Week 1 Finance Concepts

Concepts of Week One
Corporate Finance
Professor Thomas Jemison
March 28, 2011

Concepts of Week One

In today‚Äôs global economy, there is one language that unifies all countries; this is the language of accounting.   Any type of business operation will have the very basics of accounting in place and Guillermo Furniture Store of Sonora, Mexico is not exception.   This paper will discuss   the concepts in week one and how they   relate to context of the Guillermo Furniture Store Scenario.

      To make good business decisions, one must understand human behavior (Emery, Finnerty, & Stowe, 2007). The first concept reviewed will be that of the principle of self-interested behavior: people acting in their own financial self-interest. This concept is basic; however, important to understand that when doing business, the other person is after improving their self interest. It is obvious that Guillermo wants to keep up with the competition, and it would seem that the simple decision to adapt to the new business environment or consolidating into a larger organization by merger or acquisition as his competitors are would be the easiest thing to do. Because the success of his company is important, Guillermo values his time with his family and is looking to find a way to keep his business from becoming acquired. One option Guillermo has is switching his operation from manufacturing to distribution. In this example of self-interested behavior, by moving his company to primarily distribution, Guillermo can help one of his competitors expand their distribution channel by using his own distribution channel and also keep some of his high-end work in production. This will avoid becoming acquired by another company and keep his personal family time and his own business, which is what is most important to Guillermo.

      The next concept reviewed is the behavioral principle: when all else fails, look at what others are doing for guidance. There are two appropriate...