Overtrading

Question 1

What is it

Answer 1

business expands too quickly without the financial resources to back

Question 2

How can this be caused

Answer 2

sales made on credit
sig investment in operations

Question 3

what are some potential issues

Answer 3

low profit margins
use of overdraft
low capacity utilisation
increase in payables days

Question 4

how to overcome this

Answer 4

reduce inventory levels
scale back
lease equipment
favourable payment terms.. customers quicker.. suppliers longer