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Working Capital Management with Transactions

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Indicate how each of the following six different transactions that Dynamic Mattress might make would affect (i) cash and (ii) net working capital:

a. Paying out a $2 million cash dividend.
b. A customer paying a $2,500 bill resulting from a previous sale.
c. Paying $5,000 previously owed to one of its suppliers.
d. Borrowing $1 million long-term and investing the proceeds in inventory.
e. Borrowing $1 million short-term and investing the proceeds in inventory.
f. Selling $5 million of marketable securities for cash.

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Solution Summary

This solution identifies the effects of each transaction of either increasing or decreasing cash and net working capital.

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Working Capital Management. Indicate how each of the following six different transactions that Dynamic Mattress might make would affect (i) cash and (ii) net working capital:

1.Paying out a $2 million cash dividend.
2.A customer paying a $2,500 bill resulting from a previous sale. ...

Solution provided by:
Manal Elkhoshkhany, MBA
Education
  • BA, Ain Shams University, Cairo Egypt
  • MBA, California State University, Sacramento
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