Fin 571 - Financial Concepts of Guillermo Furniture

Financial Concepts of Guillermo Furniture

Financial Concepts of Guillermo Furniture

University of Phoenix

FIN/571

James Ciaramella- Instructor

August 29, 2011

Introduction

Guillermo Furniture is a furniture- manufacturing company located in Sonora, Mexico. The company has been making furniture for years and has enjoyed the benefits of a good lumber supply and inexpensive labor. Over the years competition from overseas and other retailers has caused Guillermo to make some decisions on what changes can be made to keep the company relevant and competitive.

There are 12 major financial concepts. Understanding how Guillermo's business fits into each of those concepts will assist in determining which direction the company should go. Understanding the concepts will also assist Guillermo in making the necessary changes to have the desired continued success. This paper will discuss some of those major financial concepts and how they apply to Guillermo Furniture.

Probability

Probability measures how likely it would be for an event to happen. Understanding probability can help any organization put certain business matters and decisions into perspective. Guillermo must use probability to determine the odds of being successful if the company decided to become a representative and only do high end customer work. Guillermo must also determine the probability of success should the company decided to use or market the company created furniture coating.

Statistics

The second concept is statistics. Statistics as it applies to this situation simply reflects on the data and draws conclusions based on that data. Guillermo has gather different types of data in order to make a sound decision in which direction the company should go. The company has gather data on benefits and options for changing to a computerized production method, becoming a representative for other manufactures, and the use of the company made coating. The company must now examine the data and use the information to determine what will work best for the organization.

Expected Value

The next major concept that should be considered is the expected value of each decision made. The expected value is the long term average that something will happen. Understanding the expected value will allow the company to rationally estimate what the growth of its net worth. An example of expected value as it applies to Guillermo would be the net worth growth should the company decided to manufacture the furniture coating product.

Risk