Fin 571

Abstract

Profitability and stability are important characteristics in a financially sound business. Depending on the structure and nature of the business, responsibilities of the owner rest with his or her ability to analyze, plan, and execute the business objective. Therefore, as a business owner you are inclined to make and accept risk. As a small business owner Guillermo should know the size of the market for his products, consumer demand, effects of changing or improving products and the challenges faced by competing with competitors. This paper will explore the finance concepts of week one readings and how the finance concepts relate to Guillermo Furniture Store. Whereas all the principles are conducive to a form a lucrative business, several principles are discussed further: the Principle of Self-Interested Behavior, the Behavioral Principle, the Principle of Valuable, and the Principle of Risk-Return Trade-Off.

Financially Sound

Guillermo Furniture Store Scenario

Guillermo Furniture Store is a local business in Sonora, Mexico. People recognize Sonora, Mexico as a beautiful vacation spot, although it is a large furniture manufacturing location in North America (UOP 2010). Guillermo Navallez has made furniture for years near his Sonoran home (UOP 2010). Overall, life was good for Guillermo. Unfortunately for Guillermo, in the 1990s two events combined causing a large dent in his business (UOP 2010). First, a new competitor from overseas entered the furniture market (UOP 2010). Using a high-tech approach, this foreign competition provided furniture to exact specifications and did so with rock bottom prices (UOP 2010). Second, the sleepy communities in Sonora woke up as one of the largest retailers in the nations headquarters emerged nearby, and influence had expanded considerably (UOP 2010). With a new international airport, and plenty of development an influx of people and jobs raised the cost of labor substantially (UOP 2010).

Finance...