Problem: Create a working capital policy for Lawrence Sports that addresses their cash management needs for the long term.
a. Compare Lawrence Sports' use of cash budgeting to the purpose of cash budgeting. Describe the weaknesses in Lawrence Sports' existing working capital policies that lead to their cash flow problem.
b. The policy must cover the following:
1) Cash balance requirements including cash reserves needed for long term opportunities that may arise.
2) Credit policy that balances Lawrence Sports desire to minimize accounts receivable and maximize revenue.
3) Supplier negotiation strategy for terms of payment that balances the costs to Lawrence Sports and their cash requirements.
4) Short term financing strategy to ensure availability of an adequate line of credit while minimizing the cost of that credit.
5) Metrics that will be used to monitor performance against the policy.
c. In a separate section of your paper, discuss the ethical implications of your working capital policy. Identify the conflicting interests of Lawrence Sports' stakeholders and how those interests are addressed by your policy.