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Cash Rebates on Electronics

Among the cash managment techniques used by most business 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

1) Are these practices sound business decisions? Are they ethical? Explain

2) What percentage of the rebaates offered are actually paid?

Select a business you are familiar with and explain whether you would recommend this business use cash rebates.

FOR THE BUSINESS USE CIRCUIT CITY (COMPUTERS AND ELECTRONICIS

Solution Preview

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.

Overview on Cash Management
The following are the reasons for holding cash:

Transaction Motive for Holding Cash
A firm needs cash to make payments for acquisition of resources and services for the running the business.
Precautionary Motive for Holding Cash
A firm keeps additional funds to meet any emergency situation.
Speculative Motive for Holding Cash
Some firms may also maintain cash for taking advantages of speculative changes in prices of input and output.

Objective of Cash Management
Optimum Balance of Cash
A firm should hold an optimum balance of cash, and invest any temporary excess amount in short-term (marketable) securities. In choosing these securities, the firm must keep in mind safety, ...

Solution Summary

This solution provides an overview on cash management and why businesses prefer to hold cash. It also explores the issue of delaying bill payments and what percentage of rebates that are offered are actually paid. References used are included.

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