AA DESIGN GROUP LTD

Executive Summary

AA DESIGN GROUP LTD, as a newly formed micro-entity, shows adequate short-term liquidity but suffers from a negative net asset position due to significant long-term liabilities. This financial "symptom" suggests vulnerability but can be managed with strategic capital injection and careful cash flow oversight. Proactive measures are essential to stabilize and strengthen the company's financial health moving forward.

AA DESIGN GROUP LTD - Analysis Report

Company Number: 15412468

Analysis Date: 2025-07-29 19:50 UTC

Financial Health Assessment for AA DESIGN GROUP LTD

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1. Financial Health Score: Grade D

Explanation:
AA DESIGN GROUP LTD’s financial snapshots indicate significant financial stress despite being a newly incorporated micro-entity. The net assets are negative at £712, signaling liabilities exceed assets. This is a warning "symptom of distress," warranting close attention. The company operates with minimal fixed assets and employs only one person, which is typical for a micro business but emphasizes the need for strong cash management. The negative net asset position leads to a D grade, reflecting vulnerability but not yet insolvency.

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2. Key Vital Signs

Metric	Value (£)	Interpretation
Fixed Assets	529	Very low investment in long-term assets, typical for micro companies.
Current Assets	1,346	Limited liquid resources; must be managed carefully.
Current Liabilities	420	Short-term debts appear manageable relative to assets.
Net Current Assets	926	Positive working capital, implying short-term liquidity is sufficient.
Creditors (Long-term)	2,167	Substantial long-term liabilities exceeding current assets, a concern.
Total Net Assets	-712	Negative net worth; liabilities exceed all assets.
Shareholders Funds	-712	Negative equity signals financial strain or initial losses.

Interpretation:

• Healthy cash flow is indicated by positive net current assets, suggesting the company can cover short-term obligations.
• However, the negative net assets (liabilities surpass assets) is a serious "symptom," indicating the company is technically insolvent on a balance sheet basis.
• The large long-term creditor figure relative to assets is a red flag, potentially indicating loans or financial obligations beyond available resources.
• The company is in its first financial year, so these figures may reflect initial startup costs or funding structure rather than operational failure.

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3. Diagnosis

AA DESIGN GROUP LTD is in the critical early stages of its business lifecycle. While it maintains adequate short-term liquidity (working capital), the negative net asset position suggests that the company’s financing structure is currently imbalanced—liabilities exceed total assets.

This could be due to start-up costs financed by loans or other credit facilities, common for new businesses. The absence of profitability data limits the full assessment, but the company must monitor these liabilities carefully to prevent worsening solvency.

The single director and sole significant controller (Ajmal Ashraf) implies centralized decision-making, which can be advantageous for swift action but risks lack of oversight.

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4. Recommendations

• Improve Equity Position: Consider injecting additional capital or converting some long-term liabilities into equity to eliminate negative net assets and strengthen the balance sheet "immune system."
• Monitor Cash Flow Prudently: Maintain positive net current assets and manage working capital tightly. Cash is the bloodstream of the business; ensure inflows exceed outflows regularly.
• Negotiate Liabilities: Engage with creditors to possibly restructure or extend repayment terms on the long-term liabilities to reduce pressure.
• Build Profitability: Focus on generating revenue and controlling costs to move from start-up losses to operational profit, improving reserves and shareholder funds.
• Regular Financial Reviews: Establish monthly financial health "check-ups" to track key metrics and detect any early symptoms of distress for timely intervention.
• Seek Professional Advice: If necessary, consult financial advisors to assist with restructuring plans, funding options, and strategic growth.

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