Guillermos Furniture Store

Topics: Net present value, Rate of return, Investment Pages: 7 (2521 words) Published: March 19, 2013
Guillermo Navallez has made furniture for years near his Sonoran home in Mexico as the area had a good supply of timber for the variety of tables and chairs produced by his company; and labor was also relatively inexpensive (University of Phoenix, 2009) Unfortunately for Guillermo, in the 1990s a competitor from overseas entered the furniture market causing a large decrease in business for Guillermo. Luckily, Guillermo has a few tools at his disposal to help make the tough decisions he is now faced with. Accounting budget and performance reports can be used in decision making in a variety of ways such as; estimating the expected revenue and expenditure of a business. These reports would be helpful in Guillermo's decision of which option will be best suited for his business. Guillermo must decide whether to purchase the high tech computer controlled laser lathe, represent and sell for a manufacturer in Norway, or continue selling his hand crafted coated furniture. Budget:

With the use of an account budget Guillermo can project required labor hours, product cost, and expected return. This type of income information can provide comparative figures of expected profit for the different business options. In the case of the three business options available to Guillermo, he can assess the net revenue and return on investment to help him decide which option will be more profitable for the business. Performance Report:

A performance report can also help Guillermo compare his business options by providing income information in relation to performance parameters. Performance reports can also provide comparative figures for the options that Guillermo faces by using the income information report the company has calculated which includes the expected net income before taxes. Looking at the figures one can say that using computer controlled lathe to manufacturer is the best option. But this option requires a major investment that...

Guillermo Furniture Store Analysis

Guillermo furniture store is the largest furniture industrial in Sonora, Mexico. The store obtains its name from the owner, Guillermo Navallez. Navallez has made furniture for years in the area but there is a challenge for him from some new competitors. His store is opposing decreasing profit margins. This is happening because of the rising competition. In this paper, the evaluation of the finance concepts from the readings is used to conclude what alternative is necessary to improve his business. This paper will evaluate the changes the owner is creating. However, the new competitors have positioned Guillermo in a circumstance which, he will need to evaluate the processes and find ways to make any changes necessary to compete with his competition. Although Guillermo is in an area that supplies him with a huge supply of timber this is not enough for him to compete with his competitors. Guillermo has to examine other conditions that may obstruct his business from being successful. One thing is the increase in labor cost; another is trying to keep his high quality in the manufacture of his furniture. As a result, after reviewing Guillermo’s financial data, it is possible that he need to make changes in the way he controls his business. Some of the reasons are high taxation on net income, slow growth of one percent, under production by 50%, increasing labor costs, price reduction because of competition, aging and outdated equipment requiring higher maintenance cost, higher insurance rates. Furthermore, Guillermo’s furniture retained earnings appear inadequate to handle a downturn in price, and increased labor cost and have the firm survive against competition with greater technological efficiencies (University of Phoenix, 2009). At this time Guillermo’s Furniture has three alternatives

Guillermo Furniture Store Concepts


Guillermo’s Furniture Manufacturing facility has been located in Sonora, Mexico successfully until the late 1990’s. Guillermo...
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