Explaining transactions affect cash and net working capital


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.

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Accounting Basics: Explaining transactions affect cash and net working capital
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