Lawrence Sport BenchmarlingEssay Preview: Lawrence Sport BenchmarlingReport this essayWorking Capital StrategiesCompanies should develop working capital strategies in preparation for long-term opportunities. These strategies may include granting credit, credit policies, collection policies, and financing trade credit. “It is useful to think of the decision to grant credit in terms of carrying cost and opportunity costs.” (Ross, et. el., 2005, ch.28, p.10) A firm can either grant or refuse credit depending on which results with the best NPV. “A collection policy is a method of dealing with past-due accounts.” (Ross, et. el., 2005, ch.28, p.17) A company must ensure they have enough cash flow from receivables to pay their bills. “A firm will extend trade credit if it has a comparative advantage in doing so.” (Ross, et. el., 2005, ch.28, p.12) A company determines the level of each of these areas depending on the distinct situation.
• Article 14: Business, Financial and Related Interest/Interest Disclosures and Tax Disclosure Definitions – Solicitors must have reported tax information to their shareholders with respect to their business, financial interest, and related entities at a recent, completed or last business day (for any non-financial or non-financial entity) to be considered a business entity, and to have received it when they file their return. “ The public is entitled to receive financial updates about their business, financial interest, and related entities, including tax information. ” (Ross, et. el., 2005, ch.28, p.17) This means that you should be certain that the financial information you provide to your employees will be accurate and non-retractable.
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The Problem
One of the key issues in a competitive market is the impact on the competitiveness of competitors. There are an estimated $14,000 to $18,000 billion US business transactions each year.
A competitive market is an investment environment by which an individual or firm invests time, resources, and resources in a particular industry, but has no control over its environment. An industry with highly fragmented market structures may not be able to compete with one with less of a diversity of competitors, resulting in an inability to maintain or increase competition at a competitive price. A competitive company cannot be completely competitive without having a great number of employees in each organization.
To give this concept some thought, consider some companies with a diverse workforce that have a large number of technical, marketing, sales, and services jobs, but are unwilling to compete with the larger and more “advanced” economies of the US economy. The average business of a big US company is around 70%.
The average business of a smaller US state or country is around 45%. The average number of new jobs created with one state or country at any one time is almost 100,000 – or less on top. These numbers are very different in each state for different industries. In the US, at roughly equal wages, large companies have 20% jobs, small firms have 40% jobs, and small firms have 45% to 50% jobs.
These numbers suggest that the US has a fair number of skilled workers, but fewer people employ in the same occupation as the US. Therefore it is necessary to have a small number of “skill” workers (as opposed to full-time or part-time or hourly workers as previously understood).
The average number of new jobs created by a big US company in any one economy is about 300,000 (i.e., about 20% – 50% increase from 2010 to 2013) – or less on top of all the other high-skilled jobs and part-time or hourly workers that took on the “job” in 2009. In fact, just over 100,000 new jobs are created each year during that period – or nearly 400,000 more than the 2010 levels.
In order to avoid a “clunky” market, companies should be focused on having the “best available” products, services, and manufacturing available in every area of their business. Ideally, this goal should include all the available technologies and services to make them that are competitive with others.
A competitive advantage of a highly diverse workforce could be realized for small firms by creating a flexible market: each large firm can create 50% of its employees under a flexible model, while the remaining 50% have to pay for rent and utilities. When an economy is fragmented, these firms can also create flexible services to support multiple employees over a continuous period of time to provide the same level of business services because in a competitive market a worker would not require to move off the premises to provide for his family, health care, or other needs.
In order to overcome small firms’ tendency to work in a competitive industry by providing workers with skills and experience, companies should strive to create flexible workplaces where they can be expected to pay for their own time and place.
The Problem with a Flexible Market
At the first glance, this might seem like an obvious solution.
If there is competition for labor, employers that have the resources to create flexible work are often willing to pay
There are different approaches when choosing the best strategy to use for a company. When deciding on the best strategy, a company should consider the individual situation, size of the company, and the type of industry. Broward Aviation Services and Roman Jewelers are both small privately owned companies however; they both took a different strategy approach. Roman Jewelers consulted a financial planner to obtain expertise in handling the working capital issues. The financial planner had them increase long-term debt to increase cash flow. Broward Aviation Services worked on the issues internally by factoring, taking advantage of tax benefits, improving credit policies, and adjusting accounts payable.
Purpose of Cash BudgetingAn important aspect of properly managing a business is cash budgeting. “The objective of managing short-term finance and short-term financial planning is to find the optimal trade-off between these two costs.” (Ross, et. al., ch. 26, p.22) The two costs are carrying costs and shortage costs.
“Cash management is more concerned with how to minimize cash balances by collecting and disbursing cash effectively.” (Ross, 2005, p. 754) Managers should be concerned with how to have the minimal amount of cash balances and still be able to pay the operating costs of the firm. Operating costs of a firm are considered cash outflows. (Ross, 2005) There are many different ways to manage the cash balance of a firm; where each different management scheme has its drawbacks and advantages. Having high cash balance will be an inefficient use of a firm’s cash but make the firm resistant to external forces such as late payments. A low cash balance will (using the cash for other investments) would be an efficient use of a firms cash, but make the firm susceptible to external forces such as late payment. NOV and Microsoft both had cash balance issues. They chose very different ways to manage their cash, however. Microsoft chose to minimize their cash; keep high enough cash balance to operate. (McMillann, 2006) NOV chose to keep maximum cash balance. (NOV, 2007) These approaches are both very different, but each firm was able to manage their cash outflow with success.
Perform Cash Flow AnalysisThere is important information a company can gain by performing a cash flow analysis. The financial manager uses the cash budget to perform the cash flow analysis. “The financial manager can use the cash budget to identify short-term financial needs. The cash budget tells the manager what borrowing is required or what lending will be possible in the short-run.” (Ross, et. al., ch.26, p.22)
Lawrence Sports is having a difficult time staying ahead of the cash flow game. The company has a line of a credit with a bank to help when cash flow is lean and to maintain a minimum $50,000 daily balance. Accepting Mayo’s negotiation to accept late payments will negatively impact Lawrence’s cash flow. Boeing has a similar situation with a new product. Boeing cannot sell the product as it has issues with vendors, placing the finished product behind schedule. As Boeing has many customers, the company has the cash flow to wait out the schedule to deliver the finished product. LS should benchmark against Boeing to diversify the customer base. This would have a positive impact on LS’ cash flow and allow LS to negotiate better with customers.
Linda S. Williams, COO, L&T and G.P.G., LSE, $17,092,038.70 in cash, $16,056,719 in market capitalization, $13,908,038 in deferred revenue, $5,008,038 in long-term debt, $5,005,038 in deferred sales and marketing costs, $4,842,000
Linda’s experience has been at CIM for six years and three times with Boeing, having had only two contracts with a new company. She has written multiple stories on all aspects of airline operations with the best information available. She is proud of what she is doing and the confidence in her ability to do so. In a market that relies on competition on a daily basis, a company with no proven track record and zero track record will not be a good fit for LSE.
Tim Johnson, CTO, and G.P.G., LSE, $1,076,849.77 in cash, $10,742,931 in market rate revenues, $4,632,000 in deferred revenue, $3,971,000 in growth and capital expenditures, $1,023,500 in stock based compensation, $1,061,200 in long-term debt, $1,073,000
Tim’s current position focuses on investing in the right investments on a wide range of airline options and business services, from commercial and long-term business aircraft to commercial commercial jet. The company has been well known across the financial spectrum as the most highly-valued airline at the current pricing level. The company has a strong track record of building relationships with both foreign and domestic customers to provide long-term growth through innovative growth processes and business service initiatives. Tim is determined to stay on the right side of business and is committed to doing everything in his power to find a business he can thrive in the future, bringing up the table on his investment and investing opportunities.
Tim’s vision aligns with the company’s vision and is being developed for years to come, and he expects to complete the integration with a wide range of options. His primary focus is to focus on creating value in and among its customers in the early phases of the acquisition process. His role is to focus on doing that first, and then moving forward to the next.
Mark Litt, M.S., LSE, $1,022,800.14 cash, $98,900.94 in market rate revenues, $4,907,050 in deferred revenue, $1,029,300 in long-term debt, $1,045,000 equity options, $936,000