Working capital management
Raleifoot Chisolm
FIN 554 Finance for Managerial Decision Making
University of Phoenix
Jerry Udoh
June 6, 2006
MEMORANDUM
TO: Stephanie Sanders, CFO
FROM: Raleifoot Chisolm
DATE: June 6, 2006
SUBJECT: Working Capital Management
Dear Stephanie Sanders:
Lawrence Sports is $ 20 million revenue companies that manufactures and distribute equipment and protective gear for baseball, football, and volleyball. Our principle customer is Mayo; they contribute to 95% of our sales. They are # 1 in Canada, and have stores in the U.S and Mexico.
Gartner is our main supplier of wood working process, testing equipment, fabric and accessories. We depend on them for 70% of our raw materials.
Lawrence Sports contributes to 75% of Murray's sales. They supply us with semi-leather products.
Our line of credit is $1.2 million, but the interest increase with our increase in borrowing. We also have to keep a minimum cash of $50,000.
During the period of March 31- April 26 there is no invoices coming in from Mayo, this literally means Lawrence Sports has no money coming in. Mayo has informed us that they cannot pay 80% of its invoices. We continue to have operating expenses and the need for raw material. In order to keep cash coming in we have to borrow money each month from the bank, the loan has to be repaid at the end of the month minus the $50,000 needed for a minimum cash balance. Our other expenses include our accounts payable to Gartner and Murray. I believe that we should give Mayo an extra week for paying the 80% payment for the sales in the week of March 10-16 ...