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  1. Avatar of absylum007 says

    did i get this right ??

    overcapitalization means that i have stuck money in current asset (like inventory) or got too much current liabilities ( payables) too much which is not worthwhile and it would be betteroff in investing in long term assets like machines …..

    but i don’t get it having parables is good thing as it reduces our working capital cycle which means we cash in out faster , as payable = usually interest free source of finance

    • Avatar of johnmoffat says

      If you listen carefully to the lecture, the company should have raised more long term capital and doubled the cash balance also. However too many companies do not plan for the working capital properly and end up being forced into being overdrawn. This is what overtrading is.

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