Lisa Smith has recently set up her own online business supplying leisure wear and home fitness accessories to fast fashion retailers such as ASOS and Missguided. Lisa does not possess a background in finance but has been preparing her accounts, cashflows and budgets herself. In the past 12 months, she has generated turnover of £100,000 and profits of £25,000. However, her business has no cash and she is significantly overdrawn. An accountant friend glanced over her books and concluded that Lisa is overtrading. Lisa has employed you to advise her going forward. Requirement: Write a report to Lisa defining 'overtrading', analysing how this situation has arisen and how she should best manage and monitor her working capital going forward.

Lisa Smith has recently set up her own online business supplying leisure wear and home fitness accessories to fast fashion retailers such as ASOS and Missguided. Lisa does not possess a background in finance but has been preparing her accounts, cashflows and budgets herself. In the past 12 months, she has generated turnover of £100,000 and profits of £25,000. However, her business has no cash and she is significantly overdrawn. An accountant friend glanced over her books and concluded that Lisa is overtrading. Lisa has employed you to advise her going forward. Requirement: Write a report to Lisa defining 'overtrading', analysing how this situation has arisen and how she should best manage and monitor her working capital going forward.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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