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Pro Forma Cash Flow Budget

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Analysis of different alternatives available to Guillermo

Analysis of different alternatives available to Guillermo
Guillermo's Furniture Store Scenario provides the expedient case study for studying the concept of financial principle in the competitive economic environment. The current paper discusses the approach of financial management with correct application of ideas to create value and economic efficiency through analysis of financial transactions to establish the position of Guillermo in market. Current Project, High-Tech Project and the Broker Project are three alternatives available to the company to invest in right project. Financial principles, financial markets, and business ethics form a foundation for the financial decisions that managers routinely make. Guillermo’s case study shows that the arrival of new competitor from oversees have put unexpected challenges on the financial condition of the company. Guillermo has three alternatives to approach the business with new insight and action. Incremental costs and benefits are the basis for choices among alternatives where transactions have at least two sides, with each party considering their self-interest. Concept of an opportunity cost can be applied to differentiate between the value of one action and the value of the best alternative. He can invest in new technology and make furniture automatically, accurately and with almost no labor costs. So, developing expertise can create value. Other option is to become a broker for a Norway firm and coordinate the distribution channels for that firm. Also, he can apply third alternative of continuing with his current business and use the new patented technique of coating furniture. Capital Budgeting provides the decision parameter to check whether firm’s decision to invest in any project is worth pursuing or not. The classifications of investment…...

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