ARZ INVESTMENT LIMITED

Executive Summary

ARZ Investment Limited is a newly established real estate investment company with significant investment assets but facing liquidity challenges characterized by large short-term liabilities exceeding current assets. The company relies heavily on director funding, which supports its going concern status but signals financial fragility. Addressing liquidity through refinancing and improved working capital management is critical to strengthening financial health and ensuring sustainable operations.

ARZ INVESTMENT LIMITED - Analysis Report

Company Number: 14721285

Analysis Date: 2025-07-20 16:28 UTC

Financial Health Assessment for ARZ INVESTMENT LIMITED

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1. Financial Health Score: D

Explanation:
The company shows significant signs of financial strain, primarily due to a large negative working capital position (net current liabilities exceed current assets by £1.84 million). While net assets are positive, this is largely attributable to a large investment asset funded by director loans/creditor balances. The company's cash holdings are minimal relative to short-term liabilities, indicating liquidity stress. This results in a below-average financial health grade.

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2. Key Vital Signs and Interpretation

Metric	Value (£)	Interpretation
Current Assets	62,102	Low level of liquid and short-term assets
Cash	60,614	Almost all current assets are cash, which is positive for liquidity
Current Liabilities	1,902,563	Very high short-term obligations, mainly owed to director
Net Current Assets	-1,840,461	Large negative working capital – symptom of liquidity distress
Fixed Assets (Investments)	1,883,587	Significant long-term asset base, but illiquid
Net Assets	43,126	Positive but small relative to liabilities
Shareholder Funds	43,126	Low equity cushion
Director Loan (Creditor)	1,883,686	The largest creditor is the director, indicating reliance on related party financing

Interpretation:

• The "healthy cash flow" is weak given the large current liabilities relative to cash and debtors.
• The "symptoms of distress" include the negative net current assets, suggesting the company may struggle to meet short-term obligations without additional funding or asset liquidation.
• The large creditor balance to the director reflects reliance on internal financing rather than external creditors, which could be both a stabilizing factor (due to director support) and a risk if director funding is withdrawn.

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3. Diagnosis

ARZ Investment Limited is a newly incorporated real estate investment company (incorporated March 2023, first accounts filed for period ending March 2024). The company holds substantial investments in real estate (£1.88 million), but these are funded largely by liabilities due within one year (£1.9 million), mainly owed to the director.

There is a critical liquidity imbalance as current liabilities vastly exceed current assets. This mismatch is the main "symptom" indicating potential short-term financial distress despite a positive net asset position. The business currently relies heavily on director funding to finance its investment assets and operations.

The director has expressed confidence that payments and liabilities will be met as they fall due, and the accounts are prepared on a going concern basis. However, the company's financial position is fragile as it depends on continuous director support or the ability to refinance or liquidate assets.

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4. Recommendations

To improve financial wellness and reduce symptoms of distress, ARZ Investment Limited should consider the following actions:

1. Enhance Liquidity Position:

   • Secure additional working capital financing from external lenders or equity investors to reduce reliance on director loans.
   • Improve cash flow management by accelerating debtor collections and negotiating extended payment terms with creditors.

2. Reduce Short-Term Liabilities:

   • Convert short-term director loans into longer-term financing arrangements to ease immediate liquidity pressure.
   • Explore options to restructure or refinance current liabilities to better match asset liquidity.

3. Asset Utilization and Monetization:

   • Evaluate the investment portfolio for opportunities to monetize or leverage assets to generate cash.
   • Consider phased sales or leasing strategies to increase income streams.

4. Financial Monitoring and Reporting:

   • Implement robust financial controls and regular cash flow forecasting to detect liquidity issues early.
   • Maintain open communication with stakeholders, including the director, to ensure sustained support.

5. Strategic Growth Planning:

   • Develop a clear business plan that aligns asset acquisitions with sustainable funding sources and realistic cash flow projections.

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