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Discussed in this paper is the need for change to place Lawrence Sports in a more financially strong position. Lawrence Sports will notice by making some changes to the way they currently do business

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Introduction

Running head: LAWRENCE SPORTS WORKING CAPITAL POLICY Lawrence Sports Working Capital Policy Paper Nicole Hamblin University of Phoenix Lawrence Sports Working Capital Policy Paper Discussed in this paper is the need for change to place Lawrence Sports in a more financially strong position. Lawrence Sports will notice by making some changes to the way they currently do business they can have more cash assets to grow the company to the desired level. In addition Lawrence Sports can reverse some of the negative issues identified in their present policy by making these changes to their cash revenue balance, renegotiation of the strategies used with their customers, credit policies and terms of payment, and changing the way that they look at short term financing. Working Capital Policy Cash budgeting is defined as the ending cash balance remaining after all cash has been collected and all expenses have been paid after evaluating the cash disbursements and cash receipts to attain this information. The purpose of a cash budget is to determine the minimum amount of cash that a company needs on hand as excess cash aside from the disbursements and expenses that are to be paid. In order for the Lawrence Sports organization to have adequate cash reserves, there needs to be the establishment of a cash budget. This cash budget will allow the financial managers to forecast the uses of cash for the company for cash needed for one month, three months, six months, and one year. This will give adequate levels of forecasting to establish the company with the needed cash during these intervals. Lawrence Sports had many weaknesses defined in the simulation. ...read more.

Middle

Lawrence Sports also has a monthly payment that is the interest for the short term debt that is used to keep their cash balance at the needed numbers to function every month. There was also the cost of equipment that was needed to produce the goods that the company sells. The difference between the beginning cash balance and the total of all cash collected from cash sales minus the cash disbursements paid out each month is the total that will be remaining each month as the ending cash balance. Lawrence Sports needs to change the policy that they use for terms of payment until they have built enough cash revenue to have the substantial remaining each month. This could be done by increasing the amount of initial cash payment required for providing the services and offering an increase in the cost of the products but offering a prompt pay discount for the payment of the products in a lesser timeframe that would be substantial enough so that the company would chose not to pay on the due date and allow the money to grow interest in an interest bearing account but would be slightly higher discount allowing the company to have an incentive to pay promptly therefore allowing Lawrence Sports to have a higher cash balance available each month by collecting on credit in a more timely fashion. In addition, another avenue that Lawrence Sports should take is the marketing and sales approach of their products to increase the sale of the sporting products. This will also increase the cash revenue for the company by having an increase in customers. This I feel would address the cash balance requirements and increase the cash reserves needed to function and grow the organization. ...read more.

Conclusion

Even though it is beneficial for Lawrence Sports to increase the amount of money that is received initially from customers and change the payment terms to decrease the amount of time the customers have to pay their debt, this can cause a strain on the relationships with the customers therefore potentially driving the customers to other providers of the same products therefore it is imperative that Lawrence Sports consider the ethical implications from their actions. The primary thing that Lawrence Sports needs to do is to continue an excellent working relationship with their customers throughout all potential changes and kept the customers abreast of the changes allowing adaptation periods to adjust to any impending changes. This will keep the customers happier and feel more involved and informed in the changes being made. A primary ethical implication addressed in the new policy is the increase in the cash revenue for Lawrence Sports while potentially causing unwanted financial strain on their customers. The policy addresses these issues by offering the possibility of discounts to the customers by meeting certain stipulations within the policy. This decrease the ethical implications by allowing all parties involved to win in some fashion. Conclusion In conclusion, Lawrence Sports can increase their cash balance by making some specific changes to the way they run their business. They can increase the cash revenue by changing the terms of payment set up with their current customers. This would be done by increasing the amount of cash paid at the time of the sale and decreasing the amount extended via credit. Also by offering shorter credit terms and increasing the discounts for paying in a shorter period, Lawrence Sports will be placed in a better financial position. The changes should allow for the change in status from financially distraught to financially strong. ...read more.

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