Problem Solution: Lawrence Sports Inc.

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Problem Solution: Lawrence Sports Inc.
University of Phoenix

Problem Solution: Lawrence Sports Inc. Presently Lawrence Sports has had to make some short-term decisions concerning its working capital management. In order to learn from this experience they will develop a working capital policy which will increase the predictability and efficiency of their cash. Working capital is defined as “the assets of a business that can be applied to the operations” or “the amount of current assets which exceed the current liabilities” (Answers, 2007, para. 1). Working capital management involves the “deployment of current assets and current liabilities as to maximize short-term liquidity” (The Free Dictionary, 2007, para. 1). The intent of a working capital management policy is to ensure an organization is able to continue business operations and has adequate ability to satisfy both short-term debt and upcoming operational expenses. Simply stated, “good management of working capital will generate cash, improve profits and reduce risks” (Anonymous, 2007, para. 2). Lawrence Sports, a manufacturer and distributor of sporting goods equipment, is currently facing a number working capital and cash flow management issues largely related to past due payment of their largest customer, Mayo Stores. This paper will take a closer look at Lawrence Sports’ simulation and identify the issues, goals, potential solutions, evaluate risks and define metrics to measure the success of the working capital management strategy selected to address the short and long-term financing needs of the organization.
Situation Analysis
Issue and Opportunity Identification Lawrence Sport’s finance team did not carefully identify Lawrence’s business goals in terms of developing a working capital policy and a cash budget to…...

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