AFL PROJECTS LTD

Executive Summary

AFL Projects Ltd, a young management consultancy business, is currently facing liquidity challenges with negative working capital and limited cash reserves. While the company holds positive net assets and has invested in fixed assets, urgent focus on cash flow management and securing additional funding is recommended to stabilize its financial health and support growth.

AFL PROJECTS LTD - Analysis Report

Company Number: 15209199

Analysis Date: 2025-07-29 15:07 UTC

Financial Health Assessment: AFL PROJECTS LTD

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1. Financial Health Score: D

Explanation:
AFL Projects Ltd exhibits significant liquidity challenges and working capital deficiency shortly after incorporation. While the company holds tangible fixed assets and positive shareholders’ funds, its net current liabilities and cash constraints indicate early-stage financial strain. The score reflects a need for urgent attention to cash flow and creditor management to avoid distress symptoms.

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2. Key Vital Signs

Metric	Value (£)	Interpretation
Current Assets	15,445	Includes cash (£4,210) and debtors (£11,235). Limited liquid resources available.
Current Liabilities	38,285	High short-term obligations relative to assets—risk of liquidity crunch.
Net Current Assets	-22,840	Negative working capital indicates a “symptom of distress” — liabilities exceed liquid assets.
Tangible Fixed Assets	26,015	Decent investment in long-term assets, but less liquid and harder to convert quickly.
Total Assets less Current Liabilities	3,175	Positive but very slim buffer after short-term debts are accounted for.
Shareholders’ Funds	3,175	Equity capital invested by owner, provides some cushion but minimal.
Company Age	~1 year	Early life stage, typical to see initial cash flow and funding challenges.

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3. Diagnosis

This company is in the neonatal stage of its business lifecycle, having been incorporated in late 2023. The balance sheet reveals a critical liquidity symptom: net current liabilities of £22,840. This means the company owes much more in short-term debts than it can cover with its readily available current assets.

The presence of tangible fixed assets (£26,015) demonstrates investment in equipment or property, which is good for operational capacity. However, these are not easily liquidated in the short term to meet urgent creditor demands. The modest cash balance of £4,210 further limits the company’s ability to pay immediate bills or handle unexpected expenses.

The net asset position is positive (£3,175), indicating the business is not insolvent but operates with a very tight financial margin. The sole director and 100% shareholder, Mr. Alexander Frederick Lynn, holds full control and has invested equity, which is essential in this early phase.

These signs point to a company that may be experiencing “growing pains” typical for startups or early-stage enterprises, particularly in management consultancy where cash flow timing can be irregular. The symptoms of distress include:

• Working capital deficit
• Heavy reliance on debtor collections and external financing
• Limited cash reserves for operational flexibility

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4. Recommendations

To improve its financial wellness and address liquidity concerns, AFL Projects Ltd should consider the following:

1. Cash Flow Management:

   • Implement stringent debtor collection policies to accelerate cash inflows.
   • Negotiate extended payment terms with creditors to ease short-term cash outflows.
   • Maintain a rolling cash flow forecast to anticipate funding gaps early.

2. Funding Strategy:

   • Assess the possibility of additional equity injection or short-term loans to bolster working capital.
   • Explore invoice financing or credit facilities to bridge cash flow shortfalls.

3. Cost Control:

   • Review operational expenses carefully to eliminate non-essential costs.
   • Monitor asset utilization to ensure fixed assets contribute to revenue effectively.

4. Business Development:

   • Diversify client base and secure contracts with upfront deposits or milestone payments.
   • Leverage the director’s project management expertise to improve project delivery and cash conversion cycles.

5. Financial Reporting and Monitoring:

   • Regularly review financial statements and key ratios to detect early warning signs.
   • Consider engaging professional advisors for financial planning and risk management.

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Medical Analogy:
Think of AFL Projects Ltd as a young patient with a fragile circulatory system—its "blood flow" (cash flow) is weak, and its "immune system" (working capital) is compromised. Immediate interventions to strengthen liquidity and manage obligations are critical to prevent the company from entering a state of financial shock.

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