FIN/571 Corporate Finance
February 14, 2010
Guillermo Furniture Store Concepts Paper
Most corporations adopt finance concepts as a tool to identify, analyze and solve financial problems within the organization. Corporations use finance concepts to make investment decisions for both short and long term goals. In the scenario, Guillermo Navallez operates a large furniture manufacturing company that produces an array of tables and chairs. Presently, emerging competition and economic growth threaten to encroach on the company’s profitability margin. Guillermo must contemplate options that will improve efficiency and address changes in the industry as a constant endeavor to remain competitive in the market (UOP, 2011). The paper will expound on finance concepts located in the textbook, and explore the applicability to Guillermo’s Furniture. The necessity to remain cognizant of new developments in the industry is critical to Guillermo’s Furniture future success. Additionally, following the industry model to streamline processes helps to reduce production costs. As Guillermo ponders the best strategic course of action to take next, the company displays elements of the Principle of Self-Interested Behavior. Inherently, all individuals want to secure their own financial self-interest. Unfortunately, when an individual takes action another opportunity is missed. Opportunity cost is the term for such an instance (Emery, Finnerty, & Stowe, 2009). The Principle of Two-Sided Transactions explains that every financial transaction has a minimum of two sides with one side benefiting at the expense of the other (Emery, Finnerty, & Stowe, 2009). The term for the transaction is zero-sum game. An example of the zero-sum game is a merger or acquisition, which are options available to Guillermo to manage changes in the industry (UOP, 2010). Also, by analyzing the actions of other companies in the...