Guillermo Store Recommendation

By Ron Adams

University of Phoenix

Class Accounting 571

Group ACC/571MBA10

Instructor: Mario Ducret

August 8, 2010

Work Shop Six

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Guillermo Furniture Store Recommendation

For this assignment I was instructed to review the Guillermo Furniture Store scenario and analysis the alternatives and make recommendation of financial decision. I will first begin with a background of Guillermo followed by their financial position. I will then discuss the recommendation of financial decision, justification for the recommendation, and explain how I created the pro forma (pro forma attached).

Background:

Guillermo Furniture Store was created by Guillermo Navallez in Mexico, and up until recently was able to have an inexpensive work force. He had also patented a process for fire retardant coating his furniture. However with being in an inexpensive housing market, traffic free roads, beautiful scenery, and the opening of an international airport more people have moved to his area driving up labor cost and bring in competition.

English: Diagram of private equity co-investment s...

Guillermo Fernández Vara en Mérida

investment as percentage of national cash flow (pr...

Financial Position:

With the events that have occurred the financial position of Guillermo has degraded especially in the area of debt repayment. In the attempt to combat this problem Guillermo needs to make effective decisions and take proper steps for forecasting the demand of hiss product. Before he begins his sales forecast he needed to decide upon the following option.

Should he update his operation with a new computer controlled laser lathe

Should he become a sales representative for a new company from Norway wanting to break into the market

Should he expand on his coating process

Alternatives and recommendation of financial decision:

I analyzed Guillermo's alternatives by first finding the return on investment that Guillermo would make for the two alternatives which were namely the hi-tech and broker options. During the analysis...