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Forums › ACCA Forums › ACCA FM Financial Management Forums › Overtrading
Why over-trading may result in a relatively high accounts payable turnover period?
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Because over-trading is likely to lead to a shortage of cash and therefore forces a delay on paying liabilities.
Have you watched my free lectures on this.
Thanks Sir. I got it.
I have watched the video. My thought just stick to the formula.
payable turnover period = (payable/ cost of sale) * 365
I was just thinking if company over-trading, revenue increased then COS of course also increased and payable increased as well so finally dont know weather payable turnover period is increased?
Yes, but the question is not saying that it will definitely increase. It says that it may increase (and it is likely to increase).