Running head: PROBLEM SOLUTION: LAWRENCE SPORTS INC.
Problem Solution: Lawrence Sports Inc.
Lauren Morres
University of Phoenix
Problem Solution: Lawrence Sports Inc.
Sports equipment manufacturer Lawrence Sports currently does not have an effective working capital policy in place. The company faces cash shortages each week and constantly juggles payments to vendors, customers and the bank. Additionally, the company is being forced to borrow funds frequently in order to meet the needs of accounts payable and to not lose any customers and business partners. Lawrence Sports has been borrowing near the maximum allowed and is being hit with substantial interest rate costs. This paper addresses the specific issues and opportunities facing the company, the stakeholders involved, and identified a working capital policy to be implemented by Lawrence Sports.
Situation Analysis
Issue and Opportunity Identification
Lawrence Sports manufactures and distributes sporting goods and equipment for a variety of sports and has annual revenue of approximately $20 million. Mayo Stores, the world’s largest retailer is Lawrence’s primary customer, while Gartner Products is Lawrence’s primary vendor for materials. Additionally, Lawrence Sports is the primary customer for Murray Leatherworks, a small leather manufacturing company. Throughout the simulation, several capital management issues are evident. As illustrated in the simulation, Lawrence Sports is currently not managing working capital effectively or efficiently. The cash conversion cycle currently in place at the organization is disorganized, unsystematic as well as unpredictable. The cash inflow and cash outflow from week to week is a constant juggling act resulting in the need to borrow form the company’s bank, Central Bank. Lawrence Sports does not seem to have a clear cash budgeting strategy in place based on the events in the simulation. For example, when unexpected problems arise with vendors or...