Working Capital Management Concepts Worksheet

Working Capital Management Concepts Worksheet
University of Phoenix
MBA 550 WK1
September 29, 2008
Michael Taousakis
Working Capital Management Concepts Worksheet
|Concept                   |Application of Concept in the Simulation                                     |Reference to Concept in Reading       |
|                         |Lawrence Sports have set up a credit account, with their primary customer,   |"To encourage customers to pay before|
|                         |Mayo.   Currently, this is not a good situation, because Mayo has not been     |the final date, it is common to offer|
|Term of Sale             |making their repayment due dates.   Lawrence Sports may need to change their   |a cash discount for prompt           |
|                         |term of sale in the future with this customer.                               |settlement.   You have decided on the |
|                         |                                                                             |contract that customers must sign;   |
|                         |"A Seller may allow more extended payment if its customers are in a low-risk,|and you have established a procedure |
|                         |if their accounts are large, if they need time to check their quality of the |for estimating the probability that   |
|                         |goods, or if the goods are not quickly resold" (Brealey, Myers, Allen, 2005).|they will pay up" (Brealey, Myers,   |
|                         |                                                                             |Allen, 2005).                         |
|                         |One form of financing used by Lawrence is a short-term option offered as a   |"Short-term financial planning is     |
|Short-term Financing     |line of credit by Central Bank. When Lawrence Sports positive cash balance   |concerned with the management of the |
|                         |falls below $50,000 the company automatically borrows from... [continues]

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