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Overtrading

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Overtrading

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  • October 12, 2017 at 12:47 pm #410546
    yceng1
    Member
    • Topics: 10
    • Replies: 7
    • ☆

    Hi John,

    May i know the reason why slowing down of inventory turnover is a sign of overtrading?

    Sales increases rapidly when company is experiencing overtrading, the inventory drop faster than usual, is the inventory turnover supposed to increase?

    Thanks.

    October 12, 2017 at 6:49 pm #410649
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54655
    • ☆☆☆☆☆

    Have you watched my free lectures on the management of working capital?

    As I explain in the lectures, it is common in a situation of over-trading for inventory levels to get higher than they should be and therefore for the inventory turnover to fall.

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