Identifying South African listed companies involved in overtrading
Abstract
This study investigates overtrading, which is the result of an expansion rate that is too high in relation to a particular business’s structure. It often results in cash flow problems. The phenomenon of overtrading is described in a case study on Profurn. In this study, a ratio was developed that can be used to identify companies in an overtrading position. Selected variables were tested by means of the Kruskal Wallis test in order to pinpoint variables that can discriminate successfully between companies that are overtrading and ones that are not. Overtrading occurred in 15.5% of the company years of listed South African companies between September 1989 and December 2005. Of the 35 variables tested, 31 were found to be able to discriminate statistically between company years in which overtrading occurred as opposed to ones in which it did not occur. These variables can therefore be used to profile companies that overtrade.
Keywords
Citation
Steyn‐Bruwer, B.W. and Hamman, W.D. (2007), "Identifying South African listed companies involved in overtrading", Meditari Accountancy Research, Vol. 15 No. 2, pp. 43-63. https://doi.org/10.1108/10222529200700010
Publisher
:Emerald Group Publishing Limited
Copyright © 2007, Emerald Group Publishing Limited