. Fraud is possible exist. Auditor need to compare the original documents, and also inventories to track the sales transaction.
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