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Problem Solution Lawerence Sports

Problem Solution: Lawrence Sports Inc.
Charles Baker
MBA / 550
Instructor: Donna J. Adams
Nov 21, 2006

Abstract

In an effort to maintain financial viability in today's environment, corporations are required to adhere to the basic fundamentals of economics. A company's primary objective is to consistently increase revenue for their shareholders. Lawrence Sports is a company that manufactures and distributes sports equipment and protective gear. Lawrence has a cash flow problem do to its largest customer, Mayo Stores not paying on time. In this paper we will look at Lawrence's financial problem and create a working capital policy for Lawrence Sports that address their cash management needs for the long term.
Problem Solution: Lawrence Sports Inc

Working capital refers to the cash a business requires for day-to-day operations, or more specifically, for financing the conversion of raw materials into finished goods, which a company sells for payment. Working capital management involves the relationship between a firm's short-term assets and its short-term liabilities. The importance of a well-rounded working capital cycle is crucial in today's business environment. The goal of working capital management is to ensure that a firm is able to continue its operations and that it has sufficient abilities to satisfy both maturing short-term debt and upcoming operational expenses. Simply put, good management of working capital will generate cash, which will help improve profits and reduce risks (White Paper-Managing Working Capital, 2003).
Lawrence Sports is a manufacturing and distribution company of sporting goods. Currently, the company is facing several situations that offer opportunities as well as problems that need to be evaluated. First of all Lawrence Sports has a cash flow problem, whenever there is a deficit situation, money is borrowed from the bank to tide them over. Lawrence is basely robbing peter to pay Paul. If Lawrence continues to...