Overtrading

[Keyperson]

What are the symptoms of overtrading? How to identify whether a company is overtrading?

[Sonal]

Overtrading occurs where a firm is growing too fast trying to carry on too large a volume of activities with its current level of capital.

Rapid increase in turnover, slow inventory turnover, excess of current liabilities over current assets, etc. are the symptoms of the overtrading.

[ABBAS ALI]

And cash and bank balance is not increasing more rapidly than the liabilities.

[jnrp2000]

Overtrading is when non current assets are funded by short term liabilities(current liabilities). The cardinal rule is non current assets should be funded by long term liabilities

[SandyHood]

A fall in liquidity ratios
A rapid increase in revenue
A sharp increase in the sales to non-current assets ratio (fixed asset turnover)
An increase in inventory in relation to revenue
An increase in receivables
Increase in the accounts payable period
An increase in short-term borrowing and a decline in cash balances
An increase in gearing
A decrease in the profit margin