Problem: The importance of understanding the cash needs of the firm. Based on these needs, the firm will seek to borrow -- short-term, long-term or both based on their borrowing philosophy. Cash is king according to the business community. Therefore firms are constantly striving to improve its cash flow position. One technique that has been popular recently is using cash rebates to increase sales while promising the consumer a return of some of their funds. Key concepts: cash budgeting, liquidity, borrowing techniques and working capital.
1. Among the cash management techniques used by most businesses are those that slow down their bill payments. A good example for this is "Cash Rebates" offered on household items like computers and other electronics.
2. Are these practices sound business decisions? Are they ethical? Explain.
3. What percentage of the rebates offered are actually paid?