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Situation Analysis
Lawrence Sports is a manufacturing and distribution company of sporting goods. Currently, the company is facing several situations that offer opportunities as well as problems that need to be evaluated. First of all Lawrence Sports has a cash flow problem, whenever there is a deficit situation, money is borrowed from the bank to tide them over. Lawrence is basely robbing peter to pay Paul. If Lawrence continues to operate in this manner it will put a strain on their business partners or stakeholders. Lawrence made it through the week of March by borrowing from the bank and deferring payment to Gartner by one week. The outstanding loan and interest burden have also gone up; Lawrence needs a better plan to manage the cash flow. In this paper I will take a closer look at Lawrence's dilemma and determine a viable solution that will increase cash inflow so their will be out flow to pay debt and working capital to handle unforeseen circumstances.
Issue and Opportunity Identification
Lawrence Sport's principle customer, Mayo Stores, is having a difficult time paying for the products on time. The current payment arrangements are that Mayo will pay 20% on purchases and 80% the following week. Because Mayo is the principle customer at 95%, L.S. is placed into a situation where they in turn cannot pay its creditors on time. There is a plan B. Plan B is to have Central Bank do a daily loan for any amount to keep the account at $50,000. The problem with this is that L.S. has reached the maximum amount that can be borrowed, which is $1.2 million.
Having the Central Bank loan comes with its down falls. To pay off the loan Lawrence has to come up ...