8 Growth Problems Flashcards
1
Q
Define overtrading
A
where a business does not have enough cash to support its production and sales.
2
Q
Name the problems of rapid growth
A
- the merger/takeover may require investment in new equipment or staff to support the growth which may cause financial strain if the revenue growth does not keep up with the expenses
- diseconomies of scale may increase the cost per unit and are commonly caused by cultural and communication diseconomies
- managers may be overloaded with new responsibilities and this may decrease their motivation
