Guillermo Furniture Store Analysis

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Lawrence Sports Simulation

University of Phoenix
FIN/571
Professor Helen Horton-Brown
June 25, 2012

Lawrence Sports Simulation Lawrence Sports is both a distributor and manufacturer of sports equipment and protective gear. Because of the company’s size and industry, it is critical for Lawrence Sports (LS) to integrate an effective cash budget to become less reliant on short-term financing. Cash budgeting is an integral component for effective capital working policy (Emery, Finnerty, & Stowe, 2007). Establishing a cash budget is a means to observe a company’s inflow and outflow of cash, which in turn, will assist in adequate forecasting and planning, especially concerning when it comes to short-term credit (Emery et al, 2007). A high-quality working capital policy would also free up cash, which may be allocated to strategic areas for the company’s growth. LS must cease from financing shortages through credit lines with heavy reliance on selling inventory and receiving prompt payments. To understand the changes needed, a review of LS current policy will be analyzed and alternative working capital policies will be compared. Recommendations will be represented regarding which policy LS should implement. Alternative working capital policies The first alternative working capital policy is for LS to negotiate better collection on sales terms with Mayo Stores. The initial arrangement is to receive 20% collection on sales in the first week and 80% in the following week (University of Phoenix, 2012). The collection arrangement needs to be negotiated to 40% collection on sales in the first week and 60% in the following week. As an additional incentive, customers will receive 1% off their entire purchase if paid in full by the end of business on the seventh day. The second alternative working…...

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