tApplication of Concept in the SimulationReference to Concept in ReadingTerms of SaleIn the working capital management simulation, Lawrence has terms of sale set up with its business partners to pay a certain percentage at the time of the sale and pay the rest the following week. Mayo has extended their terms of sale and not stuck to the original agreement."Terms of sale are the individual practices that a firm has for transactions that involve credit." (Brealey, Myers, & Allen, 2005)Credit ManagementLawrence Sports continues to undergo issues with the collection of full payment from Mayo, in addition to the proper payment to its suppliers. Mayo contributes to about 95% of its sales and Gartner and Murray are the only suppliers. They are a major player and can greatly impact Lawrence Sports ability to make their loan payments. Ann Wu, head of vendor relationships, believes that the business partner, Murray, is likely to run into financial trouble if Lawrence stretches payment beyond a certain limit."The
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English: Berechnung des Net Working Capital
English: Cathedral of St. John the Divine — A st...simplest way to assess a customer's credit standing is to seek the views of a specialist in credit assessment." (Brealey, Myers, & Allen, 2005)Relationship between short-term financing and working capital practices. The relationship between short-term financing and working capital is managed through budgeting and forecasting. Forecasting serves two purposes, to provide a method of constructing a budget, and to make companies aware of future cash flow needs. Lawrence Sports has had a few problems collecting short term debt and as a result they are postponing payment of their loans. Lawrence has borrowed from the bank and deferred payment to Gartner by a week."The firm's cumulative capital requirement (green line) is the cumulative investment in all the assets needed for the business. The cumulative capital requirement can be met either from long-term or short-term financing. When long-term financing...