Genesis Ltd was incorporated three years ago and has grown rapidly since then. The rapid rate of growth has created problems for the business, which the directors have found difficult to deal with. Recently, a firm of management consultants has been asked to help the directors to overcome these problems.

In a preliminary report to the board of directors, the management consultants state:

‘Most of the difficulties faced by the business are symptoms of an underlying problem of overtrading.’

The most recent financial statements of the business are set out below.

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Statement of financial position as at 31 October ASSETS Non-current assets Property, plant and equipment Land and buildings at cost Accumulated depreciation Fixtures and fittings at cost Accumulated depreciation Motor vans at cost Accumulated depreciation Current assets Inventories Trade receivables Total assets EQUITY AND LIABILITIES Equity Ordinary 0.50 shares General reserve Retained earnings 000 530 000 (88) 442 168 (52) 116 118 (54) 64 622 128 104 232 854 60 50 74 184