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Working Capital Management Concepts Worksheet

Working Capital Management Concepts Worksheet

Working Capital Management Concepts Worksheet
|Concept |Application of Concept in the Simulation |Reference to Concept in Reading |
|Cash Inflow and Cash |Lawrence Sports has a major cash deficit and has to borrow |“Cash inflows is money received by a firm as a result |
|Outflow |money from the bank to pay their account receivable that is|of its operating activities, investment activities, |
| |affected because of Mayo, a primary business customer, |and financing activities” (Business Dictionary, n.d.).|
| |which will have an effect on the capital management. The | |
| |cash inflow is from Mayo that has 95% of Lawrence’s sales |Cash outflows are four categories. They are payments |
| |while the cash outflow payments are to Gartner that supply |on accounts payable, operating expenses, capital |
| |70% of raw material and Murray that supply 75%. |expenditures, taxes, interest, and dividend payments |
| | |(Breasley, Myers, & Allen, 2005, p. 850). |
|Bank Loans |Lawrence bank loan will cause an increase interest rate |“If a company takes out a large bank loan, the bank |
| |depending on the amount that was borrowed. According to the|will track the company’s assets, earnings, and cash |
| |interest rate chart, Lawrence borrowed $1.2 million that |flow. By monitoring to protect its loan, the bank |
| |has an interest rate of 16%. Hopefully, Lawrence will be |protects shareholders’ interests also. If a company |
| |able...