lawrence problem solution
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Running head: PROBLEM SOLUTION: LAWRENCE SPORTS INC. Problem Solution: Lawrence Sports Inc. University of Phoenix Problem Solution: Lawrence Sports Inc. Introduction In the current business economy, business entities are highly concerned with maximizing liquidity and ensuring cash optimization (Keeler, 2005). Good cash management is an essential and very important activity of every business entity. "Working capital is truly the life blood of any business big or small." (Unknown author2005) "Working capital is the cash a business requires for its day-to-day operations, and for financing the conversion of raw materials into finished goods, which the entity sells for payment." (Unknown author 2003) An effective and efficient management staff will manage the entity's bottom line of working capital and realize that in order to improve the bottom line, management has to understand the tradeoff of maintaining good relationships with customers and vendors in order to protect their profits. This case will present Lawrence Sports Scenario, trying to illustrate and reveal some points about the working capital management and some changes that can enforce many large corporations to revise their strategic and the way of operating their activates to promote more competitive strategies in order to gain more productivity and profitability in their business.
These interactions help to better understand the markets. Problem Statement A problem arises when trying to maintain business relationships and balancing the organizations working capital and borrowing requirements. This was accomplished in an ethical manner by finding common ground and reaching agreements with all involved. Although this was difficult, at certain points the retailer-Mayo- had to be held to their word for payment in April, so not to create undue burden for Lawrence and its suppliers. This also required the stretching of payments to vendors. It was beyond Lawrence's control. The difference in the possible outcomes of the simulation was the decision to delaying payment to Murray and renegotiate terms with all involved. This allowed the organization to achieve its goals of increasing working capital while decreasing borrowing. End-State Vision As the financial manager of Lawrence Sports the company's cash position is of my highest concern. It is a tremendous part of my duty that I have to take care of the collection and payment policies. Mayo Stores has created difficulty with our working capital management. We have developed options to improve our cash flow and reduce high interest debt.
It is necessary to take this into consideration when making the decision to coordinate the financial inflows and outflows. Evaluation of Results Once Lawrence finds the right solution to solve its problems it will notice the difference in its cash, rather than borrowing more money from the bank. Meeting payments on loans that are borrowed must be accomplished in order to make sure there is a consistent inflow of cash. As much as the business relationships are needed to stay strong, the financial situation of the company is a priority. We have a financial responsibility to pay Murray the funds that are due to them, if Gartner does not receive the funds they need they will refuse to deliver their products which will destroy our working relationship. Conclusion Working capital is what floats a business. Without enough cash to pay suppliers, the suppliers will stop supplying necessary products. Managing finances comes with a certain amount of risk, if all money were placed in checking or savings accounts; the chances of growth are slim. Efficiently managing and understanding the related risk is extremely important. Successful negotiations will allow Lawrence to keep the cash flowing without incurring additional bank loan debt. Avoidance of additional bank loan debt will allow Lawrence to eventually develop a positive cash balance and be better prepared for future problems.
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