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1) Overtrading.

2) Poor debtor collection policy and or relaxed debtor screening process. (Bulk of sales are on credit)

3) Purchase of Investment/ Fixed assets during the financial year.

4) Redemption of debt funds, e.g. Debentures and bank loan.

5) Redemption of Equity funds, e.g. Preference share capital.

6) large financial burden ( the need to service high interest)

7) Credit period not made use of. (Repay creditors too quickly / Cash purchases instead of Credit purchases)

8) Prepayments during the year.

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