Lawrence Sports Working Capital Management
Lawrence Sports is a manufacturer of sporting goods facing a fiscal dilemma in the early spring of 2011. Between the months of March and April, the company would experience an impasse within the context of its Current Cash Conversion Cycle. Here, an improved strategy for working capital management is called for.
First, with respect to the cash conversion cycle, Lawrence Sports largely draws is working capital from two sources. The first of these is its partnership with Mayo, the largest retailer in the world and buyer of 95% of all goods from Lawrence. The second of these is the Central Bank, which maintains the company's account balance at $50,000 through a system of automatic loans that are invoked any time the company's cash availability slips beneath this margin. Historically, Lawrence has employed an Aggressive approach to its capital management by relying on...
To counter this dependence, Lawrence Sports should create a three to six-month grace period before the price changes go into effect and increase marketing efforts to other retailers during this period. This will give the Lawrence Sports advance notice of any problems that might arise in implementing this plan as well as reducing its exposure to the Mayo Stores retail outlets, allowing for greater latitude in capital management. In order
This would considerably simplify matters for Lawrence Sports. Such financing methods are best suited for alimenting short-term objectives. The reason behind implementing an electronic payments system relies on the fact that the company would count on receiving and making timely payments. This alternative is also designed for simplifying the cash flow. Preparing and effective cash budget is another alternative solution that must be taken into consideration by the company's managers. The
Finance Lawrence Sports Simulation Lawrence Sports are facing a challenge; they have a single buyer for their goods and deal with two main suppliers. The firm is facing delays in collecting the accounts receivable from the buyer; Mayo, while the payments for the suppliers; Garner Products and Murray Leather Works remain due. The strategy suggested is to readjust the credit terms with Lawrence and the suppliers to reduce the pressure o the
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