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:
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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Net working capital = Current Assets(CA) - current liabilities (CL)
a. Cash will go down by $2.0 million. The current assets will go down and owner's capital will go down( no chnage in current liabilities) hence net working capital will decrease.
b. Cash will increase. Accounts ...
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