Company Number: 12795639

Analysis Date: 2025-07-20 11:54 UTC

Financial Health Assessment for AFRO PASSION LTD

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1. Financial Health Score: D

Explanation:
AFRO PASSION LTD exhibits significant financial distress symptoms, primarily due to a large negative net asset position (shareholders’ funds) which indicates insolvency on a balance sheet basis. The company's liabilities substantially exceed its assets, a critical red flag for financial health. Despite being active and filing accounts on time, the financial condition suggests urgent attention is required.

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2. Key Vital Signs

Metric	2024 Value (£)	Interpretation
Fixed Assets	547	Very low, indicating minimal investment in long-term resources — typical for a micro retailer.
Current Assets	4,014	Small amount of short-term assets, mostly cash or receivables, but insufficient to cover debts.
Current Liabilities	61,931	Very high short-term debts due within a year, major concern for liquidity.
Net Current Assets (Working Capital)	-57,917	Negative working capital; company cannot cover short-term liabilities with short-term assets.
Net Assets (Shareholders Funds)	-58,370	Negative equity; liabilities exceed assets by a large margin — sign of insolvency.
Trend	Worsening over 5 years	Declining net assets from -£27k (2020) to -£58k (2024), showing worsening financial position.

Interpretation of Vital Signs:

• The negative net current assets indicate the company lacks a "healthy cash flow" and is under "liquidity stress" — it does not have enough liquid assets to meet immediate debts.
• The negative net assets reflect a "symptom of financial distress" where the company’s total debts exceed the value of its assets, risking solvency issues.
• The increase in liabilities alongside stagnant or declining assets signals the company may be relying on debt financing or accumulating unpaid obligations.
• The company has consistently maintained only 1 employee, suggesting a very small operational scale, but the financial strain is not due to headcount costs.

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3. Diagnosis

AFRO PASSION LTD is currently in a fragile financial condition characterized by:

• Balance Sheet Insolvency: Negative net assets imply the company owes more than it owns, a critical warning sign of insolvency risk.
• Liquidity Shortage: Negative working capital means it struggles to meet short-term obligations, risking supplier payment delays or creditor actions.
• Operational Scale vs. Financial Burden: Despite a micro-scale operation (retail via internet/mail order), the company’s debts are disproportionately high for its asset base.
• No audit requirement and micro-entity reporting: The company is exempt from audit and uses simplified reporting, which may limit transparency but highlights its small scale.
• No indication of profitability data: Absence of profit/loss figures limits insight into operational cash flow but balance sheet signals distress.

In medical terms, AFRO PASSION LTD has "symptoms of systemic financial distress" and is at risk of "financial failure" if corrective measures are not taken.

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4. Recommendations

1. Immediate Cash Flow Management:

   • Prioritize collection of receivables and convert any non-essential current assets into cash.
   • Negotiate extended payment terms with creditors to ease short-term liquidity pressures.

2. Debt Restructuring:

   • Engage with creditors to restructure or reduce current liabilities; consider debt forgiveness or longer payment plans.
   • Explore options for new equity injection or director loans to improve net asset position.

3. Cost Control and Operational Review:

   • Review all operating expenses to identify and eliminate unnecessary costs.
   • Consider scaling operations to match cash flow capabilities or pivot to more profitable activities.

4. Financial Monitoring and Reporting:

   • Implement regular cash flow forecasting and financial performance tracking to detect early warning signs.
   • Prepare full profit and loss accounts to gain a clearer understanding of operational profitability.

5. Professional Advice:

   • Seek advice from insolvency practitioners or financial advisors to explore options such as Company Voluntary Arrangements (CVA) or other rescue mechanisms if insolvency risk persists.

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