Lawrence Sports

In: Business and Management

Submitted By kspalds
Words 1750
Pages 7
Lawrence Sports: Determination of Working Capital Policy

University of Phoenix: Corporate Finance FIN/571
January 27, 2013
Course Facilitator: Troy Mahone

Lawrence Sports is a multi-million dollar company that prides itself on its ability to manufacture and distribute quality sports equipment and protective gear. Their principal Customer, Mayo Corporation, has recently requested a repayment extension on their loan with the company. Mayo would like to pay 80% of the payments due for the weeks of March 17-23 and March 24-30 and no payments would be made prior to April 14-20. To allow this payment arrangement, Lawrence Sports would have a deficit cash position for the weeks of March 31-April 6, where they would have to take an additional loan to cover the $307,000 deficit. Additionally, they would incur an interest payment of $3,150 on the loan. For the week of April 7-13, a loan would have to be made to cover the $411,000 deficit with an additional interest payment of $3,690. Lawrence Corporation has already reached their $1.2 million credit limit level and they would, according to company policy, be unable to make additional loans.
Lawrence Corporation greatly values the business relationship with Mayo Corp, and a decision must be made determining whether to allow a repayment extension based on the terms Mayo has stated, or come up with an acceptable plan, not only for Mayo Corp, but a plan that would be agreeable with all the parties involved. Allowing any extension on repayments from Mayo Corp would affect Lawrence’s ability to make timely payments to other business partners at Gartner Partners and Murray Leather Works.
In the following paragraphs, Team C reviews three working capital plans to determine which plan will reduce risk to Lawrence Corporation. After reviewing each working capital plan, and their contingencies, the team will then…...

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