Lawrence Sports Simulation

Paper Summary:

The paper discusses the Lawrence Sports simulation and emphasizes that the Lawrence Sport manager wants to hold back from borrowing in an attempt to build a good rapport with organization vendors. The paper looks at three alternative working capital policies namely the conservative working capital policy, the aggressive working capital policy and an aggressive financing strategy. The paper also explains that a contingency plan will assist in building a good rapport with all vendors.

Outline:
Introduction
Alternative one working capital policy
Alternative two working capital policy
Alternative three working capital policy
Risk
Contingencies
Performance
Implementation plan
Cash Conversion cycle
Conclusion

From the Paper:

"If cash is the lifeblood of a business, then Lawrence Sports needs to put into place a definitive plan for securing and maintaining the amount of cash available to them for their short-term business transactions. Accounts receivable, accounts payable and inventory are several aspects that need to be evaluated. Through analyzing and improving these three areas, Lawrence Sports will be able to have a strong working capital ratio, which is essential for a successful business.It seems currently Lawrence Sports has insufficient working capital due in part because they have a standing loan at the bank that is constantly drawn from to keep their main account's balance at an acceptable level when their accounts receivable are delayed. The loans are further depleting available cash because of the interest being paid over time. To mitigate this problem, the company needs to evaluate how they handle their debtors, or accounts receivable. Lawrence Sports should implement a company policy that will establish clear credit practices and expectancies. Two options should be considered, such as establishment of firm credit limits for each customer and imposing penalties on overdue accounts. This will allow them accurately to forecast their cash on hand."

Sample of Sources Used:

• Chase, R. B., Jacobs, F. R., & Aquilano, N. J. (2006). Operations management for competitive advantage (11th ed.). New York: McGraw Hill/Irwin.
• Emery, D. R., Finnerty, J. D., & Stowe, J. D. (2007). Corporate financial management (3rd ed.). Upper Saddle River, NJ: Pearson Prentice Hall.
• Inventory Solutions Logistics Corp. (2007). What is MRP?. Retrieved May 25, 2009, from www.inventorysolutions.org
• LOan universe. (N.D.) Asset conversion cycle. Retrieved on June 13, 2009 from http://www.loanuniverse.com/cashcycle.html.
• PlanWare (2009). Business planning papers: Managing working capital. Retrieved June 14, 2009, from http://www.planware.org/workingcapital.html

More papers on Lawrence Sports Simulation:

• Case Study # 112540 : "Capital Management at Lawrence Sports"
• Case Study # 110334 : "Lawrence Sports Working Capital Policy"
• Analytical Essay # 112593 : "Lawrence Sports Inc."

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