Conclusion on overtrading, Financial Accounting

Assignment Help:

Q. Conclusion on Overtrading?

The majority of the evidence suggests that our company is moving into an overtrading situation, although the evidence is not conclusive. Current pressure as of our bank to reduce our overdraft serves to highlight the fact that our company needs to reduce its trust on short-term finance whether trade finance or overdraft finance. Enhanced working capital management could reduce the level of investment in receivables and to a lesser extent perhaps in inventory which would ease our financial difficulties. But more drastic measures than this will be needed to deal with our reliance on short-term finance.

Though the size of the reduction in the overdraft required by the bank isn't known at present simply reducing trade credit to an average level would require $1m of additional finance. Factoring of receivables has been recommended as a source of working capital finance and it is certainly true that this would produce an immediate injection of cash that could decrease our overdraft and lower our average trade credit period. A additional consideration is that our company has no long-term debt and given our continuing growth this source of finance also deserves serious consideration.


Related Discussions:- Conclusion on overtrading

The statement of changes in equity-financial statement , THE STATEMENT OF C...

THE STATEMENT OF CHANGES IN EQUITY This is a very important report because it explains the movements in the shareholder funds during the year and also acts as a link between the

Ifrs guidelines, IFRS guidelines IFRSs Gives the guideline on the conte...

IFRS guidelines IFRSs Gives the guideline on the content and the accounting statements of certain events and transactions in the financial statements. The following IFRSs are r

Accounting treatment of deferred tax-financial statement, Accounting treatm...

Accounting treatment of deferred tax The objective of accounting for deferred tax is to ensure that the profits for the period d onto fluctuate due to temporary differences. To a

Account receivable, what is the treatment of increase in allowance receivab...

what is the treatment of increase in allowance receivable.

How do you react to the investment banker?, You are the CFO of Diversi?ed I...

You are the CFO of Diversi?ed Industries. Diversi?ed has suffered through 4 or 5 tough years. This has deteriorated its ? financial condition to the point that Diversi?ed is in dan

Help, #The ABC Organization Unadjusted Trial Balance As of 31 December 2012...

#The ABC Organization Unadjusted Trial Balance As of 31 December 2012 Account Codes Dr Cr Cash 10,789 Furniture and fixtures 60,000 Supplies inventory 8,531 Pledged contributions r

Expense recognition, Purchases office supplies on account costing $12,600 d...

Purchases office supplies on account costing $12,600 during July. It pays $5,500 for these purchases during July and the remainder during August. Office supplies on hand on July 1

Calculate the new interest rate and excel function pv, Continuing growth of...

Continuing growth of the company has required that we issue the company's corporate debt soon. As you know, in 6 months we plan to issue $10 million worth of 20-year corporate bond

Draw budget constraint for cooking oil and flour, 1. You can buy any quanti...

1. You can buy any quantity of cooking oil at $5 per litre and any quantity of flour at $2 per kilo. You have allocated $20 to spend on cooking oil and flour.    (a) If you choo

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd