Guillermo Furniture Store Financial Analysis


Guillermo Furniture Store Financial Analysis
Anne Dodson, Christopher Pepe, Jon Marra, Michael Bradshaw, John Weatherston
University of Phoenix
Week 4

In this paper Team A will pose as an analyst for Guillermo Furniture Store.   We will be revising the store’s flex budget.   We will be including risks associated with sales forecasts and an analysis of ethical considerations in the preparation and subsequent use of the budget.   Lastly, in this paper we will consider how Guillermo Furniture Store’s code of ethics requires an ethics analysis of a performance tool.

For any business, a well prepared budget can be used to project, track and compare expenditures and revenues. “The reason for the budget is to lay out... projected costs of doing business… and thereby lay the foundation for building your pricing structure for tomorrow and… generate the cash flow” (Schmitt, 2002). The budget is generally formulated by taking into account the previous performance of the business and can be assessed and changed depending on the current needs of the business. Guillermo Furniture has been operating on a flex budget to ensure that costs are controlled and that sales budgets are being met as the marketplace changes. With increased competition, Guillermo must understand which products are succeeding and identify areas for improvement. A flex budget accounts for changes in volume and the related consequences. “Unlike a static, traditional budget, a flex budget can be designed to quickly identify where such variations occur and create a better picture of current finances, as well as, a more realistic outlook” (Barr, 2005). Moreover, a flex budget is a collection of income and cost predictions at a variety of production or sales volumes.   The cost payments for each expense are able to differ as sales or productions fluctuate.   This analysis examines the risks associated with the sales forecasts...