Working Capital Management. Indicate how eachof the following six different tran

Question

Working Capital Management. Indicate how eachof the following six different transactions that Dynamic Mattressmight make would affect (i) cash and (ii) net workingcapital:

a. Paying out a $2 million cash dividend.

b. A customer paying a $2,500 bill resulting from aprevious sale.

c. Paying $5,000 previously owed to one of itssuppliers.

d. Borrowing $1 million long-term and investing theproceeds in inventory.

e. Borrowing $1 million short-term and investing theproceeds in inventory.

f. Selling $5 million of marketable securities forcash.

Explanation / Answer

1 Decrease Decrease

2 Increase No change

3.Decrease No Change

4. No Change(money raised will be spent) Increase

5 No Change No Change (inventory increases....so doesliability)

6 Increase No change(marketable securities replaced by cash)

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