Problem Solution: Lawrence Sports Inc.
Today’s highly competitive market has created different opportunities for all companies to grow and to develop themselves. Lawrence Sports (LS) is a manufacturer and distributor of sporting equipment and protective gear. Mayo Stores, the world’s largest sporting goods retailer, is the primary customer of Lawrence Sports accounting for almost 95% of their sales. The primary suppliers to Lawrence Sports are Gartner Products and Murray Leather Works (University of Phoenix, 2008). Gartner Products supplies LS with approximately 70% of their raw materials and Murray Leather Works supplies the rest. In recent weeks, Mayo has defaulted on 80% of its outstanding payments and LS expects additional delays. Due to the cash flow issues this has created for LS, the company has been forced to negotiate payment deferrals to Gartner Products and Murray Leather Works because its outstanding loan and interest burden have increased. The nine step model includes describing the situation, framing the right problem, describing the end-state goals, identifying the alternatives, evaluating the alternatives, identifying and assessing the risks, making a decision, developing and implementing the solution, and evaluating the results. This paper will propose alternative solutions to LS financial issues regarding cash flow and to determine the optimal financial solution that maximizes current and future wealth of the company.
Situation Analysis
Issue and Opportunity Identification
Based on Lawrence Sports scenario the company is going through some issues relating with their cash flow. According to Ross, Westerfield, Jaffe (2005, p. 734), the operating cycle is the time interval between the arrival of inventory stock and the date when cash is co ...