Lawrence Sports
Essay by 24 • May 9, 2011 • 638 Words (3 Pages) • 1,243 Views
Lawrence Sports is a $20 million review company that manufactures and distributes equipment and protective gear for baseball, football, baskeball, and volleyball. The company has hired recently a Finance Manager who will be responsible for managing the working capital needs of the company while maintaining good relationships with its three business partners (Working Capital, 2007). Working capital management is the financial foundation vital to the success of businesses. Working capital, simply defined, is current assets less current liabilities. It refers to the amount of capital that is readily available to an organization. Working capital management involves managing inventories, accounts receivables and payable as well as cash. (Allen. 2005, p832). In this paper, the author has benchmarked six companies and compared issues relating to short-term financing options, commitment bank loans, cash conversion cycle and risk & opportunities to issues similarly faced by Lawrence Sports.
Short-term Financing Options
"Short term financing is essentially to provide capital deficit businesses funds for a short term period of a year or less," (http://www.unixl.com/). Companies use short-term financing to run its day-to-day operations which may include payment of wages to employees, inventory ordering and supplies. There are many different kind of short-term financing options that companies can choose that will help the cash flow of the company. Some types of short-term financing are: overdrafts, short-term loans, bills of exchange, credit cards, line of credit, promissory notes/commercial paper, inventory loan, letters of credit, and factoring. The two companies that were benchmarked used line of credit, credit card, and short-term loans. The two companies that were benchmarked are: Catholic Charities and Idaho Airships, Inc.
Both companies have a lot of similarities and lot of differences than Lawrence Sports. The difference between Catholic Charities and Lawrence Sports, Inc are:
* Lawrence Sports, Inc used a loan as a short-term financing option. The loan that Lawrence has must be paid back in a short while. Most loans normally have an interest rate that is usually higher than the interest rate of a long-term loan.
* Catholic Charities used credit cards, stretching payables and line of credit to assist the company with its short-term financing needs. Of the three mentioned Catholic Charities uses the company credit cards the most to help preserve the
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