Define the meaning of overtrading, Financial Management

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Define the meaning of Overtrading

When a company is trading at a very fast pace, it would be generating sales on credit with speed, so have a large volume of trade receivables. It would also be purchasing inventories on credit at a fast pace and thus have a large volumes of trade payables. If company doesn't have sufficient capital (finance), it will find it difficult to continue as there are insufficient funds to meet all the costs.

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