Acquisition of Assets ("Financial Terms," 2011) - Essay

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Acquisition of assets ("Financial Terms," 2011) - which is a merger or consolidation in which an acquirer purchases the selling firm's assets. This is seen in the reading when it discussed about how the different companies are being acquired by other bigger companies, or even in some instances merging. This can be seen quite often in instances akin to the reading to keep a company from going out of business and help it stay in business. All in cost- total cost, explicit and implicit. The reading discusses that in the beginning Guillermo was able to charge a premium for his furniture, because his cost were so low and he did not have to pay much for labor; Asset pricing model ("Financial Terms," 2011) -- a model that determines the required rate of return on a particular asset; Asset- a firm's productive resources. This term deals with the beginning of the reading when Guillermo discusses the vast resources of timber that make production low and plentiful, as well as access to inexpensive labor. Average rate of return (ARR) ("Financial Terms," 2011) the ratio of the average cash inflow to the amount invested. This term deals within the reading where there was a discussion as to how much production was costing at the oversee competitors as well as the local competition; Explaining that though initial costs can be higher than would be a payoff in the end and less need for the same number of staff.

Balance sheet ("Financial Terms," 2011) -- also called the statement of financial condition, it is a summary of the assets, liabilities, and the owner's equity. A balance sheet was definitely necessary for Guillermo to be able to determine how much he was making, sending etc. this would allow him to see what assets and liabilities that there currently were within his furniture business, therefore allowing a better view of what may need to be done differently in the future to increase revenue, decrease liability etc. Balance of trade ("Financial Terms," 2011) -- net flow of goods (exports minus imports), luckily for Guillermo he did not have to import any of the resources that he needed to create his end product, however this is something that he should consider when viewing the practices of hi oversees counterpart.

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There may not have had the same available, local resources that Guillermo did have as well as the lower labor rates.

Base probability of loss ("Financial Terms," 2011) - the probability of not achieving an expected return; This became evident once Guillermo was able to see that the competitor (oversees) had a way to produce a product of the same quality and a much lower price to the public, this would cause Guillermo to have to determine a way to make a substantial profit, while cutting costs to stay competitive with the competition. Basic business strategy ("Financial Terms," 2011) -- key strategies a firm intends to pursue in carrying out its business plan. Guillermo had a plan that initially worked for him; he had the ability to have a vast amount of resources that were little to no cost to him. As well as cheap labor and other over head. However, it became necessary for Guillermo to contemplate other strategies that would allow his business to be successful without having to be acquired by….....

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