- This topic has 1 reply, 2 voices, and was last updated 8 years ago by
.
- Posts
Sir march hybrid exam.
Question 1: Evaluate whether Crago can be considered to be overtrading and discuss how overtrading can be overcome
Could you help me to solve the question please?
to show overtrading we need to show that WIC is being financed by short-term finance (overdraft) right? and the way to overcome is to finance by long – term money?
I can’t really add to what the examiner has written in his answer (I assume you have read his answer).
Over-trading is where a company expands rapidly without a corresponding increase in working capital, and hence a bigger reliance on short-term (overdraft) finance – exactly as I explain in my lecture examples.
And yes – as I say in my lectures and as the examiner has written in his answer, the solution is to raise more long-term finance.
- The topic ‘WIC question’ is closed to new replies.