Overtrading

From Wikipedia, the free encyclopedia

Overtrading is a term in financial analysis. It means a corporation is running in a bad business situation.

[edit] Conditions

• Rapid growth in business development and sales.
• Lesser net profit.
• The business running a business with limited knowledge.
• Cash flow problem or short of working capital.
• Bad cash budget or unrealistic.
• Current liabilities are overdue, having large amount of unpaid suppliers.
• High amount of financial interest expenditure.
• High gearing ratio.
• Going concern issue at least within 12 months.
• Management integrity issue.
• Lack of good bank facilities or support.
• Lack of board of directors, management committment or support.
• Lack of sources of finance.
• Keen market competition.
• Overstock or slow movement of inventory.
• Lack of quality of personnel or accountant.
• Change of key personnel or business partners.