We have heard the word “Overtrading” used by bankers, credit rating organization and analysts. It’s therefore important to understand what is Overtrading, how it is cause and what serious repercussions will happen and as financial executive what we can do.
So what is Overtrading?
In simple word, it denotes a condition in which the resources in particular the liquid resources of a business are insufficient to maintain the existing level of trading. This particularly happens during the booms when companies increase revenue without considering it means to finance the increase turnover.
In colloquial terms, we can also say that the management has failed to cut their coat according to their cloth.
Continue reading Overtrading: Definition, Causes, Consequences and Remedy
FCCA,CA(MIA)with more than 26 years of post-qualifying working experiences. Previous working stints with one of the big accounting four, Regional GFC & Group Treasurer in a group of Malaysian and Group CFO in Singapore public listed concern.
Also author to another very popular free educational accounting cum finance blog: http://basiccollegeaccounting.com under the branding of College Accounting Coach.
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