Due to Covid-19 pandemic, stores are temporarily closed, but e-commerce growth in the market remains strong. Most of the growth we have seen in athletic footwear, for example, has come from the online channel. Provide your information technology strategy for short-term, mid-term and long term range planning. (Atleast 2-3 pages of word)

CASE STUDY
Source: The Star Online, New Straits Times
THE economy may be slowing and the retail industry is going through a rough patch, but Al-Ikhsan Sports Sdn Bhd believes this is as good a time as any for it to shine. “The economy is soft, even globally. I think Malaysia is fairly stable in that sense. When the economy faces rough weather, that’s when the true strength of retailers can be seen. “When the economy does well, everyone does well. You can hide your inefficiencies and all that. But if you can grow your business when the economy is down, it shows the strength of the company. As the economy gets tougher, Al-Ikhsan will become more relevant,” says chief executive officer Vach Pillutla. At a time when most businesses are looking to downsize their physical presence, Al-Ikhsan is looking at ways to expand its number of outlets. The company currently has 131 stores under five different retail models, namely, the Al-Ikhsan Sports chain (116 outlets), Sports Warehouse (4), Football Republic (6), Sneaker Street (2) and Factory Outlets (3). The homegrown sports retailer has carved a name for itself in the market by selling products from international sporting brands such as Nike, Adidas, Puma and Umbro at an affordable price. Pillutla says it is planning to open 12 to 14 new doors every year, with 80% of its expansion plans focused on the entry- to mid-level concept. Although the retail industry has become increasingly competitive, he notes that the company’s advantage in staying ahead of the pack is its core mission to stay affordable.
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“Our core purpose will keep us going for the next few years. As long as we are able to communicate our core purpose properly to consumers, I think they will keep coming back,” he says. Tapping the bottom As consumers become a little more tight-fisted, retailers have been trying to diversify into either the more premium or niche markets to maintain margins and profitability. Pillutla notes that unlike most emerging markets, the local retail space has two very distinct segments: the high-end and entry-level segments. “Most emerging markets have a very big middle-class segment. It works like a typical pyramid, where the well-heeled consumers make up the smaller segment at the top and the entry level is much bigger. As the economy grows, the middle-class will expand and other consumers will aspire to move up the pyramid. “Malaysia is different in the sense that people are either at the top end or at the entry level. There’s very little middle-class. So brands and retailers who try to stay in the middle of the spectrum don’t do well because consumers who see a middle-class brand are either willing to trade up or trade down. So you either have to be at the upper-end or lower-end of the market, ” he explains. Hence, he believes that there is also money to be made at the bottom of the pyramid. “People at the bottom of the pyramid are also aspirational. They, too, want things and if you can make it affordable for them, you can tap that market. Consumers are the king. So we have to keep our brand focus and give them what they want,” he adds. Although margins may be thinner at the entry-level, Al-Ikhsan has a variety of retail concepts which can be pushed out to meet the needs of the market it is in and grow its volume. Pillutla says its Sports Warehouse brand, for example, which focuses on entry-level consumers, is a concept that still has legs to go, particularly in smaller towns. “Wherever that has a catchment of 50,000 people, we can do any one of our concepts. We started the Warehouse this year and it has shown very strong results so far. We can
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see another 35 to 40 Sports Warehouse outlets over the next three to five years. Our next position is to move down, deeper,” he says. That said, he maintains that Al-Ikhsan also has enough variety of products to cater to a wider range of consumers. “Our stores have products from different brands. We can have prices for certain products that go up to RM600. So while we make products affordable to consumers, we are also able to sell them at a certain level of prices if the brand can command that price. In that way, we can cater to a wider range. “But we always try to stay to our core purpose, to stay affordable. We are about making Malaysia fit and active since 1993 by making brands affordable to consumers. That is our strength and our core purpose. It cannot go away.” Al-Ikhsan was founded by Ali Hassan Mohd Hassan in 1993 in a small shop in Holiday Plaza, Johor. His entrepreneurial pursuit had started earlier on as a student in Universiti Teknologi Malaysia to fund his studies. He sold trinkets and such and managed to graduate with a diploma. When he started the business, he was diligent to ensure that he maximised every opportunity to keep sales going. He built a good rapport with his customers and kept his sports products affordable. Ali Hassan’s success in growing Al-Ikhsan was obvious when the retailer caught the eye of government-linked private equity firm Ekuinas, which bought a 35% stake in the company in 2016. Ali Hassan and his wife still holds the remaining 65% of the company and he has stayed on as its chairman. Pillutla thinks the company is only halfway through “what we are really capable of doing”. As long as the sports industry continues to grow, Al-Ikhsan will be able to grow in tandem. He adds that its retail concepts are also applicable to any emerging market, making it easier for it to expand overseas when the time is right.
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On the horizon Over the next three years, the company will continue to expand into tier-2 and -3 cities. It will also continue its focus on the entry-level concept stores like the Sports Warehouse. Another thing that the company will be paying close attention to in the coming years is its private label. Pillutla hopes to make its private label and licences more relevant to the masses as he views this as a good channel for Al-Ikhsan to have a deeper engagement with its consumers. “We want to create products that consumers want. I think our house brand can grow to be a significant brand pillar for us, maybe making up to 30% of the brands we have,” he says. With these strategies in place, the retailer is aiming to keep its double-digit growth every year – a target that Pillutla says is “absolutely achievable”. “That’s the job of professional CEOs like us. There’s a limit to what founders and entrepreneurs can do for a company because the thing about professional CEOs is that we don’t think from our hearts. “We see opportunities, we look at our current capabilities and we think in terms of how we can build that capability for future growth. We are a bit disconnected, so we don’t make decisions based on emotions. But that is not to say that one is right and one is wrong. It is just a way of working. “In business, you need data and experience to take a very informed action, so that you’ll have stronger chances of success. And we believe we have a formula here,” he says. “The challenge for us is more internal. We are no longer small. And we need to continue to drive and align our people towards our mission. As long as we understand our core, we can have market share,” he says.If all goes well, the company is eyeing listing plans in two to three years’ time. The company’s three concepts – Al-Ikhsan, Football Republic and Sneakers Street – are vital to promote sustainable growth for its retail sports business in order to mitigate the seasonal impact.
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“Our three concepts are catered for entry to mid-level consumers and up to high-end consumers. Football Republic is a specifically designed for personalisation or customisation of football’s boots and attire, targeting professional amateur players or fans”. “Sneakers Street category is a sports lifestyle concept that offers affordability for sneakers and accessories to consumers,” he said. Pillutla said the company aspires to have stability in its business earnings with promising growth for long-term sustainability, while adapting to the current market needs. “We want to aggressively expand our market reach, especially in East Malaysia and outside the country with about eight stores are expected to be opened this year. “For long-term expansion plan, we target to open up to 30 stores by 2021,” he said, adding that this would allow the company to reach about 145 Al-Ikhsan stores nationwide. Pillutla said the company also plans to open 15 Sneakers Street stores in the next three years, with initial four stores to be opened this year, followed by additional five Football Republic stores in the future from the current five stores. He said Al-Ikhsan is currently in the discussion with various parties to expand its business in other market in Southeast Asia region, while providing numerous choices to consumers. “We have ‘reasonable’ allocation for capital expenditure (capex) as it will be financed internally. The cost of each store will typically be depended on its size and location,” he said, citing that it is important for the company to have single-digit or lowest double-digit rent-to-sales ratio. Pillutla said capex should not be extremely high as the company on its self-sustaining mode to generate sustainable earnings, while reducing its debt. The company’s inventories is also important to keep its earnings healthily to avoid inventories not age beyond certain points. “We will also embark on digital platform – Omni Channel – to complement our existing retail stores. This allows customers to choose and buy our products virtually through
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mobile app or online platform. The initiative would also enhance our efficiency and productivity, as it easily helps us to monitor our inventories,” he said. "Our commitment is to keep Malaysia fit and active by making sports affordable for all. We also need to understand consumers well and must change ourselves based on what consumers want,” he said in a media interview here recently. Al-Ikhsan will launch a new e-commerce online platform (website) next month, a move that will help the company become a global player in the sports retail segment. “We are ranked 64th largest sports retailer in the world. Therefore, when consumers look at us, they don’t just perceive us as a Malaysian company but rather benchmark us as a global player,” Pillutla said. “I don’t think, even our founder Tuan Haji Ali, thought that we could reach this stage,” says Vach Pillutla, Chief Executive Officer of Al-Ikhsan from his office at Taman Tun Dr Ismail. The company, with its various concept outlets, is by far the largest sports retailer in Malaysia, commanding over 20 percent market share in the sports equipment, apparel and footwear segment. “Ten million people have walked through our doors every year. To put things into perspective, almost one third of the Malaysian population visited Al-Ikhsan stores.” He expects Al-Ikhsan’s e-commerce platform to contribute about 5.0 per cent of the total sales over three years. “In general, the overall retail sector grows about 4.0 per cent to 5.0 per cent annually, while the sports retail around 8.0 per cent to 9.0 per cent. “Globally, most markets are likely to remain stagnant but I think Malaysia continues to perform quite well in sports retail,” he said. He also said Al-Ikhsan continued to learn about consumers and offered products and services at prices preferred by customers. “As long as we continue to pursue it, we are not worry about competitions. For the next three years, we intend to open up to 14 stores annually in the Peninsular Malaysia with
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concepts including Football Republic and Sneakers Street, depending on the market and catchment to match consumers’ demand,” he said. He did not divulge further on how much capital the company would invest, saying that it had sufficient money to fork out internally. As stated earlier, Ekuiti Nasional Bhd (Ekuinas) acquired a 35 per cent stake in Al-Ikhsan in July 2016 for RM68.6 million. Ekuinas chief executive officer Syed Yasir Arafat Syed Abd Kadir said the first two years since the partnership with Al-Ikhsan were about stabilising the company, in particular improving its back-end support. “We need to ensure that we have strong back-end processes before exploring growth. We focus on effective resource planning - an inventory software system - as well as execute strategic business plans, recruit the right talent and strengthen existing brands under us,” he said. Syed Yasir Arafat said it was important for the government-linked private equity fund manager to strengthen Al-Ikhsan’s foundation and expand in certain areas, while offering different products not only active brands but promoting in-house products. “We have about 30 brands under Al-Ikhsan. We employ around 1,200 staff and command about 30 per cent local market share in multi-retailer segment.” Syed Yasir added that since Ekuinas invested in Al-Ikhsan, the former had managed to more than recoup its investment. “From Ekuinas’ perspective, Al-Ikhsan has strong liquidity and sufficient cashflow to grow, with good inventory management. Hence, Al-Ikhsan doesn’t require further capital injection to expand further,” he added. Al-Ikhsan founder and chairman Ali Hassan Mohd Hassan believes the sports retail business was growing with abundance of opportunities locally. “We are investing about RM1mil in each new outlet, inclusive of renovation and stocks.” Ali Hassan said strengthening the company’s position in the local sports goods retailing segment would discourage foreign companies from taking over the domestic market.
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He said it was important to stop these companies from expanding in Malaysia, as local players should be given the opportunities. He said prospects for sports goods in Malaysia were bright as the goods sold here were the second cheapest in the world after the US. Ali Hassan said by having a formidable presence in the urban and rural areas, it would be almost impossible for foreign sports goods retailers to gain a strong footing here. He said the company catered to customers who were serious in sports and those who were into sports fashion. He said Malaysians were brand conscious and more customers were willing to spend money on branded items. “Previously, there was a huge pressure from the sports brand principals as they demanded for growth based on the global trend. “Similarly, they expected growth from Al-Ikhsan in Malaysia due to opportunities in sight. Hence, we decided to partner with Ekuinas to support our future growth and become more competitive,” he said. Through the partnership, Ali Hassan said Al-Ikhsan had undergone due diligence exercise to evaluate the company’s weaknesses and strengthens. “Ekuinas had helped us to find new team members, while consolidating our stores and improving the back-end processes.
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1.

In order to test the claim that average amount spent for lunch per day by MSU students is not $ 7.25. A random sample of 40 students is taken. After calculating sample mean and standard deviation p- value is found to be 0.0482. Which one of the following statement is correct.

Question 6 options:

2. US department of labor wanted to compare the average unemployment rate in two different states California and Washington. From California they took a sample of size 12 and found that sample mean 20.32 and sample standard deviation is 3.55. From Washington they took a sample of size 15 and found that sample mean 21.24 and sample standard deviation is 2.70. Find the critical value (use t-table) to compute 95% confidence interval of the true difference in population.  

3.

Following data shows number of ICU admission (X) and number of death per day (Y) for seven days due to COVID-19 virus. Calculate the test value to test the hypothesis there is no significant correlation between X and Y.

4. According to the data published by Minnesota Dept of Health, as of May 2, 2020 there are total 6228 conformed positive cases of COVID-19 and 395 death due to the virus. Find the point estimate of the death rate due to COVID-19 in Minnesota.

5. The CEO of a large electric utility claims that more than 82 percent of his 2,500,000 customers are very satisfied with the service they receive. To test this claim, the local newspaper surveyed 200 customers, using simple random sampling. Among the sampled customers, 174 say they are very satisfied. Find the p value to test this claim.

On December 1, 2015, ABC Company acquired a new delivery truck in exchange for an old delivery truck that it had acquired in 2012. The old truck was purchased for $35,000 and had a book value of $13,300. On the date of the exchange, the old truck had a market value of $14,000. In addition, ABC paid $2000 cash for the new truck. The exchange lacked commercial substance. At what amount should ABC record the new truck for financial accounting purposes?

The following facts relate to Headland Corporation.

Compute income taxes payable for 2020.

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020.

Prepare the income tax expense section of the income statement for 2020, beginning with the line “Income before income taxes.”

The All-Star company borrows funds of USD 1,000,000, with an interest of 5% from Bank of America and has been withdrawn on 15 January 2019.

The loan has a tenor of 1 year. When withdrawing USD/IDR Rp 14,250,-. Currently available Call Options for USD for 365 days tenor are as follows:

Premium 2.5% Strike USD/IDR 16,000, - as of 14 January 2020 If on January 14, 2020, the USD/IDR exchange rate is Rp 15,000,-

A. What is the total cost borne by All-Star on loans from Bank of America?

B. Does All-Star exercise against the Option Call purchased on January 15, 2019?

C. Draw in graphical form for this pay-off Option Call

XYZ Ltd. is a large retail company listed on a major stock exchange, and its reported net income for the year ended December 31, 2019, is $5 million. The earnings were announced to the public on March 31, 2020. Just before the release of the 2019 earnings on March 31, 2020, financial analysts had predicted the company’s net income for 2019 to be $7 million.

Assumptions

■ No other news about XYZ Ltd. was released to the public on March 31, 2020.

■ No significant economy-wide events affecting share prices occurred on March 31, 2020

Consider the two situations below:

i The $2 million deviation of forecasted earnings from actual earnings is completely accounted for by XYZ Ltd.’s having closed down a number of its retail outlets.

ii The $2 million deviation of the forecasted earnings from actual earnings is completely accounted for by a fire in XYZ Ltd.’s largest retail outlet, which had caused

the outlet to be closed temporarily for six months.

A. Which event would likely cause the largest impact on the share price in an efficient market – a loss from a fire disaster that disrupts business for a short period of time, or a similar size loss from closing a large number of stores?

B. Would the market reaction to the fire disaster be positive or negative? Would you expect the market reaction to the store closings to be positive or negative? Defend and explain each answer.

[assume that the market was unaware of the fire disaster or the store closings, as the case might be, prior to the earnings announcement. Thus, when the company reported earnings, it also disclosed for the first time the cause of the earnings shortfall. The assumption means that we have a scenario where the disclosure of the earnings shortfall and the simultaneous disclosure of the reason for the shortfall is both news to the market.]

Great University is planning to build a new parking deck for increasing the number of parking spaces for its faculty members, staff, and students. Marcus Araujo is the Vice Chancellor (Business Affairs) at Great University. Mr. Araujo had hired Mala Iyer (a bachelor’s degree holder in Mathematics) as a Project Scheduler in December 2019. The proposal for the new project had to be given to the Board of Trustees by April 15th, 2020. As part of the project proposal, Mr. Araujo was planning to include a section on Costs and Budgets for the project.   

In his weekly meeting with Mala Iyer (on March 25th, 2020), Mr. Araujo asked her to give him the preliminary outline for the costs and budgets for the new parking deck project. Marcus Araujo then added “Mala, I know that you have not prepared costs and budgets in the past. However, I would like you to make an attempt to include the details of different types of project costs, direct and indirect costs, recurring and non-recurring costs, fixed and variable costs, normal and expedited costs, cost estimations, and project budget”.   
Mala, with not much of a background in accounting and business, was at a loss on where to begin. Help Mala Iyer by explaining the following concepts (including the limitations and advantages of using the different methods) as they relate to the new parking deck project:

a) Different Types of Project Costs.
b) Direct and Indirect Costs, Recurring and Non-Recurring Costs, Fixed and Variable Costs, and Normal and Expedited Costs.
c) Cost Estimations (Ballpark Estimates, Comparative Estimates, Feasibility Estimates, and Definitive Estimates).
d) Project Budgets (Top Down Budgeting, Bottom-up Budgeting, and Activity Based Costing).
e) Developing Budget Contingencies.
  

Wright Corporation had the following permanent accounts and ending balances on December 31, 2020 (before adjusting entries):

There have been no transactions recorded in Allowance for Doubtful Accounts over the year. The company should recognize bad debt expenses for $5,000 at the end of 2020. The company prepaid $20,000 for one-year insurance becoming effective on October 1, 2020. The company purchased the equipment on July 1, 2018, and estimated that the useful life of the equipment is 20 years and there is no residual value of the equipment. The company adopted straight-line method to account for depreciation. On December 31, 2020, the fair values of FV-NI investment and FV-OCI investments were $200,000 and $520,000, respectively. The company used the perpetual inventory system. There were no accrued interest and discount/premium on bonds, and other accrual items. Please do not consider the income tax effect.

Required:

Prepare a statement of financial position as at December 31, 2020, presenting assets and liabilities in order of liquidity.

Enterprise Risk Management (ERM) is an activity undertaken by many organizations. Jiffy Sportswear, Inc., is a fast growing privately owned company that will soon issue its shares to the public and be subject to SEC jurisdiction. Its CEO wants to implement a corporate wide ERM program and asks you, the CAE, to counsel him on the following:

1. Explain the purpose of ERM and how it may add value to the organization.
2. What is the role of internal auditing with respect to ERM? Moreover, what should internal auditing refrain from doing with respect to ERM?
3. Explain the concept of risk-based auditing and how it relates to ERM.

Corporate Accounting

Benito Company reported the following information for the financial year ended 30/06/2020:

Required:

l. What is the net cash inflow (outflow) from operating activities?   

ll. What is the net cash inflow (outflow) from investing activities?

lll. What is the net cash inflow (outflow) from financing activities?

IV. Determine the cash & cash equivalents as of 30/06/2020.

V. Determine the total cash flow from operations as of the end of the year. Opening Balance of Cash at the start of the year is $100,000.