Q1) Point out how each of the given six different transactions which Dynamic Mattress might make would affect (i) cash and (ii) net working capital:
1. Paying out a $2 million cash dividend.
a. Cash will
b. Net Working Capital will
2. Customer paying a $2,500 bill resulting from a previous sale.
3. Paying $5,000 previously owed to one of its suppliers.
4. Borrowing $1 million long-term and investing the proceeds in inventory.
5. Borrowing $1 million short-term and investing the proceeds in inventory.
6. Selling $5 million of marketable securities for cash.