My writer delivered an awesome dissertation on the Creek War, I definitely didn’t have the time to do all the research she did on my own.
Essay (any type)
09/08/2022
If a business is overtrading, do you think the following ratios would be higher or lower than…
If a business is overtrading, do you think the following ratios would be higher or lower than normally expected? 1 Current ratio 2 Average inventories turnover period 3 Average settlement period for trade receivables 4 Average settlement period for trade payables Your answer should be as follows: 1 The current ratio would be lower than normally expected. This ratio is a measure of liquidity, and lack of liquidity is a typical symptom of overtrading. 2 The average inventories turnover period would be lower than normally expected. Where a business is overtrading, the level of inventories held will be low because of the problems of financing them. In the short term, sales revenue may not be badly affected by the low inventories levels, and therefore inventories will be turned over more quickly. 3 The average settlement period for trade receivables may be lower than normally expected. Where a business is suffering from liquidity problems it may chase credit customers more vigorously in an attempt to improve cash flows. 4 The average settlement period for trade payables may be higher than normally expected. The business may try to delay payments to its suppliers because of the liquidity problems arising.
