ACCA · Question 16.3 · Working Capital Management
Section B - Case 1: Verdant Yields Co
Scenario: Verdant Yields Co is an organic avocado exporter. The business is highly seasonal. Annual credit sales are $18,250,000. The current trade receivables balance is $3,000,000. Assume a 365-day year.
Question 3: The finance director is concerned that the rapid expansion into new markets might lead to 'overtrading' (undercapitalization).
Which TWO of the following are classic symptoms of overtrading?
Answer options:
Rapidly increasing sales revenue
A decreasing reliance on short-term overdrafts
A deteriorating current ratio
A decrease in inventory turnover days
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