The ex-owner/manager of a private limited company recently acquired by a large plc, of which he is now a board member, said: ‘This company has grown very quickly over the past few years so that our sales revenue is now over £20m per annum. Even though we expect our revenue to grow further and double in the next two years I cannot see why we need to change our existing financing arrangements. I know we need to make some large investments in new machinery over the next two years but in the past we’ve always operated successfully using our existing overdraft facility, which has been increased as required, particularly when we’ve needed new equipment. I don’t really see the need for all this talk about additional share capital and long-term loans.’ Discuss.

Answer rating: 100% (QA)

The above statement suggests that the individual has a lack of understanding of how working capital and cash flow can impact on the business The busin... View the full answer