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Hi Mr John
On the your video of over/under capitalisation . On the example of “the company intends to double in size over the next year “. So we expect that inventory will be double from 100$ to 200$ , receivable will be double from 200-400$ , but you didnt mention cash , why cash won’t be double ?
Thank youThat is the whole point.
They should need more cash, but the cash doesn’t grow on trees and so if they haven’t planned properly and raised more finance (as they should have) then the cash needed to finance more inventories etc. will have to come from short-term borrowing and that is why they are forced into an overdraft and liquidity problems.
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