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    Working Capital Management

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    How do each of the following six different transactions that Dynamic Mattress might make affect (i) cash and (i) 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

    The solution describes the effect of transactions on cash and net working capital.