Running Head: LAWRENCE SPORTS WORKING CAPITAL POLICY
Lawrence Sports Working Capital Policy
University of Phoenix
MBA 550: Resource Optimization
William James Smith
September 9, 2008
Lawrence Sports Working Capital Policy
Lawrence Sports also referred to as L.S. is a manufacturing and distribution company. L.S. makes and distributes equipment and protective gear for baseball, football, basketball, and volleyball. L.S. purchases its materials from Gartner Products and Murray Leather Works. L.S. also distributes 95% of its products to Mayo Stores and has revenues of $20 million. L.S. recently hired a financial manager to help with the current capital management position. The basis of this paper is to examine Lawrence Sports current use of cash budgeting and to describe the weaknesses that exist in the working capital policies that is leading to the interruption of cash flow problems. Operating a business with a balance in capital management is essential to every business whether small or large. Maintaining constancy in cash flow operations is vital for the survival of the business. A business could find itself at a production standstill or even bankruptcy because of a lack of cash. The Lawrence Sports scenario lacks strategic capital working policies as well as broad selection of customers and suppliers. The following working capital strategies should be applied to the Lawrence Sports scenario:
1. Cash balance requirements including cash reserves needed for long term opportunities that may arise.
2. Credit policy that balances Lawrence Sports desire to minimize accounts receivable and maximize revenue.
3. Supplier negotiation strategy for terms o ...