Decoding Financial Statements: A Guide for Leaders

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Capella University *

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Accounting

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Jun 12, 2024

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Uploaded by CaptainDragonMaster1134

Accounting Methods for Leaders Justine Probert Capella University Training Accounting Tools and Practices James Shelton May, 2023

What is Urban Outfitters? 1970 was the birth year of the concept of Urban Outfitters. Dick Hayne, Judy Wicks, and Scott Belair all met in college and played around with the idea of opening up a retail store. Belair was taking an entrepreneurial course in college, which helped bring their first concept called Free People to life. This stores mission was o provide second-hand clothing, furniture, jewelry and home décor for college-aged customers in a casual fun environment ( The First Store & Mission, 2023). The first Urban Outfitters opened in West Philadelphia, introducing the concept of maintaining the history of the building and culture while creating a new atmosphere. This company is all about giving its consumers a new way to experience clothing- through culture, history, and new era thinking. Financial Statements and Notes Here at Urban Outfitters it is vital to understand what an income statement is and how to read it. There is important information on this document that can help analyze where the company stands with our finances. “An income statement is one of the most common, and critical, of the financial statements you’re likely to encounter. Also known as profit and loss (P&L) statements, income statements summarize all income and expenses over a given period, including the cumulative impact of revenue, gain, expense, and loss transactions. Income statements are often shared as quarterly and annual reports, showing financial trends and comparisons over time” (Stobierski, 2020). The balance sheet is also essential to understanding the company’s finances. “While an income statement tallies income and expenses; a balance sheet, on the other hand, records assets, liabilities, and equity” (Stobierski, 2020). This will help you determine the net worth of Urban Outfitters. “Balance sheets are typically prepared and distributed monthly or quarterly depending on the governing laws and company policies” (Misamore, 2016). We will find the company’s assets, liabilities, and shareholders’ equity. Here is an example of the income statement versus the balance sheet ( [solved] how do you find current ratio and quick ratio for urban outfitters...: Course hero 2023). Making your own notes within a financial statement is important. These types of notes are also known as footnotes. This can help highlight the important finds within a financial statement. This can help us as a business view what we are doing right and where we are headed wrong. It can ultimately save the company from going under if we are able to appropriately read these financial statements and make adjustments before the company is in too deep. Analyzing Financial Statement Notes When looking into the different segments of the operation, Urban Outfitters has both retail and wholesale segments. “The retails segments consists of

Anthropologie, Bhldn, Free People, Terrain, and Urban Outfitters brands and our Food and Beverage division” (sec.gov). In simpler terms, this is what is sold in stores directly to the public. “The wholesale segment consists of Free People wholesale division that primarily designs, develops, and markets young women’s contemporary casual apparel and shoes sold directly through specialty and department stored and third party websites” (sec.gov). The data within the income statement will help you understand where your net sales, gross income, income from operations, and net income are as well as a broken down version of balance sheets. On the balance sheets you will be able to see data on working capital, total assets, total liabilities, and total shareholders equity. Having access to Urban Outfitters annual report on Form 10-K is essential to your role in understanding the operation. Advertising Costs Advertising is how a company gets its name and product out into the public’s eye. It helps sell and promote products or services of a company, and highlights key components that set that company aside from the rest. A company’s success can rely on how great their advertising strategy is. For Urban Outfitters specifically, the advertising piece focuses on what the clothing represents, which is a unique clothing that is defined by a history filled, easy going lifestyle. There are many different ways to advertise, such as through social media ads and posts, to getting a sponsored blogger to rate their clothing and in store experiences. Advertising can get costly, which is why there is an advertising expense line on the financial statements where all advertising costs should get reported. In the finances for 2015- 2017 you can find that the expenses were $127,159 for 2017, $114,104 for 2016 and $103,882 for 2015 (Urban, 2016-2017). Store Opening Costs There are many costs associated with the opening of an Urban Outfitters, some of those being travel expenses, training and hiring employees, and paying those new employees. These expenses are categorized under selling, general, and administrative expenses (Urban, 2016-2017). Capitalizing Vs. Expensing Capitalizing costs requires the cost to be recorded on the balance sheet as an asset. Then the cost is allocated to the income statement as a depreciation expense for tangible assets (Robinson, 2012). To expense a cost, the pre tax income will be reduced by that amount (Robinson, 2012). Net income will increase when a cost is capitalized and you will also see an increase in the shareholder’s equity.

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References The First Store & Mission . Our History. (n.d.). https://www.urbn.com/who-we-are/history Investor publications . SEC Emblem. (2007, February 5). https://www.sec.gov/reportspubs/investor-publications/investorpubsbegfi nstmtguide Misamore, B. (2016, June 9). Balance sheets 101: What goes on a balance sheet?: HBS Online . Business Insights Blog. https://online.hbs.edu/blog/post/balance- sheets-101-understanding-assets-liabilities-and-equity Robinson, T. R. (2012, April 4). International Financial Statement Analysis . Google Books. https://books.google.com/books/about/International_Financial_Statement_ Analys.html?id=6fGaDWOUyBUC Stobierski, T. (2020, May 28). Income statement analysis: How to read an income statement . Business Insights Blog. https://online.hbs.edu/blog/post/income- statement-analysis [solved] how do you find current ratio and quick ratio for urban outfitters...: Course hero . [Solved] How do you find current ratio and quick ratio for Urban Outfitters... | Course Hero. (n.d.). https://www.coursehero.com/tutors- problems/Finance/24852431-How-do-you-find-current-ratio-and-quick- ratio-for-Urban-Outfitters-fis/ Urban  Resources (2016-2017). 2016- 2017 Finance Report. Finance Statements. Retrieved

from https://www.sec.gov/Arc hives/edgar/data/912615/ 000119312517108506/ d286750d10k.htm Urban  Resources (2016-2017). 2016- 2017 Finance Report. Finance Statements. Retrieved from https://www.sec.gov/A rchives/edgar/data/912 615/000119312517108 506/d286750d10k.htm Urban Resources (2016-2017). 2016-2017 Finance Report. Finance Statements. Retrieved from https://www.sec.gov/Archives/edger/data/912615/000119312517108506 /d286750d10k.htm