Fin_571_Wk_1_Giullermo_Simulation

Scenario: Guillermo Furniture Store Concepts Quincy Brown University of Phoenix FIN/571 Corporate Finance MBAA0O0NE6 MBA/Oscar Lewis Monday March 15, 2010 Week One The curious case of Guillermo and his furniture store really seems to be a serious case of business and finance. Guillermo has been pushed away from the comfort he felt for so long and because of it; he now is forced to completely change the way he would like to run his business. Even more importantly, the way he knows best how to run the business must change. The financial side of the matter is money; the way it will be spent, but most importantly with so many changes how it will be made. How should Guillermo change his budget and what is the most relevant financial information for this situation' Ethics Guillermo has decisions to make for his family, his business and to keep up with the competition now suddenly world-wide. “Accountants, statisticians, and mathematicians try to express as many decision factors as feasible in quantitive terms; because this approach reduces factors they need to consider (ch. 5, Burgstar, Schatzberg).” Guillermo also has a patent for his stain resistant, non-flammable furniture coating and he started plotting immediately. In every field there is a fine line drawn between the practices known as ethical and those known as unethical. In many cases some people want to stay ahead of the competition, and in other cases they want to take everyone down for self (personal or corporation’s purpose) benefit. Sometimes the pressure to be successful can be hard to cope with. There are both good responsibilities like assets (cash, accounts receivable, inventory, buildings and patents); also there are liabilities (accounts payable, taxes payable, mortgage payable and unearned revenue) which can lose a business’s value and/or create a shut down. “To make good business decisions, you need to understand humans. Although there may be individual exceptions, we assume that people act in an economically rational way (Chp 2: Emery, Finnerty, Stowe).” Management in finance provides information with competitive value which supports management efforts to plan, control, and evaluate the organization’s performance in providing goods and services to choice customers throughout the world. Guillermo must also keep in mind that organizations compete on the basis of cost, quality, and timeliness. “New products and services can create value, so if one has a new idea, it may be wise to transform it into an extraordinary positive value to make profits. (Chp 2: Emery, Finnerty, Stowe).” Financial statements will prove the success. Use of Budget Guillermo now has so much to think about, he must use budget reports and use them to his advantage. There are now the thoughts of higher wages for labor, higher cost of products and the plummet in price of sale. Then worst of them all, Guillermo must decipher to buy a lathe that will keep his overall production cost down. Guillermo lastly, has the notion of being a vendor to larger furniture manufacturing companies. The great benefit of financial reports will not only keep up with the spending Guillermo Furniture will have with all these various options, but it will project precise dollar amounts before it is ever spent. Guillermo has already found out things are going to cost a lot more than they use to. Now with proper reports this will prevent negligence and awareness for every dollar coming in and out for any reason. There are variable, fixed and absorption methods use in finance; Guillermo must have a little bit from every angle. A very important factor is this is a small business; it will not get the tax breaks that larger businesses get, so it is imperative to keep track of every penny spent for Guillermo Furniture. Conclusion Every organization must budget their finances; some have much less than others, but this makes no difference. “Budgets help allocate resources effectively so the organization can accomplish their mission (Albrecht, W., Stice, J., Swain, M.).” Budgeting is a quantitative expression of a plan of action that shows what a firm organization will acquire and uses resources over some specified period of time. References Albrecht, S., Stice, J., Stice, E., Swain, M. (2005, Chp. 1) Concepts & Application Fundamental of Corporate Finance. Inc. Retrieved March 13, 2010, from University of Phoenix rEsource, Week One. Burgstar, Schatezberg. (2008, Chp. 5) Introduction to Management Accounting Fundamental of Corporate Finance. Inc. Retrieved March 13, 2010, from University of Phoenix rEsource, Week One. Mantzke, K., Carnes, G., Tolhurst, W.(2005, Sep) Incorporating Professional Ethics Throughout an Accounting Curriculum. CDA Journal 75(9), 66. Retrieved March 13, 2010, from University of Phoenix reserved readings rEsource, Week One. Emery, D., Finnerty, J., Stowe, J. (2007) Chp. 2: The Financial Environment Concepts and Principles. Retrieved March 13, 2010, from University of Phoenix reserved readings Readings rEsource, Week One.