Business A-Level
overtrading
What overtrading means in Business A-Level, as defined for AQA.
Definitions of overtrading
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Reference: AQA
When a profitable and fast growing business runs out of money because rapid growth absorbs the working capital it has to find in between.
A condition where rapid growth ties cash up in stock and in trade receivables faster than the profit comes in.
A situation where sales outpace working capital, managed by securing overdrafts or factoring debts.
Topics that use overtrading
- Analysing financial performance (AQA A-Level)
- Assessing a change in scale (AQA A-Level)
- Setting financial objectives (AQA A-Level)
Related terms
- break-even output
- capacity utilisation
- cash flow forecast
- contribution per unit
- contribution squeeze
- control and motivation
- credit terms
- data reliability
Using overtrading in the exam
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