ARMA PROJECTS LTD

Executive Summary

Arma Projects Ltd exhibits moderate financial risk with minimal equity and increased leverage, though current assets cover short-term liabilities. Cash reserves have declined significantly, and rising trade debtors increase liquidity risk. Conditional credit approval is recommended pending further cash flow validation and ongoing monitoring of debtor collections and debt servicing capacity.

ARMA PROJECTS LTD - Analysis Report

Company Number: 12590467

Analysis Date: 2025-07-20 16:07 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   Arma Projects Ltd demonstrates a stable operating presence since incorporation in 2020, with no overdue filings or legal issues identified. However, the company’s net asset base is very low (£558 in 2024) and has declined significantly from £49,544 in 2020. The high level of borrowings (£123,836 long-term loans) relative to equity and modest net current assets indicates leverage risk. While the company maintains positive net current assets and a working capital buffer, cash reserves have dropped sharply from £159,785 in 2023 to £31,621 in 2024, which may impair short-term liquidity. The directors have not provided audited accounts, so underlying profitability and cash flow reliability are less clear. Given these factors, credit approval is conditional on obtaining updated cash flow forecasts and confirmation of repayment sources for borrowings.

2. Financial Strength:
   The balance sheet shows increased tangible fixed assets (£94,171) but net assets have eroded to near zero, indicating minimal equity cushion. Current assets (£286,802) exceed current liabilities (£256,579), yielding positive net current assets (£30,223), supporting operational liquidity. However, the significant loans and borrowings (£123,836) fall due after one year, creating a leveraged capital structure with shareholders’ funds barely positive. The company’s retained earnings are negligible (£448), suggesting limited accumulated profits. The decrease in cash balances and increase in trade debtors (£255,181) may raise concerns about collection efficiency and cash conversion cycle.

3. Cash Flow Assessment:
   Cash at bank has reduced substantially year-on-year, which may stress short-term liquidity. Trade debtors have increased markedly (from £88,549 to £255,181), creating working capital tied up in receivables. The company must manage debtor collection closely to ensure cash inflows meet obligations. Net current assets are positive but modest relative to borrowings. The director’s remuneration remained stable (£24,000), indicating controlled overheads. Absence of profit and loss account details limits precise cash flow analysis, so monitoring of operating cash flow and debt service capacity is critical.

4. Monitoring Points:

• Trade debtor ageing and recovery rates to ensure timely cash inflows
• Cash balance trends and liquidity ratios (current ratio, quick ratio)
• Servicing of long-term borrowings and repayment schedules
• Profitability trends once full accounts are available
• Any changes in director remuneration or related party transactions
• Compliance with filing requirements and any changes in company status or control