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Finance
Lawrence Sports Simulation
Lawrence Sports are facing a challenge; they have a single buyer for their goods and deal with two main suppliers. The firm is facing delays in collecting the accounts receivable from the buyer; Mayo, while the payments for the suppliers; Garner Products and Murray Leather Works remain due. The strategy suggested is to readjust the credit terms with Lawrence and the suppliers to reduce the pressure o the cash flow and decrease the requirement for borrowing. The strategy requires the balancing of the different stakeholders needs in order to retain the good business relationships. The strategy of tightening the credit policy is to be accompanied by the use of the balanced scorecard which will help the firm focus on the overall performance and Cash Conversion Cycle
The cash conversion cycle measures the time between a firm spending cash and collect cash from...
The longer the time period the greater the potential need for working capital to support the firm. Generally, lower cash conversion cycle times are seen as favorable. The cash conversion cycle starts with Lawrence Sports purchasing the inputs for the goods they make from Garner Products and Murray Leather Works. The purchases will be on credit, and payment will be due at a point in the future. The goods are then made and shipped to Mayo, the payments to Garner Products and Murray Leather Works are due before the payments are received from Mayo, with Mayo creating further delays. With no action the cash conversion cycle is extending, with Lawrence Sports carrying the cost.
Working Capital Management
Working capital is the amount of money that a firm has tired in their operations, including the inventory (Sagner, 2010). The longer the cash conversion cycle the greater the amount…
The alterative many be to review the payment terms offered to Mayo in order to reduce the time they are taking to pay their invoices, even offering a small discount may be preferable to the incurring of interest charges on large amounts of outstanding capital. Mayo may also resist, so this would also take negotiation and may place the business prelateship under strain; especially if Mayo has low switching costs and other suppliers are available (Mintzberg et al., 2008). A combination of the two may be advisable as it would allow for moves at both ends of the cash conversion cycle.
Balanced Scorecard Measures
The balanced scorecard is being introduced as a way of guiding and measuring the firm performance. If implemented it is necessary to assess the measures which may
Lawrence Sports Working Capital Management Lawrence Sports is a manufacturer of sporting goods facing a fiscal dilemma in the early spring of 2011. Between the months of March and April, the company would experience an impasse within the context of its Current Cash Conversion Cycle. Here, an improved strategy for working capital management is called for. First, with respect to the cash conversion cycle, Lawrence Sports largely draws is working capital from