Finance

Capital plays a central role in any business and by any standards, its orientation determines the destiny of any the business. Adopting a working capital that has a largely credit orient puts the firm to a larger risky, though may have higher returns. On the other hand, avoiding credit orientation of working capital reduces risks, yet has the lowest returns on the very capital. The mix of the capital policy therefore is pivotal in the performance of any business that be. This paper looks at three working capital policies that would be appropriately adopted by the Lawrence sports.

Working Capital Policy
Businesses require a comprehensive and elaborate capital policy. The policies should not be singular but multivariate to facilitate accessibility options. This paper looks at possible alternative capital policies that is not only profitability oriented but also risk cutting. However, the central role of the policies proposed is to avert risks as much as would be possible.

The choice of suppliers would also be incidental in the choice of the capital policies. Whereas suppliers who accept credit transactions would allow the business to adopt a credit policy of capital, suppliers whose preference is for cash transactions calls for the company to have ready liquid cash for any transactions (Hieima, 2004, p 32). Within the mandate of this assertion, the choice becomes so highly depend on the debt settlement policies of the chosen suppliers.

I propose that Lawrence Sports adopts the following capital approaches and policies that would not only leverage profits but also reduce the risks that are imminent in firm. First, Lawrence Sports would opt for a hedging policy. Within this approach the L.S would have to match its assets and the liabilities with the maturities of their respective maturities. The L.S should use long term sources in the financing of its fixed assets and assets that are permanent. Temporal current assets would then be financed through the use of short term financing.

While the approach could be appealing, it could lend itself to a number of shortfalls for Lawrence Sports. In the long run this approach is prone to numerous disadvantages particularly resultant from the fact that inflation would vary over time. Besides, the interest rates would equally vary for the financial institutions and therefore affect the repayment schedule for the firm. This might affect the overall performance of Lawrence Sports.

Lawrence sports can similarly use a conservative policy. Within this approach the firm will have to hold more cash for the purposes of carrying out its transactions. Assets will be acquired through the use of permanent or long term funds. Long term financing is quite expensive this will make the Lawrence Sports more prone lower returns. It is appreciable that the risks will be ultimately lower (Hieima, 2004, p 102). Lawrence under this policy approach will need to invest its excess cash to earn additional returns, particularly during times that are termed off peak.

The sports firm would also have an option of adopting an aggressive working capital policy in which case high risks are taken. Within this policy the firm will have to use short term funds to finance both fixed and current assets. The serving of the acquired funds, unfortunately, will rely largely on the present performance of Lawrence sports business. If the firm at any point experiences slowdowns in its turn over prospects, then Lawrence Sports would be at risk.

The aforementioned options only give insight into the options for the choice of working capital acquisition. Nevertheless, it is recommendable that the firm adopts a multi-pronged working capital acquisition policy. The policy should amalgamate the various options. This will make the Lawrence Sports less prone to adverse effects resulting from the risks inherent in singular working capital acquisition policy (Hieima, 2004, p 62).

In conclusion, any assertion that a particular working capital policy is comprehensive enough and all certifying is wrong and far fetched. Lawrence should leverage the varied orientation of its suppliers to choose the appropriate nature of working capital. This will moderate profits and equally minimize the risks the central objective of any business oriented firm.