ADD WINEHOUSE LTD

Executive Summary

ADD WINEHOUSE LTD is a start-up retail company showing early signs of financial strain with net liabilities and a negative equity position. However, it maintains positive working capital and a modest cash reserve, providing short-term liquidity comfort. Immediate actions to strengthen equity, improve profitability, and manage debt and inventory will be critical to ensure long-term financial health and business sustainability.

ADD WINEHOUSE LTD - Analysis Report

Company Number: 15113959

Analysis Date: 2025-07-20 13:49 UTC

Financial Health Assessment Report for ADD WINEHOUSE LTD
Assessment Date: Financial year ended 30 September 2024

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1. Financial Health Score: D

Explanation:
ADD WINEHOUSE LTD shows early signs of financial strain despite being a newly incorporated company (since September 2023). The company reports net liabilities of £19,089 and negative shareholders' funds, indicating that its debts exceed its assets. Although it holds some tangible fixed assets and current assets, the balance sheet reveals a financial "symptom" of distress — more liabilities than assets, which may pose solvency risks if not addressed timely. Given the company's infancy, this grade reflects caution but also room for recovery with appropriate financial management.

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2. Key Vital Signs (Critical Metrics and Interpretation)

Metric	Value (£)	Interpretation
Net Assets (Shareholders' Funds)	-19,089	Negative net assets indicate the company owes more than it owns — a fundamental financial health concern.
Current Assets	37,142	Represents liquid and short-term assets; relatively healthy cash and stock levels for a start-up.
Cash at Bank	6,100	Cash reserve is modest but positive — a "healthy cash flow" sign for day-to-day operations.
Debtors	6,542	Amounts receivable from customers; good to have but should be monitored for timely collection to maintain liquidity.
Stocks (Inventory)	24,500	Significant inventory holding; requires careful management to avoid obsolescence or overstocking.
Current Liabilities	10,878	Debts payable within one year; current assets exceed current liabilities, indicating positive working capital (£26,264).
Non-current Liabilities	63,258	Long-term debts significantly exceed assets, driving the overall net liability position.
Tangible Fixed Assets	17,905	Reflects investment in physical assets; useful but illiquid.

Additional Observations:

• The company has only two employees including the director, typical for a micro or small-sized start-up.
• The director holds full ownership and control, which gives agility in decision-making but also concentration risk.
• No audit was required due to company size, but financials are prepared under UK accounting standards.

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3. Diagnosis: What the Financial Data Reveals About Business Health

• Balance Sheet Weakness: The company is showing a net liability position (£19k deficit), which is a "symptom" of financial distress, typically indicating that the business is financed more by debt than equity at this early stage. This can be common in new businesses but requires monitoring.
• Liquidity Status: Despite the net liability, current assets exceed current liabilities by about £26k, indicating the company can meet short-term obligations. This "healthy cash flow" buffer is a positive sign.
• Leverage Concerns: Long-term liabilities (£63k) are high relative to tangible assets and equity, suggesting reliance on borrowing. This "symptom" could risk financial stability if revenue and cash flow do not improve.
• Asset Composition: A high inventory level (£24.5k) relative to cash and debtors suggests capital tied up in stock. This requires effective inventory management to avoid cash flow constraints.
• Profit and Loss Data: Not disclosed, but the negative retained earnings (loss reserves) imply the company has yet to generate profits, which is typical for first-year trading.

Overall Assessment: The company is in a fragile financial state typical for a start-up, with good short-term liquidity but concerning long-term solvency risks. It must improve profitability and reduce debt reliance to stabilize.

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4. Recommendations: Specific Actions to Improve Financial Wellness

1. Strengthen Equity Base: Consider additional capital injections from shareholders or third parties to reduce net liabilities and improve solvency ratios.
2. Improve Profitability: Focus on increasing sales and operational efficiency to generate positive retained earnings and rebuild reserves.
3. Manage Inventory Efficiently: Reduce stock levels where possible to free up cash, avoiding overstocking and write-down risks.
4. Debt Restructuring: Negotiate with lenders to manage or extend long-term liabilities to reduce pressure on cash flows.
5. Cash Flow Monitoring: Maintain rigorous cash flow forecasting and debtor collection to ensure liquidity remains healthy.
6. Financial Reporting: Prepare profit and loss accounts and consider voluntary audits or reviews to gain better insights and credibility.
7. Risk Management: Develop contingency plans for potential cash flow shortages or adverse market conditions.

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