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Sir, in 80. Wibnoc Co, under signs of overtrading, why is one of the points given “Reduction in profitability”
I thought overtrading increases profitability and reduces liquidity. :/A reduction in liquidity is certain a sign that the company may be over-trading.
With regard to profitability, it can certainly increase (in the short-term) when there is over-trading. However the question is asking specifically for this particular company – all the things they have considered are indications that they might be over-trading, but none of them individually make it certain. It is just that looking at them all together it certainly does appear that the company is over-trading.
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