Fin 571 Guillermo Paper
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Foundational Principles of Finance
Amber Chancey-Anguish
University of Phoenix
FIN 571
Danica Djordjevich
April 12, 2010
Foundational Principles
Guillermo Navallez currently faces some very difficult business decisions, which will make or break his business. To ensure Guillermo is making the most effective, positive decisions on behalf of his furniture business, he should first evaluate the basic foundational principles of finance. This document will outline some of these principles and show how they apply to Guillermo’s current situation.
First, is The Principle of Self-Interested Behavior, which says that when all else is equal, all parties to a financial transaction will choose the course of action most financially advantageous to themselves (Emery et al, 2007). Guillermo is not looking to expand his management responsibilities. Therefore, he is considering becoming a representative for another manufacture to become a channel for distribution in North America. Guillermo needs to realize that this other manufacturer is not in the game of treating all vendors fairly and ensuring all vendors receive equal payouts. On the contrary, this manufacturer will make decisions to affect their business in a positive way, and if that means hurting Guillermo’s business, they will do it.
Another principle for Guillermo to understand is The Principle of Two-Sided Transactions, which says that for every sale, there is a purchase. For each buyer, there is a seller (Emery et al, 2007). Guillermo may consider selling his business. Although he does not relish the idea of being acquired by a larger competitor, it does offer pros to consider. However, Guillermo should beware of zero-sum game in which one player can gain only at the expense of another player. Guillermo is currently in a vulnerable position, so he needs to be cautious about approaching an option in zero-sum game could become a reality.
Guillermo will need to be careful with any decision he...
Amber Chancey-Anguish
University of Phoenix
FIN 571
Danica Djordjevich
April 12, 2010
Foundational Principles
Guillermo Navallez currently faces some very difficult business decisions, which will make or break his business. To ensure Guillermo is making the most effective, positive decisions on behalf of his furniture business, he should first evaluate the basic foundational principles of finance. This document will outline some of these principles and show how they apply to Guillermo’s current situation.
First, is The Principle of Self-Interested Behavior, which says that when all else is equal, all parties to a financial transaction will choose the course of action most financially advantageous to themselves (Emery et al, 2007). Guillermo is not looking to expand his management responsibilities. Therefore, he is considering becoming a representative for another manufacture to become a channel for distribution in North America. Guillermo needs to realize that this other manufacturer is not in the game of treating all vendors fairly and ensuring all vendors receive equal payouts. On the contrary, this manufacturer will make decisions to affect their business in a positive way, and if that means hurting Guillermo’s business, they will do it.
Another principle for Guillermo to understand is The Principle of Two-Sided Transactions, which says that for every sale, there is a purchase. For each buyer, there is a seller (Emery et al, 2007). Guillermo may consider selling his business. Although he does not relish the idea of being acquired by a larger competitor, it does offer pros to consider. However, Guillermo should beware of zero-sum game in which one player can gain only at the expense of another player. Guillermo is currently in a vulnerable position, so he needs to be cautious about approaching an option in zero-sum game could become a reality.
Guillermo will need to be careful with any decision he...