Guillermo Furniture Store Concepts

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Date Submitted: 05/03/2012 08:22 AM

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Guillermo Furniture Store Concepts

The environment in which a business operates to a large extent shapes the principles of financing. In the case of Guillermo Furniture Store scenario, the principles of financing could guide Guillermo in making financial decisions that would be best for the business. The purpose of this paper is to outline these concepts or principles and explain how they could relate to the Guillermo situation.

The Competitive Economic Environment

The principle of self-interested behavior states that when all else is equal individuals involved in a financial transaction will choose the course of action most financially advantageous to them. Guillermo does not desire to have his once thriving business merged or acquired by a larger company and risk losing his years of hard work to rising costs and shrinking profits. This principle forces him to seek alternatives that would be financially beneficial to the business. The two-sided transaction appears as a warning that there are at least two sides to each transaction. This means that others can be just as competent and dedicated to a successful transaction as the initiating agent. As a business owner, Guillermo needs to appreciate the hard work, business integrity, and intelligence of those with whom he does business regarding them as stakeholders. The signaling principle of actions conveying information relates to Guillermo seeking to enter into a distribution partnership with a Norwegian company. This action sends the message that Guillermo is attuned to the effect the changes taking place in his community has on his business. This leads to the behavioral principle, which calls for looking at what others are doing for guidance. Other businesses in Sonora are adjusting to the competitive changes in the community through consolidation, mergers, or acquisitions. Guillermo will do researches on what similar business in the industry are doing and process the information to assist in his...