...Introduction Guillermo Navallez has been in the furniture making business for several years in Sonora, Mexico. This once quiet town was notorious for vacationing and has a great supply of timber for the furniture that Guillermo produces. Consumers pay a higher premium for the well-crafted furniture and his labor is inexpensive. In Guillermo’s Furniture Store scenario, there are various financial concepts that are found. Location For 13 years Guillermo’s furniture business was at a prime location partially due to materials being available, after the competition had moved in creating numerous changes, the location has declined. In one year from 12/31/09 to 12/31/10 Guillermo’s assets, liabilities and equity, and overall total liabilities increased 1.12% and total liabilities & equity also increased 1% despite the competitive changes. Although the business shows an increase, it is not large enough to maintain a steady profit. Operating Expenses For years Guillermo has used local timber that delivers high quality furniture. His products were priced higher because of the craftsmanship and well-known quality. He had developed a variance analysis that displays his budget for various expenses including materials. All total operating expenses (excluding supplies) exceeded the budgeted amount by 1.1%, while his overall revenue had not met his budgeted amount which could be due to competitive products that are moving in. For example, because of budgeted net revenue...
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...Guillermo’s Furniture Store Concepts and Principles of Guillermo’s Store Kendall Norman II University of Phoenix Corporate Finance/571 The goal of this paper is to briefly discuss the Guillermo Furniture Store scenario while pointing out and tying key financial concepts and principles discussed in the textbook. The Guillermo Furniture store scenario is about a local furniture manufacturer whose business is located in Sonora, Mexico. He has enjoyed several years of success without any threat of competition. Most recently competition has come about from two different directions. Guillermo has competition via a new international furniture manufacturer who makes the same furniture with better precision, in less time, and at a much cheaper price. The next type of competition comes through the way of development of a new international airport. This is a problem because this airport development will need labor workers. This need will surely drive up the cost of wages, and thus force Guillermo’s hand in the way of increasing his wages for his employees. This is one concept from the text that will be discussed in correlation to Guillermo’s furniture store. Some of the other concepts and/or principles that will be branched into are the concepts of risk aversion, diversification, specification, and time value of money, as well as, the behavior principle, the self interested behavior, and finally the Comparative Advantage Principle. The combination of two forces of...
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...the financial factors that affect decisions. In the University of Phoenix (n.d.) scenario, Guillermo’s Furniture Store has several options to consider which can help bring the revenues back to the company. This paper explains and relates three basic principles and concepts to the scenario. Financial Principles When it comes to corporate finance, there are many principles that are important. These include the principles of self-interested behavior and risk-return trade off. How they relate to the scenario involving Guillermo’s Furniture Store vary based on the principles and concepts themselves but they relate in one way or another. Guillermo, the owner of the furniture store is faced with many options once his sleepy little town expands (University of Phoenix, n.d.). The main financial principle that is described in the furniture store scenario is the behavioral principle. In this principle, people look to others for guidance based on what similar companies have done recently (Emery, Finnerty, & Stowe, 2007). Guillermo knew of his options to either be bought out or acquire another company based on what other companies in the area had done, he was following the behavioral theory. Another financial principle is the principle of self-interested behavior, which states that people generally act on their own personal financial well being (Emery, Finnerty, & Stowe, 2007). In the scenario, Guillermo acts in his own self-interest by eliminating his options to have his...
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...RUNNING HEAD: GUILLERMO FURNITURE STORE University of Phoenix Guillermo Furniture Store Guillermo Furniture Store Guillermo Furniture Store has undergone a major critical change within its industry. In order for this organization to stay focused there should be a change that can provide the organization with the best possible ambition to recap the profit and stability that the organization is use to. This paper will recap the cost relationship and behavior, management control systems that will help achieve Guillermo’s goals, also this paper will provide the break-even analysis for Guillermo’s current situation, and compute the Return on Investment. Cost Relationship and Behavior Cost relationships and behaviors can affect Guillermo’s decision making prerogatives for the manager. Cost behavior is defined as, “how the activities of an organization affect its costs” (Burgstahler, Horngren, Schatzberg, Stratton, and Sundem, 2008). Cost behavior consists of variable costs and fixed costs. Variable costs are, “costs that change in direct proportion to changes in the costs driver” (Burgstahler et al., 2008). Examples of variable costs for Guillermo are materials, equipment, and labor (Guillermo, 2009). Fixed costs are, “costs that is not immediately affected by changes in the cost-driver level” (Burgstahler et al., 2008). Examples of fixed costs for Guillermo are labor, utilities, taxes, and etc (Guillermo, 2009). Cost behavior can affect the choice of the process...
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...Guillermo Furniture Store Analysis Introduction When looking at a budget there are many factors to discuss and apply. The Guillermo Furniture Company has been a staple in Mexico for numerous years. Guillermo will have to use the correct reports relating to both performance and budgets in many different ways. Guillermo's competitor has updated machinery and budget. The competitor has forced Guillermo to look at his budget, sales forecast, and analysis of ethical considerations in the preparation, use of the budget and ethical code of ethics. The authors of this paper will provide Guillermo’s Furniture Store with the tools needed to make decisions based on data using performance and budget reports. Sales Forecasts: Risks and Organizational Success Sales budget is the foundation of budgeting and the accuracy of this budget relies heavily on the accuracy of budgeted sales. Managers prepare the departmental budgets monthly based on the sales forecast. Several factors contributes to creating sales forecast, which are past patterns of sales, estimates made by the sales force, general economic conditions, competitors’ actions, changes in firm prices, changes in product mix, market research studies, advertising, and sales promotion plans. Specifically in Guillermo’s case, the four challenging instance to creating his sales forecast is in the 1990s, when foreign competition provided furniture to exact specifications at very low prices. Enabling Guillermo to make an...
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...Guillermo Furniture Store Concepts Paper 1 Guillermo Furniture Store Concepts Paper 2 Introduction In the world of business, we have many financial concepts and principles that help and allow business managers to make financial decisions that give them the greatest advantage in the market. The Guillermo Furniture Store is located in one of North America’s most popular vacation spots of Sonora, Mexico. Guillermo manufactured custom made furniture with an excessive supply of local timber. Guillermo faces a new competitor within industry that uses hi-tech strategies to manufacture furniture. This paper will highlight financial concepts that will relate to the gist of the Guillermo Furniture Scenario. Outlining The Principle of Self-Interested Behavior Human behavior defines that people (act in an economically rational way people act in their own financial self-interest) (Emery, Finnerty & Stowe, 2007). Mr. Guillermo displays his desire to gain control of his business while not being pushed out of the market by a competitor that has enhanced and expanded their operation within the furniture industry. One main focus that Guillermo’s Furniture has overcome would be analyzing the benefit with advancing toward being a distributor hopefully becoming a representative operation in Norway using an automated system...
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...Guillermo Furniture Store Lori A. Poole FIN-571 Marcel A. Santiz December 12, 2011 Guillermo Navallez resides in Sonora, Mexico and has made a living for a number of years creating his own style of furniture. The area of Sonora, Mexico is not only known as a beautiful vacation spot, but it is also large furniture manufacturing location in North America. A good supply of timber is an available in this area that allows Guillermo to have access to a variety of wood to create tables and chairs for his company. For years, Guillermo has had the advantage of inexpensive labor cost and charged a premium for the quality of his handcrafted pieces of furniture (Guillermo’s Furniture Store, 2011). Guillermo eventually faced a challenge during the 1990s when two obstacles caused a dent in his business. The first obstacle was the entrance of a competitor located overseas into the furniture market. The second obstacle was the opening of a large retailer causing...
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...Recommendations for Guillermo's Furniture Store Sterling Kroll, Ana De Leon, and Richard Scott FIN/571 February 20, 2012 Dr. Rodney Simmons Recommendations for Guillermo's Furniture Store Guillermo Furniture store faces completion in various formats that threatens the growth of the business. The new competition entering the market forced Guillermo to evaluate his current operation and choose on of three alternatives that best suit him, that would allow him to remain competitive. Guillermo will need to decide if he wants to remain an independent manufacturer of his own furniture and continue his business operation as normal. His other options consist of investing in becoming a hi-tech manufacturer or becoming a broker and distributing furniture for other companies. A detailed analysis on all three of the options will be conducted. This analysis will allow the team to make a decision on which option will be the best for Guillermo’s business. The group will also present a justification for the final decision. Current Course Guillermo Navallez has made furniture for years in his home town of Sonora, Mexico. Sonora has a good supply of raw material and labor is relatively inexpensive. Beginning in the late 1990’s business started to weaken, globalization, mergers, and acquisitions in the worldwide furniture market, businesses, and operations need to change for Guillermo Furniture Company. The market brings together buyers and sellers in many forms (McConnell...
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...Guillermo Furniture Store Concepts People go into business to make money by providing goods and/or services to their customers. Some businesses are successful while others fail. Managers make difficult and complex decisions that can make or break the company. The Guillermo Furniture Store in Sonora, Mexico is not any different. The owner, Guillermo Navallez, must make decisions that will, no doubt, have a huge impact on the success or failure of his company, so he will engage in foundational corporate finance principles that will guide his decision-making. This paper will explain several principles of foundational corporate finance, and show how they relate to the Guillermo Furniture Business Scenario. Principle of Self Interested-Behavior The principle of Self-Interested Behavior of foundational corporate finance plays a fundamental role in the Guillermo’s decision-making because he acts in his own best interest to attain the success of his company. The principle of Self-Interest Behavior states that, “All things being equal, all parties to a financial transaction will choose the course of action most financial advantageous to themselves” (Emery, 2007). Naturally, Guillermo wants his company to be a financial success, so he will base his decisions that will give him the best possible income. For instance, when Guillermo begins to realize that his profits are dropping and costs are going up, he conducts research on his competitors to understand how they are more successful...
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...Guillermo Furniture Store Concepts Paper FIN 571 Guillermo Furniture Store Concepts Paper Sonora, Mexico was the ideal location for Guillermo’s Furniture Store. An abundant supply of cheap timber and relatively cheap labor costs, Guillermo’s had been producing high quality products, mainly chairs and tables, selling at premium prices. Guillermo’s exclusivity came to an end; competition from overseas using high-tech manufacturing equipment eroded his business market share through lower prices. Sonora, once a sleepy village, has grown. Along with this growth has come is the influx of people, increased labor rates and material costs. Higher costs to produce, lower prices to sell, Guillermo’s Furniture Store faces the recurring problem through the market place, change. Guillermo’s looked at his competition, his operations, his customer base, and the potential for business into the future. Guillermo’s needed to re-establish their competitive advantage; a strategy and methodology to ensure increase in value through economic efficiency. Guillermo’s discovered many smaller companies were consolidating with larger companies through mergers or acquisitions. Large organization offer scale of magnitude and ability to adjust available resources resulting in consolidation of costs and efficiency with manufacturing. Guillermo’s was not interested in purchasing smaller locations or being acquired by another company. Guillermo’s could opt for the advantages of the lower manufacturing costs...
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...Guillermo’s Furniture Store Scenario FIN/571 Earnest Jackson 8/14/2012 In the great vacation spot known as Sonora, Mexico Guillermo Furniture was created. Mexico is none as one of the largest furniture manufacturing areas in North America. Guillermo build his manufacturing plant in Sonora, not far from his home. He was a family oriented person that believed in family time, so his goal was to be close as possible. He also built furniture in Sonora because the area was saturated with timber that was used to build tables and chairs. Guillermo’s was a profitable company for a long time, until mid 1990’s. In the 1990’s two of the major organizations joined companies to make their organization bigger and stronger giving them and edge over smaller companies. They focused on builder better quality products in faster time with lower cost. This concept and others the company used made Guillermo Furniture profit margins drop considerably low with production costs increasing. Guillermo even had to lower his prices Guillermo Furniture desperately needed to create a strategic plan in developing a competitive edge to regain profits in this industry. They started to monitor and survey the competitors observing their operation structure. He was able to discover that smaller companies merged in regaining stability and lowering cost creating higher profit margins. Guillermo’s also discovered that the competitive foreign company...
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...Guillermo Furniture Store Recommendation Team A FIN/571 James Carlin February 21, 2011 Abstract Guillermo founded Guillermo’s furniture company; in Sonora, Mexico, which is gorgeous retreat location. Guillermo has been the leading furniture manufacturing company in the vicinity for numerous years. Before the later part of the 1990’s Guillermo was holding their own, until new competition arrived in the area that also made furniture. The competitors came with the latest new-fangled technology seen at the lowest prices ever for clientele. For that reason, Guillermo’s felt he’s obligated to come up with the best alternative for the company, which is to improve with technology and venture ahead or carry on working as he has for the previous years and uphold the quality product their customers have come accustom to over the years. Guillermo Furniture Store Recommendation Analysis and Recommend Financial Decision The economy is weak, new competitors’ establishing a presents, Guillermo must tackle a tough decision, which is to become a furniture distributor or stay on the manufacturing side, or possibility do both. Guillermo understands that change is forth coming and he has to venture forward but the dilemma is what the best alternative is. First Guillermo must analysis the financial alternatives and establish which objective is beneficial for the company. The next step is to gather information and formulate a pro forma cash flow budget to analyze the projected earnings...
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...Guillermo’s Furniture Store Scenario University of Phoenix Team C FIN/571 July 25, 2012 Dr. Guillermo’s Furniture Store Introduction Sonora Mexico is known to many people as a beautiful vacationing area in the heart of Mexico. Home to the largest furniture manufacturing companies, Sonora is also home to Guillermo Navallez, and has been for many years. Guillermo Navallez and his furniture company, produces a variety of tables and chairs, he even has a patented solution for his furniture. In addition, Guillermo handcrafts products are priced at a premium rate, which separates him from his competitors. Guillermo’s competition is increasing due to the inexpensive labor cost and location. After researching his competition, Guillermo has to determine the alternatives; he has available for his company. Based on the scenario, choices will include the high tech approach, or broker distributor. Team C chose the best approach to fit his need, and to represent what he has delivered for many years. Guillermo’s goal is to retire one day, and his best route to a safe, and fulfilling retirement is the hi-tech approach. High-tech Approach Guillermo’s largest competition has sparked uproar, in the communities of Sonora. Along with large retailer’s influence expanding, affordable housing, new establishments, and rock bottom pricing, he has to consider taking a different approach to stay aligned with his competition. Since the 90’s, two...
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...Guillermo’s Furniture Store Concepts Denisse Cruz FIN/571 March 19, 2013 James Ciaramella Guillermo Furniture Store Concepts Paper First week (1st) individual assignment was write no more than 800 word paper explaining the finance concepts found in the Guillermo Furniture Store Concepts Paper and relate finance concepts to the context of the scenario. Following Finances Concepts and relationship with scenario assigned. Finance Finances are the studies and addresses the ways in which individuals, businesses, and organizations raise, allocate, and use monetary resources over time, taking into account the risks entailed in their projects. Finance is defined as the set of activities and administrative decisions that lead a company to finance the acquisition of fixed assets such as land, buildings, furniture, etc. and circulating such as cash, accounts and notes receivable, etc. The analyses of these decisions are based on the flows of income and expenditure and its effects on management objectives that the company intends to achieve. The definition of finance comprises several factors that are involved directly with them and some of them are such as investment, brokerage, personal financial planning, financial planners and advisers, securities analysts, agents real estate, etc. Finance Concepts at Guillermo’s Scenario 1 Guillermo Navallez, is an entrepreneur localized in Sonora Mexico. Sonora Mexico is a large furniture manufacturing location in North...
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...Guillermo Furniture Store Analysis Fin571 Guillermo Furniture Store Analysis Guillermo Furniture Store (Guillermo) is a manufacturer of furniture located in Sonora, Mexico and is the largest industrial furniture manufacturer in the area. Guillermo has investment opportunities but must consider past and current choices. Guillermo Navallez, the owner of Guillermo’s Furniture store, has been experiencing a slowdown of business, primarily due to the increase in competition. Due to the changes in the operating environment, Guillermo must find an alternative investment opportunity. Regardless of the opportunities available, the value of each is determined by the net present value they offer. This paper, which will include the evaluation of finance concepts from the readings, will identify which alternative is necessary to improve business. It will include an evaluation of possible changes and demonstrate how capital budget analysis can provide the necessary information for the best possible return on investment. However, due to the competition Guillermo is in a situation, which requires an evaluation of processes and find ways to compete. With more competitors in the market, the labor costs have increased but at the same time, the competitors have introduced techniques that lower production costs. These changes have decreased Guillermo's profit margins significantly, but Guillermo can use capital budgeting to increase the profit margins. The geographical location of...
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