Lawrence_Sports_Simulation

Lawrence Sports Simulation When an organization or company needs to apply the importance of working capital management there will be certain policies that an organization must enforce in order reduce issues in the business. In this paper, Team A will create at least three types of alternatives for working capital that would try to reduce future difficulties, and make recommendation on the each policy that is related to the Lawrence Sport Simulation. These recommendations will include: an evaluation of the risk associated with the recommendation, contingencies for the recommendation, performance measures that are used to evaluate the recommendation, and an implementation plan for the recommendation. In this discussion the following recommendations will also include a review of the cash conversion cycle for the Lawrence Sport Simulation and how it relates to working capital management. Risk associated with the recommendation Doing business financial decisions taken is key for Keep Company profitable and sustainable for long run. One key item for sustain company financial health is the capacity for manager the amount of money (cash) that get in and amount of cash that get out in other word Inflow and outflow described on Lawrence Sports Simulation (University of Phoenix, 2012). During the simulation, decision was taken for controlling cash flow. The source of cash flow were mainly the inflow from the principal customer Mayo and outflow to Lawrence`s suppliers (Gartner and Murray). Another source of cash flow is possibility borrowing money from bank with interest rate range from 10 to 16%. The interest rate increases, increasing the borrowed values. All possible decision taken impact the overall Lawrence business with its stakeholders, and off course cash flow. Looking for always keep a positive cash flow, company need force receive payment from Mayo not under Mayo desired, this generates created a risk of Mayo looking for other supplier in future, reducing Lawrence costumers. As Mayo is one of the largest sellers of the Lawrence products this could create difficulties on the future. By the other side of supply chain Lawrence has to deal with suppliers, trying as much as possible reduce the outflow. If the deal with supplier would not provided enough cash to them, paying what they need, they would also be on financial difficulties them this issues could generates problem for Lawrence receive its raw materials. As described above the actions controlling the cash flow are always interacting each other, with intrinsic relation between inflow (Cash from customers or Borrowing money) and outflow (payment of suppliers, financial and operational cost). The risk involved on this tread are always presented on the business and actions for mitigate them are necessary. Be on continuous contact with the stakeholders; understand their financial necessities are key element for take right decision mitigating short and long term risk, optimizing cash flow and maximizing the profitability of the company, necessary element for long term company sustainability.