A-level Business Studies Lesson 34 (3.5.4)

Question 1

Sale and leaseback

Answer 1

A financial transaction where a company sells an asset - typically property, land, or equipment - to a buyer and then
leases it back for a long-term period. This allows the company to free up capital while still being able to use the asset for its operations.

Question 2

Working capital

Answer 2

Refers to the difference between a company’s current assets and current liabilities. It measures a firm’s short-term liquidity
and operational efficiency, indicating its ability to cover day-to-day expenses and short-term debts.

Question 3

Overtrading

Answer 3

Overtrading occurs when a business expands its operations too quickly without having sufficient working capital to support
the growth. This often leads to cash flow problems, as the company struggles to meet short-term financial obligations like paying suppliers, employees, and other operational costs.