Lawrence Sports Simulation
Lawrence Sports Simulation
Team B
FIN 571
March 21, 2013
Cindy Lynch
Lawrence Sports Simulation Lawrence Sports is a company with revenues of $20 million. Lawrence manufactures equipment and protective gear for various sports; its business partners include Gartner Products and Murray Leather Works. Gartner sources Lawrence with 70% of its raw materials, and Lawrence contributes to 75% of Murray’s sales. Mayo is the world’s leading retailer and Lawrence Sports’ principal customer (“Lawrence Sports”, 2012). Lawrence Sports entrusted Team A to develop a working capital policy that would benefit Lawrence Sports’ profitability while remaining competitive, and in good standing with its business partners, suppliers, and major customers.
Working Capital Policy Approaches The concept of working capital management involves the management of accounts receivable, current assets, marketable securities, current liabilities, and inventory (Raheman, Qayyum, & Afza, 2011). The effective management of this working capital is of vital importance for the appropriate administration of a company’s financial systems. Policies exist to assist financial managers with the day-to-day operations of the organization. There are three types of working capital policies a company may institute to facilitate maximum profitability for an organization. The three working capital policies are conservative, maturity matching, and aggressive (Emery, Finnerty, & Stowe, 2007). Team A devised three different working capital policies in an effort to reduce future difficulties for Lawrence Sports. The team reviewed the three alternative policies and determined one of the policies is better suited to meet the needs of the company. Following are the three alternative capital policies formulated for final recommendation.
Maturity-Matching Approach Emery et al. (2007) define Maturity-matching approach to working capital that as the financing firm takes risk by matching the maturities
Team B
FIN 571
March 21, 2013
Cindy Lynch
Lawrence Sports Simulation Lawrence Sports is a company with revenues of $20 million. Lawrence manufactures equipment and protective gear for various sports; its business partners include Gartner Products and Murray Leather Works. Gartner sources Lawrence with 70% of its raw materials, and Lawrence contributes to 75% of Murray’s sales. Mayo is the world’s leading retailer and Lawrence Sports’ principal customer (“Lawrence Sports”, 2012). Lawrence Sports entrusted Team A to develop a working capital policy that would benefit Lawrence Sports’ profitability while remaining competitive, and in good standing with its business partners, suppliers, and major customers.
Working Capital Policy Approaches The concept of working capital management involves the management of accounts receivable, current assets, marketable securities, current liabilities, and inventory (Raheman, Qayyum, & Afza, 2011). The effective management of this working capital is of vital importance for the appropriate administration of a company’s financial systems. Policies exist to assist financial managers with the day-to-day operations of the organization. There are three types of working capital policies a company may institute to facilitate maximum profitability for an organization. The three working capital policies are conservative, maturity matching, and aggressive (Emery, Finnerty, & Stowe, 2007). Team A devised three different working capital policies in an effort to reduce future difficulties for Lawrence Sports. The team reviewed the three alternative policies and determined one of the policies is better suited to meet the needs of the company. Following are the three alternative capital policies formulated for final recommendation.
Maturity-Matching Approach Emery et al. (2007) define Maturity-matching approach to working capital that as the financing firm takes risk by matching the maturities
References: Chiou, J., Cheng, L., & Wu, H. (2006). The Determinants of Working Capital Management. Journal of American Academy of Business, 10(1), 149-155. Retrieved from http://search.proquest.com.ezproxy.apollolibrary.com/docview/222872625 Emery, D. R., Finnerty, J. D., & Stowe, J. D. (2007). Corporate financial management (3rd ed.). Morristown, NJ. Wohl Publishing Inc. Lawrence Sports Simulation. (2012). University of Phoenix Material. Retrieved from https://ecampus.phoenix.edu/secure/AAPD/vendors/tata/sims/finance/finance_simulation1.html Raheman, A., Qayyum, A. & Afza, T. (2011). Sector-wise Performance of Working Capital Management Measures and Profitability Using Ratio Analysis. Interdisciplinary Journal of Contemporary Research in Business, 3(8), 285-303. Retrieved from http://search.proquest.com/docview/928449989?accountid=35812