Working Capital
Working Capital
WORKING CAPITAL CONCEPTS
Working Capital Concepts
Working Capital Management Worksheet Assignment
Concept
Application of Concept in the Simulation
Reference to Concept in Reading
Cash Conversion Cycle
Lawrence Sports’ cash conversion cycle is made up of the $20 million in revenue it receives for manufacturing and distributing equipment and protective sporting gear. Lawrence Sports generates its revenue by purchasing material from their vendors and selling the materials to their customer. Cash inflows and outflows are generated through the collection of accounts receivables from the customer, and making payments to the suppliers.
Describe the firms cash conversion cycle.
Effects of credit policy on cash conversion cycle and revenue.
The Cash Conversion Cycle is one of the tools credit analyst use to determine credit worthiness. Credit analyst want to know why the business needs more cash to operate, and when and how it will be able to repay the cash.
Effects of credit policies.
Effects of accounts payable terms on cash conversion cycle and cost of goods.
Accounts payable are amounts a business owes. The accounts payables at Lawrence Sports are the monies due on the bank loan and the amounts due to their suppliers. The cost of sale includes the cost of goods sold, internal resources and, financing terms and late payments.
Effects of accounts payable.Collection policy, discounts, terms of sale, late fees.
Working capital practices.
Effective working capital practices at Lawrence Sports should consist of successful credit and