David Sterman

For many retailers, the slow economy has made it hard to meet sales and profit targets. Formerly stellar retailers such as Talbot's (NYSE: TLB), Pacific Sunwear (Nasdaq: PSUN), and Coldwater Creek (Nasdaq: CWTR) have all seen their stock move below $3 as investors grow tired of waiting for sales to rebound. Crucially, these companies have decent balance sheets, so they will at least likely hang in there until the economy picks up.

The same can't be said for American Apparel (AMEX: AAP), a retailer known for its eccentric executive Dov Charney, who has been the target of several sexual harassment lawsuits initiated by former employees. Charney has repeatedly been criticized for paying more attention to his image than his company. And with a seemingly casual disregard for the health of his business, he's brought it to the precipice of bankruptcy. In fact, there's a series of metrics that will appear on the company's balance sheet in the next two quarters that may spell the end for this stock as the company potentially declares bankruptcy.

Let's break down the balance sheet to see whether the company is indeed on the cusp of a bankruptcy filing.

David Sterman

David Sterman has worked as an investment analyst for nearly two decades. He is currently an analyst for StreetAuthority.com