Lawrence Sports

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lawrence sports simulation

Alternative working capital policies.

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lawrence sports simulation

Alternative working capital policies.

International Corporate Finance 571

International Corporate Finance 571

One concern that becomes evident when viewing the simulation is the fact that liquidity will be a real concern at Lawrence if they are to pursue a plan for growth. Lawrence Sports is presently in need of capital management analysis and methodology overhaul. This, amongst other issues, opportunities, values and solutions will be developed in this discussion. The identification, evaluation and implementation of elements that will transform a problem into new growth opportunity is the intent.

Lawrence Sports is a $20 million dollar revenue company that assembles and distributes sporting goods. Mayo, who is a retailer responsible for 95% of sales, is hindering Lawrence from paying raw materials suppliers. Unfortunately, this cash positioning problem is direct result of the Lawrence credit policy and the Mayo request to delay payment until the week of April 14-20. Borrowing money to deal with supplier payables should not be a long term option due to the $1.2 million dollar maximized bank limit. Lawrence will need to design a new credit policy, implement cash management models and introduce risk mitigation techniques. A credit policy that is too liberal will continue to cause damage to Lawrence Sports. As it stands the receivables and payables are unsynchronized, which is putting financial distress on the firm, as well threatening supplier relationships which can harm the company’s character. Considering the dominant sales role that Mayo plays in the supply chain, Lawrence will have to be very careful in pressuring the payment of receivables. In the current economic environment businesses are finding it increasingly difficult to obtain external...