Lawrence Sports Simulation Essay

Running Head: Working Capital: Lawrence Sports Simulation

Working Capital: Lawrence Sports Simulation

Saisamoa Vaitautolu

Efren Mallari

Kwok Hei Ng

Learning Team E

University of Phoenix

FIN 571

Abstract

Working Capital: Lawrence Sports Simulation

Business Background

Lawrence Sports specializes in the manufacturing and distribution of sports equipment. Sports equipment ranges from baseball, football, basketball, and volleyball. Lawrence’s key customer, Mayo Stores, is the world’s leading retailer of sports equipment. Having close to 3,000 stores, including Canada, South America and Europe, Mayo constitutes about 95% of Lawrence Sports’ sales. Lawrence Sports’ main supply chain partners are Gartner Products and Murray Leather Works. Gartner Products, with revenue of about $200 million, provides about 70% of raw material to Lawrence Sports. Murray Leather Works specializes in semi-finished leather products, where Lawrence Sports accounts for 75% of their total sales. Working with business partners who account for a large percentage of sales has emphasized the importance of working capital within an organization, specifically for Lawrence Sports who must maintain a cash balance of $50,000 with a maximum credit limit of $1.2 million. This document will discuss a comprehensive review of the cash conversion cycle for Lawrence Sports, a recommendation of working capital along with a risk assessment evaluating contingencies associated, performance measures used to evaluate the working capital policy, and an implementation plan for the working capital policy.

Cash Conversion Cycle

The cash conversion cycle is the length of time between the payment of accounts payable and the receipt of cash from accounts receivable (Emery, 643). Lawrence Sports is placed in a difficult situation with its principle customer, Mayo Stores. Mayo Stores has defaulted on two weekly payments and will be unable to pay any money for...