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Working Capital

WORKING CAPITAL CONCEPTS

Working Capital Concepts

Working Capital Management Worksheet Assignment

Concept Application of Concept in the Simulation Reference to Concept in Reading
Cash Conversion Cycle Lawrence Sports' cash conversion cycle is made up of the $20 million in revenue it receives for manufacturing and distributing equipment and protective sporting gear. Lawrence Sports generates its revenue by purchasing material from their vendors and selling the materials to their customer. Cash inflows and outflows are generated through the collection of accounts receivables from the customer, and making payments to the suppliers. Describe the firm's cash conversion cycle.
Effects of credit policy on cash conversion cycle and revenue. The Cash Conversion Cycle is one of the tools credit analyst use to determine credit worthiness. Credit analyst want to know why the business needs more cash to operate, and when and how it will be able to repay the cash. Effects of credit policies.
Effects of accounts payable terms on cash conversion cycle and cost of goods. Accounts payable are amounts a business owes. The accounts payables at Lawrence Sports are the monies due on the bank loan and the amounts due to their suppliers. The cost of sale includes the cost of goods sold, internal resources and, financing terms and late payments. Effects of accounts payable.Collection policy, discounts, terms of sale, late fees.
Working capital practices. Effective working capital practices at Lawrence Sports should consist of successful credit and cash flow management.
Relationship between short-term financing and working capital practices. The relationship between short-term financing and working capital is managed through budgeting and forecasting. Forecasting serves two purposes, to provide a method of constructing a budget, and to make companies aware of future cash flow needs. "The firm's cumulative capital requirement (green line) is the cumulative...