Guillermo Furniture

Guillermo Furniture Scenario

Operating a business requires financial planning to develop, maintain, and work toward achieving success. Guillermo Furniture must develop a financial plan to improve the business and maintain future growth and success. The subsequent paragraphs will identify the financial principles and concepts and how these principles and concepts relate to Guillermo Furniture.

Guillermo Furniture Background

Guillermo Furniture has been a successful handcrafted furniture business for many years. Reasons for success include timber supply readily available, inexpensive labor, quality of product, and few competitors in the area. However, the largest retailer has moved into the area, which resulted in development of the area, causing the labor costs to substantially increase. As a result, Guillermo’s profit margin decreased, prices fell, and costs rose. Guillermo must evaluate his current business practices to continue grow his business and improve his profit margin.

Financial Principles

The principles of finance provide financial insight into the way the world works. “They are the foundations on which financial management is built” (Emery, Finnerty, & Stowe, 2007, p. 19). Guillermo Furniture used several of the principles that relate to competition in the environment to evaluate the possible changes that could be implemented to improve his business.

The Principle of Self-Interested Behavior identifies people who seek financial rewards that benefit them. “When all else is equal, all parties to a financial transaction will choose the course of action most financially advantageous to themselves” (Emery, et al., 2007, p. 20). Guillermo is considering several options, but does not believe being acquired or acquiring another company will be beneficial as he will be required to work more and spend less time with his family.

Additionally, Guillermo used the Behavioral Principle to evaluate his competitor and the actions they have taken. He...