Working Capital Management Concepts Worksheet
Concept Application of Concept in the Simulation Reference to Concept in Reading
Credit policy
Lawrence Sports (LA) current credit policy is not catering to the needs of the company.
LAs credit policy is too lenient, and there is no money coming into the company. The
companys working capital minimum requirements are not being achieved. In addition, it
has a direct effect on the LAs cash conversion cycle because cash is constantly paid for
materials but not collected from receivables. LA will need to implement a credit policy that
is more stringent than the current one.
A companys credit policy is based on: