Lawrence Sports Solution Proposal
University of Phoenix
“Short-term, or current, assets and liabilities are collectively known as working capital” (Brealey, Myers, & Allen, 2006). Managing a company’s accounts receivable, inventory and cash balances are all part of the working capital management formula. Working capital provides companies with liquidity and the ability to compete more effectively in the marketplace. In order to be successful, companies have to make certain that this working capital is optimized. Some of the ways to optimize working capital is to develop policies to guide them as well as develop a cash budgeting system for each organization. A manager not only has to deal with the day-to-day cash handling in the organization, but also deals with things like collections, bad debts, disbursements and loan repayments. What a working capital policy does is to pin point the level of each current asset account and how they would be financed. A successful policy will ensure that a company is able to meet its obligations. The objective of this paper is to propose a solution to help Lawrence Sports develop a working capital policy and a cash budget to help optimize working capital. This will help the company get to a stage where they would be able to meet their current needs.
The simulation displays what it is like to juggle with cash inflows and outflows and in good times and bad. Lawrence Sports is a $20 million revenue company that manufacturers and distributes equipment and protective gear for baseball, football, basketball and volleyball. The world’s leading retailer, Mayo, is Lawrence’s principal customer. Lawrence sources all of its material from Gartner Products and Murray Leather Works. As the newly appointed Chief Financial Office (CFO) the author will be responsible for working capital management. As readers will find, there are a lot of interesting issues that need to be...