Overtrading
A situation where a business grows too rapidly without sufficient working capital to finance the expansion, leading to c...
Real World
UK fashion brand Missguided collapsed in 2022 partly due to overtrading — rapid expansion and huge order volumes outpaced its cash flow, leaving it unable to pay suppliers even as sales figures looked strong on paper.
Exam Focus
Stress that overtrading can occur even in profitable businesses — examiners expect you to distinguish profit from cash flow when explaining the cause of failure.
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