Company Number: 12508046

Analysis Date: 2025-07-20 17:39 UTC

Financial Health Assessment for ABOUT BUILDING SUPPLIES LTD (as of 31 March 2024)

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1. Financial Health Score: D

Explanation:
The company exhibits significant liquidity and solvency challenges, with deeply negative net current assets and overall negative net assets (shareholders' funds). These symptoms indicate financial distress and risk to the company's operational continuity without corrective action. The score reflects pressing concerns despite the company remaining active.

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2. Key Vital Signs

Metric	Value (£)	Interpretation
Current Assets	72,983	Short-term resources available to meet immediate liabilities.
Cash	11,303	Actual liquid cash available – quite low relative to liabilities.
Debtors	61,680	Amounts owed to company, reasonable but collection risk exists.
Current Liabilities	849,673	Obligations due within 1 year – very high compared to assets.
Net Current Assets (Working Capital)	-776,690	Negative – symptoms of liquidity distress, unable to cover short-term debts.
Total Assets Less Current Liabilities	180,239	Positive but declining – signals some buffer in long-term assets.
Creditors due after 1 year	221,585	Long-term debt obligations, significant but stable.
Net Assets (Shareholders’ Funds)	-41,346	Negative – company’s liabilities exceed assets, indicating insolvency on a balance sheet basis.

Additional observations:

• Tangible fixed assets increased to £956,929, representing significant investment in property or equipment.
• Related party transactions are substantial, with large balances owed to a related company (£674,306) and amounts due from another related company (£61,741), suggesting interconnected financial exposure.

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3. Diagnosis (What the financial data reveals)

The company is showing "symptoms of financial distress," particularly a severe liquidity crunch evidenced by the very negative net current assets (-£776,690). This means the company lacks sufficient short-term assets to cover its looming current liabilities, which can threaten day-to-day operations if creditors demand payment.

The negative shareholders' funds (-£41,346) indicate a balance sheet insolvency where total liabilities exceed total assets. This is akin to a patient whose vital organ function (financial foundation) is compromised. While the company has invested heavily in tangible fixed assets (likely property), these are not easily converted to cash to pay debts, presenting a risk if immediate cash flow needs aren't met.

The large creditors balance due within one year (£849,673) combined with a relatively low cash balance suggests dependence on external financing or delayed payments from debtors. The company’s related party balances also hint at complex internal financial arrangements which may mask liquidity issues.

The company’s growth in fixed assets indicates a possible strategy to build long-term capacity, but without a corresponding increase in working capital or equity, this can exacerbate liquidity problems.

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4. Recommendations (Prescriptions to improve financial wellness)

• Improve Liquidity ("Restore healthy cash flow"):
  Prioritize collection of outstanding debtors and negotiate longer payment terms with suppliers and creditors to reduce immediate cash outflows.

• Review Related Party Transactions:
  Scrutinize the high balances with related companies to ensure transactions are conducted at arm’s length and structured to avoid further liquidity pressure.

• Restructure Debt:
  Engage with lenders to explore refinancing options or debt restructuring to ease short-term liabilities and extend repayment schedules.

• Equity Injection:
  Consider raising additional equity capital from existing shareholders or new investors to strengthen the balance sheet and reduce insolvency risk.

• Cost Management:
  Review operational expenses and reduce overheads where possible to conserve cash.

• Financial Monitoring:
  Implement rigorous monthly cash flow forecasting and financial reporting to detect early signs of distress and react proactively.

• Strategic Asset Management:
  Evaluate if any fixed assets can be monetized or leveraged better to support working capital needs.

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Executive Summary