University of Phoenix
July 18, 2011
Guillermo Furniture Store Concepts Paper
Finance concepts and principles are divided into three sections with the first group of principles dealing with competition in an economic environment. The second group deals with ways of creating value and economic efficiency and the third group of principles deals with observing financial transactions. I will briefly define each principle and then explain how they relate to the given scenario (Emery, D.R., Finnerty, J.D., and Stowe, J.D., 2007).
The First Group
The Principle of Self-Interested Behavior: People act in their own financial self-interest is defined as that when all else is equal, all parties to a financial transaction will choose the course of action most financially advantageous to themselves. The Principle of Two-Sided Transactions: Each Financial Transaction has at least Two Sides and is defined as for every sale, there is a purchase, for every buyer there is a seller (Emery, D.R., Finnerty, J.D., and Stowe, J.D., 2007). The Signaling Principle: Actions that convey information is defined as another extension of the self-interested behavior principle which also addresses the problem of asymmetric information. The Behavioral Principle: When all else fails, look at what others are doing for guidance is defined as the direct application of the signaling principle (Emery, D.R., Finnerty, J.D., and Stowe, J.D., 2007).
The Second Group
The Principle of Valuable Ideas: Extraordinary Returns are achievable with new ideas is defined as finding a new way of doing something and transforming it into some extraordinary positive value for you. The Principle of Comparative Advantage: Expertise can create value is defined as if everyone does what they do best, we will have the most qualified people doing each type of work (Emery, D.R.,...