Week One Finance

Guillermo Furniture Store Finance Concepts

Fin/571 Corporate Finance

December 19, 2011

Guillermo Furniture Store Finance Concepts

The purpose of the paper is using financial concepts to help Guillermo Furniture Store (GFS) utilize

company decision-making process. There were two changes that forced GFS to look at these concepts: A

new competitor has moved in and an influx of people and jobs raised the cost of labor. To help guide

GFS, 12 finance concepts that will be explored to help GFS in their decision making and future direction.

By applying these concepts GFS will be able to implement and direct the company after applying these

concepts.

Principal of Self Interest

Understanding human behavior is necessary because there may be exceptions that might not be

economically related. Owner, Mr. Navallez wants to have work life balance meaning his financial self-

interest or accumulating wealth is not everything to him. This reflects in him not wanting to merge with

other organizations because this action will take him away from his family with increase multiple

responsibilities.

Principle of Two Sided Transactions

This principle reminds us that other parties we contract with act on their own self- interest. By having

GFS agree to become a distributor for his second competitor; all sides of the agreement must be explored.

The question arises, how would GFS benefit by changing from a primarily manufacturer to a distributor?

The Signaling Principle/Behavior Principal

The signaling Principal states actions convey information or actions speak louder than words. The next

concept is the Behavior Principle, which relates what the industry or others firms are doing within this

segment and by trying to use this information. These concepts would include Mr. Navallez seeking the

use of Norway’s highly automated systems and investigating the newest foreign competitor. This

behavior could signal to his...