Working Capital Management - Bonus questions Flashcards
1
Q
When does over trading / undercapitalisation occur?
A
When a company has too small a capital base to support its level of business activity
2
Q
What is overtrading associated with in regards to revenue?
A
A rapid increase
3
Q
What is overtrading associated with in regards to inventory days?
A
Deterioration in inventory days
4
Q
What is overtrading associated with in regards to receivables days?
A
Deterioration in receivables days
5
Q
Over trading is associated with an increase reliance on…
A
Short term finance
6
Q
What are four factors that determine the investment in current assets?
A
- Length of working capital cycle
- Terms of trade
- Policy on level of investment
- Industry of operation
