Lawrence Sports Working Capital Policy Paper

Running head:   LAWRENCE SPORTS WORKING CAPITAL POLICY

Lawrence Sports Working Capital Policy Paper
Mahesh Chandra
MBA 550 - Resource Optimization
Jenny Francis ?
March 30, 2009
Lawrence Sports Working Capital Policy Paper
Lawrence Sports manufactures and sells sporting goods and associated supplies. Recently, the company has been faced with an imbalance in working capital caused by a combination of lack of planning and the delay by one customer in paying 80% of their large outstanding account. Lawrence Sports must put into place a well-planned and well-implemented working capital policy in order to prevent unforeseen events such as that recently experienced from causing serious financial problems for the organization or, even worse, possibly causing the company to fail. While developing the working capital policy, Lawrence Sports must take into account ethical guidelines, cash balance requirements, short-term financing needs, ethical policies, supplier relationships and these should be traceable through the use of metrics so that Lawrence Sports can readily gauge their financial situation. By developing and implementing a realistic working capital policy, Lawrence Sports can experience growth and increase profits

Working Capital Policy
To develop a working capital policy, Lawrence Sports must understand the definition of working capital. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Working capital calculated as current assets minus current liabilities. If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit (Wikipedia.com)
As is true of any functioning company which sells manufactured products, Lawrence Sports has to negotiate with and pay vendors for raw materials in order to produce their inventory of products, pay overhead expenses such as utilities and payroll as well as, in a sound environment,...