Concept Application of Concept in the Simulation Reference to Concept in Reading

Lawrence focuses on one of the four principal types of current asset, “Accounts Receivables.”

  Lawrence Sports is a $20 million revenue company that manufactures and distributes sporting goods. The world’s leading retailer, Mayo is Lawrence’s principal customer and having difficult time payment to Lawrence that has applied pressure to receive payment from Mayo in a timely manner. This will reduce the burden on future finances and forecasting options. They need to do by negotiating short-term payment and collection arrangement with Mayo. “Company frequently sells goods on credit, so that it may be weeks or even months before the company is paid.” (Brealey-Myers-Allen, 2005). The cash flow from Lawrence comes from collections on accounts receivable. 
“The Company’s Credit Manager sets the terms for payment, decides which customers should be offered credit, and ensures that they pay promptly,” (Brealey-Myers-Allen, 2005).

Analyze how the firm’s financial decisions affect its working capital and cash balances.

  The company establishes a minimum operating cash balance to absorb unexpected cash inflows and outflows. The most important current liabilities in Lawrence are line of credit and accounts payable. Lawrence needs to develop a working capital policy, cash balance requirements, credit policy, supplier negotiation strategy, short-term financing and measurable metrics to monitor performance against policy. “The best short-term financial plan inevitably proceeds by trial and error.” “Financial manager must explore the consequences of different assumptions about cash requirements, interest rates, so ...