Guillermo_Furniture_Store_Evaluation

Decision Making – Guillermo Furniture Store Evaluation Michael A. Nealy ACC561 / Accounting 10/4/10 Professor Monique Smalling Guillermo Furniture Store is a small company that is located near a resort in Mexico. Guillermo is independently owned by Guillermo Navallez. There are several major financial decisions that are facing Guillermo. These decisions can affect how Guillermo competes in the industry as well maintains its current business.   Guillermo could start to evaluate and monitor his financial reports in an effort to understand his business even better. One way that Guillermo can get a better understanding is by using budgets and performance reports. This will allow him to see customer-buying trends so he can better prepare for the rise and decline in his business. As a result of evaluating the data he will be able to determine if he should adjust his manufacturing process, invest in a high tech solution or if he should partner with another company or sub-out part of his production.   The reports will allow him to plan for changes and manipulate his numbers without actually affecting his bottom line. If Guillermo wants to continue building his business, he is going to have to make wise decisions. He is going to need to focus on budgets and performance reports. As well he is going to have to implement ethical standards that will be new to the company.   If he focuses on the financials, and determines that the budgets and other reports have incomplete or incorrect data in them, it could be unfavorable to the health and well being of the company.   If the reports support Guillermo investing in a high tech solution because of a higher profit margin or greater revenue and reduced production costs, he would lean toward this choice.   On the contrary, if the reports failed to support a high tech solution, an investment in that area would cause the business to dramatically decline, because of the added expense. Failing to properly interpret the data correctly can lead to costly mistakes that can cause the company to be crushed under the weight of the error. If Guillermo wanted to make a wise decision he would need to have adequate assets, liabilities and equity information that has come from financial reports that have been professionally prepared.   These reports will give him a better perspective of how his business is really doing. It is not good enough to see people in the store purchasing furniture. The reports will give him clarity about how the revenue and the expenses stack up against each other, which will give him a picture of the current state of the business. It can also assist in forecasting based on current conditions and budget planning for future endeavors.   Another way that Guillermo can benefit is by using income projections, which could be based on current production schedules. The projections should be in both Mexican Peso and also in American Dollars, which would allow him to project income from revenue received from his exports.   Lastly, Guillermo should produce cost estimates for materials, which are used in the manufacturing of furniture.   This information directly relates to the financial reports mentioned above.   If the information provided is inaccurate the business can be driven further into debt and dramatically reduce profits. In closing, all financial reports and ethical behavior should be held in high regard because it will directly affect the health and welfare of the business. Individuals preparing financial reports realize that their customers use these documents to evaluate their business and make necessary decisions. As a result they expect the reports to be error free and reliable. Those accounting professionals must be competent, have integrity and be confidential. The codes of ethics as it relates to accounting requires that all information remain confidential to accounting personnel and should not be disclosed to anyone outside the company. The only exception to these confidentiality rules is when a court has requested the reports.   References University of Phoenix electronic resources: University of Phoenix (2010). Guillermo Furniture Scenario. UOP Online. Retrieved October 10, 2010 from https://ecampus.phoenix.edu/classroom/ic/classroom.aspx. University of Phoenix (2010). Guillermo Furniture Budget. UOP Online. Retrieved October 10, 2010 from https://ecampus.phoenix.edu/classroom/ic/classroom.aspx.