Lawrence Simulation Paper Fin 571

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Lawrence Sports Simulation
Lawrence Sports experienced difficult times in March and April when their biggest consumer could not pay for its products. Because of this, the cash conversion cycle was examined as well as the working capital management presently used. Additional views were studied to determine the best course of action for the company. Although multiple factors play a role in determining the best working capital management policy, Team D will offer recommendations and how each philosophy would be beneficial for Lawrence Sports.
Cash Conversion Cycle

Emery, Finnerty, and Stowe (2007) summarized that “the cash conversion cycle is the length of time between when a firm pays its accounts payable and when it collects on its accounts receivable and is equal to the inventory conversion period plus the receivables collection period minus the payables deferral period” (p. 659). The initial start for the cash implementation plan would be to create and demonstrate a vendor program, such as a payable deferral period program and create longer cash conversion cycles for floating payment programs for payments going to the banks. Next pre-arrange the short term borrowing program by using short term marketable securities.
The Lawrence Sports Company financial departments need to begin following strict money formulas before any transactions pertaining to the market are made. Then it would be smart to hold cash balances for pertinent needs. This will allow and open doors for investing in inventories for the future and existing. The approach mention above is a mature approach that will melt the Lawrence customer base needs more quickly and give them more time along with extending credit to those major customer’s. The main standard for Lawrence Sports cash conversion plan will be to maintain operations as a fundamentally strong business that will plan toward short…...

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