Accounting & Finance for Fashion Business - PDF

L1: Introduction of Accounting & Finance for Fashion Business Tools for Business Decision Making in the dynamic world of fashion KL by Prof. Ken Law Textbook Ref.: Kimmel, Accounting: Tools for Decision Making,8th Edition, 2021 Chapter 1 Agenda 9:30 Accounting and Busin...

L1: Introduction of Accounting & Finance for Fashion Business Tools for Business Decision Making in the dynamic world of fashion KL by Prof. Ken Law Textbook Ref.: Kimmel, Accounting: Tools for Decision Making,8th Edition, 2021 Chapter 1 Agenda 9:30 Accounting and Business Activities 10:00 Basic Financial Statements 10:20 Financial and Management Reports 11:00 Summary - Learning outcome - Homework - Quiz 2 What is Financial Accounting? 1 Definition Process of identifying, recording, and communicating financial information 2 Purpose Provides stakeholders with information for informed decision-making 3 Scope Covers entire business entity's financial activities 3 Users of Financial Accounting Information Investors Make investment decisions based on financial performance Any other parties? Creditors Assess company's ability to repay loans A/. Customers; B/. Suppliers; C/. Analysts; D/. Auditors; Management E/. All of the above. Guide strategic decisions and resource allocation Regulatory Bodies Ensure compliance with financial regulations 4 Types of Business Activity in Fashion Financing Investing Operating Fashion brands secure funds Acquiring Assets like store Core activities include designing through borrowing or selling locations, manufacturing collections, manufacturing stock. Loans create Liabilities, equipment, furniture, design garments, and selling to while stock sales increase Equity. software and intangible assets is customers. Net income results crucial for operations. when revenue > expenses; otherwise, Net Loss. 5  The Fashion Industry Overview Global Reach Dynamic Nature Seasonality Complex Supply Chain Multi-billion dollar industry Fast-paced, trend-driven, and Huge seasonality and From design to retail, involving spanning continents highly competitive market trendy products numerous stakeholders WHAT ELSE? 6 Financial Accounting in Fashion Inventory Management Tracking seasonal products and predicting trends Cost Control Balancing quality and affordability in production and other operating costs Pricing Strategy Setting competitive prices while maintaining profitability 7 Agenda 9:30 Accounting and Business Activities 10:00 Basic Financial Statements 10:20 Financial and Management Reports 11:00 Summary - Learning outcome - Homework - Quiz 8 Key Financial Statements Balance Sheet Snapshot of assets, liabilities, and equity on a specific date Income Statement Profitability over a specific period Retained Earnings Statement Changes in retained earnings over a specific period Cash Flow Statement Cash movements in and out of business over a specific period 9 Income Statement Balance Sheet Cash Flow Statement Cash is King! 10 The Accounting Equation Assets 1 Resources owned by the company A = 2 Liabilities L Debts and obligations owed to others + 3 Equity E Owners' stake in the business 11 Retained Earnings Statement 1 Beginning Balance Start with the previous period's retained earnings balance. 2 Add Net Income Include profits from successful fashion collections and ventures. 3 Subtract Dividends Deduct payments made to shareholders, if applicable. 4 Calculate Ending Balance The final figure represents funds available for future fashion investments. 12 Interrelationships of statements 13 Agenda 9:30 Accounting and Business Activities 10:00 Basic Financial Statements 10:20 Financial and Management Reports 11:00 Summary - Learning outcome - Homework - Quiz 14 Financial Accounting Objectives 1 Decision-making Provide useful information for stakeholders 2 Accountability Ensure transparency in financial reporting 3 Performance Evaluation Facilitate assessment of business performance 4 Comparability Enable comparison between different fashion businesses 15 Managerial Accounting in Fashion Informed Decision-making Provide timely information for management Cost Management Identify areas for improvement and cost reduction Strategic Planning Facilitate long-term business strategies 16 Financial vs. Managerial Accounting Aspects Financial Accounting Managerial Accounting 1/. Focus External reporting Internal decision-making 2/. Time Orientation Historical Forward-looking 3/. Users External stakeholders Internal management 17 Financial vs Management Reports 18 Group Exercise Image you are working for the following position in the company, A) what kinds of business decisions you will need to make, and B) what business/management reports do you need? 1/. Product Designer; 2/. Retail Manager; 3/. Warehouse Manager; 4/. Inventory Control Manager; 5/. Marketing Manager; 6/. Shop Visual Merchandising Manager; 7/. Production Manager; 8/. CEO 19 Learning Outcome Check Now you should be in a position to: ▪ Identify users of accounting information; ▪ Explain the three principal types of business activity ▪ Explain the special needs of fashion business in accounting; ▪ Identify the basic financial statements and management reports; ▪ Understand the use of accounting information for decision making. 20 Class Attendance https://www.polyu.edu.hk/class_attendance/index.php If you have taken attendance during the break, no need to repeat this. You only need to take attendance once per class. 21 Homework 1 Why is it critical to manage well finance? The Hong Kong-listed group says seven of its businesses in Germany cannot pay their bills and it is "unviable financially to continue the business as it is currently structured in Germany". 1/. Please suggest what caused this company to go bankrupt. Source: EuroNews Published 27 May, 2024 2/. Who will be affected by this bankruptcy event? 3/. What could be done better financially to avoid this? 22  What counts as class participation? Raising hands to answer in class Raising hands to ask questions Presenting in the class exercise Please record your Individual answers in classpoint participation today Homework posted on Blackboard SFT210FB - 2024-25 Sem 2 - What does not count as class participation? participation.xlsx Answers in chorus, such as good afternoon, yes, no, nodding head Group discussions within the group No double dip – uReply quiz, individual assignment and group presentation should not be counted as class participation Class participation for this week will be locked after two weeks 23