The Guillermo Furniture Store Concepts
Even though a great deal of financial information is on accounting statements, the information that is relevant is the one that would detail the firm’s financial position. Knowing relevant financial information can provide the guidance in making the best financial decision. Nevertheless, understanding the principles of finance is essential to guiding a firm to work more efficient in financial matters. This paper details some financial principles related to Guillermo’s Furniture Store scenario.
The Competitive Economic Advantage
Value and Economic Efficiency
Observing Financial Transactions
The concept of observing financial transactions with the options presented to Guillermo are trade–offs between the risk and the return on investments. Even though merging with another company reduces risk, Guillermo has no interest in this option (University of Phoenix, 2007). However, the choice of investing into the latest technology that will provide an automated means of production may provide the best return on the investment. The option of moving from a manufacturing operation to distributor operation may have a lower risk than its incremental benefit. However, considering the opportunity cost of the alternatives will help in the decision-making process. Moreover, Guillermo could lower risks by merging with another company, expand as a representative in distribution for another company, and market his patented process of coating furniture in an effort to invest in different areas, whichis a means of diversification.
Summary
References {text:bookmark-start} {text:bookmark-end}
Emery, D. R., Finnerty, J. D., & Stowe, J. D. (2007). Corporate Financial Management (3rd ed.). Upper Saddle River, NJ: Pearson Education, Inc.
University of Phoenix. (2007). The Guillermo Furniture Store. Retrieved October 7, 2009, from University of Phoenix, Week One, Fin/571.
{text:bookmark-start}…