Overtrading

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July 25, 2016 at 9:44 am #328835
aziz5210
Member
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Sir,
1. In Kaplan text it has stated that a rapid increase in volume of current assets is one of the
reason of overtrading – the volume means in terms of units or over all CA of balance
sheet ?
2. Does Overtrading company have symptoms of increase in payable days ?
3. Does Overtrading company has increase in working capital turnover ratio ?
Thanks >>>> 🙂
July 25, 2016 at 11:39 am #328869
John Moffat
Keymaster
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Please watch my free lectures on this where I explain with an example.
I cannot type out the whole lecture here!
An increase in current assets is a symptom of overtrading, not a reason for it. And it is in terms of $’s not units (units only apply to inventory).
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