Lawrence Sports Working Capital Policy Paper
MBA550 January, 2008
University of Phoenix
Many companies today are faced with challenging decisions regarding ways to compete in the domestic and or international marketplace especially regarding a working capital policy. Consequently, in today's changing financial business environment, a company must maintain financial viability by adhering to the basics of a business strategy which is to be profitable and continually increase revenues for shareholders. A company by the name of Lawrence Sports is no exception to the challenging decisions on a working capital policy. Lawrence Sports is a manufacturing and distribution company. In the simulation, Lawrence Sports makes and distributes equipment and protective gear for baseball, volleyball, football and basketball. Lawrence Sports purchases materials from Gartner Products and Murray Leather Works. The company distributes 95% of the items produced to Mayo Stores. Lawrence Sports has revenue of $20 million along with a line of credit for $1.2 million. A financial manager was recently hired by Lawrence Sports to help with the current capital management challenges and opportunities. Lawrence Sports needs to develop a working capital policy, cash balance requirements, credit policy, supplier negotiation strategy, short-term financing, and measurable metrics to monitor performance against policy. The ultimate goal of a company is to create value for shareholders. In order to create this value, the company has to create a competitive advantage using the policies and strategies in this paper to enhance the working capital along with cash flow for business growth.
The first step in this process is to understand working c ...