Running head: WORKING CAPITAL STRATEGIES

Working Capital Strategies

MBA550

University of Phoenix

Working Capital Strategies

Managing working capital is one of the most difficult concepts to master for any organization no matter what the industry. Arriving at the optimal balance of cash inflow, outflow, financing and investing is a struggle that has no real defined ending. Managing working capital is a continual strive for what is best for now and what is believed to be best going forward. However, even the best laid plan will have the need for alterations and evolve with the growth or constraints of the organization.

Lawrence Sports is currently faced with this dilemma. The company must understand the purpose for cash budgeting, strategies for long-term opportunities and the risks associated with them, be able to analyze cash flow while understanding the ethical implications of the alternatives. By benchmarking other organizations and companies Lawrence Sports can understand different approaches that may help them come close to a solution that will deliver the desired results.

Purpose of cash budgeting

“The cash budget is a primary tool of short-run financial planning. It allows the financial manager to identify short-term financial needs (and opportunities),”(Ross, Westerfield, & Jaffe, 2005). The cash budget can tell the manager the required borrowing for the short term. “The idea of the cash budget is simple: It records estimates of cash receipts and disbursements,”(Ross, Westerfield, & Jaffe, 2005). A cash budget will help a company determine its future ability to pay debts and expenses. “For example, preliminary budget estimates may reveal that your disbursements are lumped together and that, with more careful planning, you can spread your payments to creditors more evenly throughout the entire year. As a result, less bank credit will be needed and interest costs will be lower,”(Va-interactive, n.d.). Lawrence Sports could use...