Lawrence Sports Simulation

University of Phoenix
May 30, 2010

Lawrence Sports Simulation
  Maintaining a positive cash flow is imperative for any business. Lawrence Sports has found itself in a situation in which the company is struggling to pay for a loan, meet customer needs, and maintain a positive vendor relationship. The statement of cash flows is a financial statement indicating the change of position in cash of the period covered by the income statement   [ (Emery, Finnerty, & Stowe, 2007) ]. The cash flow breaks down the use of cash throughout the period and shows the flows from operating, investing, and financing activities. This team will attempt to compare the different policies of the cash flow strategies for Lawrence Sports and offer a recommendation of the best strategy that will prove to advance Lawrence Sports' business activities.  
Maturity-Matching Approach 
A moderate approach to financing working capital entails maturity matching.  In simplest terms, Lawrence Sports can curb their risks by matching the maturities of their assets and liabilities.  Lawrence would be able to finance seasonal variations in current assets with  current liabilities of the same maturity.  Long-term assets are financed through the issuance of long-term debt equity securities.  Long- term capital is also financed with a  permanent component of current assets gained from this policy; whereas inventories and receivables will be able to sustain a minimum level.  In regard to short term borrowing, which is inclusive of bank loan such as the one Lawrence is struggling to pay for, under this policy, the short-term borrowing will be reflective of seasonal swings in current assets.  Short-term borrowing will fall to zero during seasonal low points (Emery, et al., 2007).
It is presumed funds will always be available under a moderate  policy and Lawrence will be dependent on short-term financing for any temporary...