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    Working Capital Management Problems

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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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    Solution Preview

    a. Cash will reduce and working capital will reduce.
    b. Cash will increase. No Change in Working Capital ( The accounts receivable get converted to cash and no change in ...

    Solution Summary

    The solution explains the impact on working capital for Dynamic Matteress of various actions