CPA PEP Prep Q&A

Financial Analysis

 
Picture of Marvin Gikaru
Financial Analysis
by Marvin Gikaru Send a message - 21 Jan 2016, 2:24 AM
 

How does overtrading affect the aspect of financial analysis of a company?

 
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Picture of Angela Hernandez
Re: Financial Analysis
by Angela Hernandez Send a message - 24 Jan 2016, 7:59 AM
 

I once encountered the same question, and the books tend to be unfairly clear on this, so I asked one of my seniors and they gave me an example of a fisherman with a small boat, the boat limits his catch since he fishes in the deep lakes. if he fishes beyond the limit that the boat can handle, he will start sinking. The same applies to firms, overtrading is overfishing in this aspect.

 
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