ABSTRACT WORX LIMITED

Executive Summary

Abstract Worx Limited is currently experiencing significant liquidity challenges, with negative working capital worsening over recent years and a very thin equity buffer. While not insolvent, the company's financial health is fragile, requiring urgent attention to cash flow management and potential capital strengthening. Prompt action can stabilize the situation and improve the company’s financial prognosis.

ABSTRACT WORX LIMITED - Analysis Report

Company Number: 12787679

Analysis Date: 2025-07-19 12:03 UTC

Financial Health Assessment for Abstract Worx Limited (As of 31 March 2025)

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1. Financial Health Score: D

Explanation:
The company shows persistent negative working capital (net current assets) over multiple years, indicating a "symptom of distress" in liquidity. Despite positive net assets, the margin is very slim and declining. The company’s ability to meet short-term obligations is weak, and overall financial stability is fragile.

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2. Key Vital Signs

Metric	2025	Interpretation
Fixed Assets	£27,563	Increased investment in long-term assets, suggests some capital expenditure or asset acquisition.
Current Assets	£4,187	Sharp decline compared to prior year (£18,246), indicates reduced liquid resources.
Current Liabilities	£31,014	Increased short-term obligations, outstripping current assets by a large margin.
Net Current Assets (Working Capital)	-£26,827	Negative and worsening; a critical sign of liquidity problems, meaning the company likely struggles to pay short-term debts without additional financing.
Net Assets (Equity)	£586	Positive but very low, nearly eroded, signaling weak buffer against financial shocks.
Share Capital	£10	Minimal paid-in capital, typical for micro-entities but limits equity cushion.

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3. Diagnosis

• Liquidity Distress: The company exhibits "symptoms of distress" with consistent negative working capital over at least four years, worsening sharply in the latest year. This means current assets (cash, receivables, stock) are insufficient to cover current liabilities (creditors, short-term loans), posing a risk to ongoing operations if creditors demand payment.

• Thin Equity Cushion: Net assets remain positive but have declined from £739 to £586, showing a diminishing equity buffer. This exposes the company to higher financial risk in downturns.

• Asset Composition: The rise in fixed assets suggests investment, but the sharp drop in current assets may imply cash tied up or difficulties in converting assets to cash quickly. This imbalance stresses liquidity further.

• Operational Scale: The company is micro-sized with only one employee (the director), indicating a small operational scope and limited internal resources.

• Profitability & Cash Flow: No explicit profit/loss figures are provided, but declining net assets and negative working capital hint at possible losses or cash flow challenges. The absence of audit and reliance on micro-entity provisions limit detailed insight but reinforce the possibility of limited financial robustness.

• Industry Activity: Operating in consulting and IT services, sectors typically requiring low capital but depending heavily on receivables and timely payments. The negative working capital may be due to delayed client payments or short payment terms from suppliers.

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4. Recommendations

• Improve Liquidity Management:

  • Negotiate longer payment terms with suppliers to reduce current liabilities pressure.
  • Accelerate receivables collection to boost current assets.
  • Monitor cash flow closely and maintain a cash reserve if possible.

• Capital Injection:
  Consider raising additional equity or unsecured financing to strengthen net assets and provide a liquidity buffer.

• Cost Control:
  Review expenses to ensure operational costs align with revenue, especially as the company is small and must maintain tight controls.

• Financial Monitoring:
  Implement regular financial reviews focusing on working capital ratios and cash flow forecasts to identify issues early.

• Seek Professional Advice:
  Engage with financial advisors or accountants to explore restructuring options or funding alternatives.

• Contingency Planning:
  Prepare for scenarios where liabilities exceed assets or cash flow tightens further, including potential negotiation with creditors.

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Medical Analogy Summary:
Abstract Worx Limited is showing "symptoms of liquidity distress," akin to a patient with low blood pressure and dehydration. Although the "heart" (equity) is still beating, it is weak and at risk of failing if immediate "rehydration" (improved cash flow and capital) is not administered. Without intervention, the prognosis could worsen, risking insolvency.

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