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Guillermo Funature

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Submitted By christoh
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Guillermo Furniture Store Finance Concepts

July 2, 2011
FIN/571

Guillermo Furniture Store Finance Concepts The risks associated with financial concepts in the case of Guillermo Furniture raises when a company considers joining forces with another company. In such a case with Guillermo Furniture, trying to forecast future purchasing of materials is more difficult because the chance for over purchasing may come into play if the company does go the route to sell itself to a competitor. The questions that come to the forefront is whether the merger will pick up what the other company has on hand.
Risks vs. Reward

Guillermo Furniture having been approached by a competitor about joining forces brings into play the idea of risk vs. reward. Guillermo Furniture has thought about selling the company or maybe closing the business and possibly merging with the competition. Should Guillermo Furniture do any of the above, what are the risks vs. reward in any of these options? Using information obtained from the sales forecast is used to create the sales budget. “This budget is a result of decisions to create the conditions that will generate a desired level of sales.”(Horngren, 2008). Managers usually take into consideration a number of factors when examining risks for their company. These factors can be looked upon as risks for the company as well. Some of the factors include reviewing past patterns of sales which can be used to help with predicting future sales as well as analyzing the general economic conditions and comparing the competition’s actions in the market. The greatest gains in business often are made by those who are willing to take a calculated financial risk. In any market sector, the biggest risk that can evolve from sales forecasts is over purchasing raw materials for production or under purchasing. When under forecasting

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