Cash Budget

1) Explain the use of a cash budget to the financial manager and other decision-makers of the organization. What purpose(s) does it serve?

2) Solve the following problem and walk through your solution: Problem: Best-4-Pets Corps sales for the current month are $17,000, and they are projecting a 2% growth per month in sales for the next 3 months. 25% of its customers pay in the first month and take the 1% discount, while the remaining 75% pay in the month following the sale and do not receive a discount. The firm has no bad debts. Purchases for next months sales are constant at 55% of projected sales for the next month. "Other payments", which include wages, rent, and taxes, are 25% of sales for the current month. Construct a cash budget for the next month and calculate the average cash gain or loss during the month. Do not round intermediate calculations.

3) Managerial Decision: As a customer of Best-4-Pets Corp, would you take the discount being offered? Explain the conditions under which you would and would not.