. Indicate how each of the following six different transactions that Dynamic Mattress might make would affect (I) cash and (ii) net working capital:

Well, seems you have some stuff missing. But I believe this is the same question someone else posted and here is my response from that one:




First, you need to make sure that you know the working capital equation: current assets minus current liabiliites.

For each transaction, you need to think which accounts it affects. I'll do the first one. Paying out a dividend will reduce retained earnings, and it will reduce cash. Since working capital does not involve retained earnings, you don't need to worry about that part. But since it reduces cash, it will affect that account. Also, since cash is a current asset, it affects total current assets by reducing them also.

So now you have less current assets. How will that affect working capital?

If you are not sure how that affects the working capital, then make up some numbers for your current assets and current liabilities. Make up any numbers -- they don't have to be realistic, like $10 million current assets and $7 million current liabilities. Then literally do the math: subtract the $2 million of cash paid for the dividends from the current asset number, and just see what it does to the working capital.

Do keep in mind that each one is independent of the others, so you're "starting over" with each transaction.

Now I'll leave you to try the rest of them. If you want to post your answers, someone can check them.