Lawrence Sport Case

Lawrence Sports is in a unique position. The company is caught in the middle of a three-way tug-of-war involving its working capital needs. Its bank has capped its borrowing capacity at $1.2 million. Its largest customer is responsible for more than 80 percent of the company's sales revenue. Therefore, Lawrence has very little negotiating power with this customer. According to Carl Warren, James Reeve, and Jonathan Duchac in their book "Accounting," companies often expect customers for to pay for products and services sold on account within the credit terms established. Unfortunately, this is not always the case. Collecting accounts receivable efficiently is the key to turning a current assets, in this case accounts receivable, into positive cash flow (Warren, Reeve, and Duchac, 2007).

Another factor involves the two primary suppliers of Lawrence. One of these suppliers is

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rease the dollar limit. Another important issue that should be pursued involves obtaining a higher working capital line of credit not simply to take advantage of serendipitous opportunities as they occur, but also in response to the volatile nature of Lawrence Sports' working capital. This volatility is the result of the fact that Lawrence as one customer that accounts for the majority of its sales, and two suppliers that account for the majority of its purchases There are a number of metrics that can be used to monitor performance at Lawrence as a relay to improving the cash management process. The most obvious involves the interest expense incurred each year relating to borrowings made against the working capital line of credit. Another involves the weighted average interest rate been charged to Lawrence on its borrowings. This is important since the interest rate increases in proportion to the amount being borrowed by Lawrence. Another metric that can be used to measure Lawrence's cash budgeting process involves how frequently the company must make use of the working capital line. Another measurement of the company's effectiveness involves a calculation of its day's sales outstanding. DSO or days sales outstanding is a
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Some common words found in the essay are:
Gartner Murray, Lawrence Sports', Lawrence Summary, Lawrence Sports, Capital Policy, Lawrence Mayo, Murray Gartner, Financial Management, Companies Lawrence, Collection Handbook, cash inflows, capital line, capital line credit, line credit, cash flow, accounts receivable, annual sales, accounts payable, credit department, account terms, credit hold, alternative sources supply, total annual sales, murray's financial condition, cash inflows outflows,
Approximate Word count = 3459
Approximate Pages = 14 (250 words per page)

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