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rapid growth problem

Forums › ACCA Forums › ACCA APM Advanced Performance Management Forums › rapid growth problem

  • This topic has 2 replies, 2 voices, and was last updated 14 years ago by dou.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • April 26, 2011 at 3:02 pm #48220
    dou
    Member
    • Topics: 15
    • Replies: 32
    • ☆

    hi everyone,
    can u tell me what is the problem of rapid growht organisation?
    suddenly i have question about this and i cannot completely get the answer from the web or books. so can u share your knowledge to me please? ^^

    April 27, 2011 at 1:44 pm #81186
    antoniorasco
    Member
    • Topics: 3
    • Replies: 19
    • ☆

    Hi

    I believe that this is overtrading.

    Overtraded companies enter a negative cycle, where increase in interest expenses negatively impact net profit, which leads to lesser working capital and hence to increased borrowings.
    This leads to more interest expense and the cycles continues. Overtraded companies eventually face liquidity problems and/or running out of working capital.

    Other problems facing overtrading companies:

    – Limited business knowledge
    – Having large amount of unpaid debtors.
    – Overstock or slow movement of inventory

    May 4, 2011 at 9:29 am #81187
    dou
    Member
    • Topics: 15
    • Replies: 32
    • ☆

    thank you for your useful information.

  • Author
    Posts
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