Financial Health Assessment: ASKHAM MOTORS LIMITED

1. Financial Health Score: A-

Explanation: Askham Motors Limited exhibits robust financial health with exceptionally low leverage, consistent asset growth, and a strong net asset position. The company's balance sheet is well-capitalised with minimal liabilities. The slight deduction from a perfect score reflects the property-heavy asset concentration (which creates liquidity risk) and a declining cash trend in recent years. The business shows no symptoms of financial distress and maintains a healthy heartbeat.

2. Key Vital Signs

Ten-Year Net Asset Progression

The long-term trajectory shows a 61.7% increase in net assets over the decade — a strong sign of compounding financial health.

3. Diagnosis

What the Financial Data Reveals About Business Health

Overall Condition: Healthy with mild liquidity monitoring required

Strengths — "Signs of Vitality"

a) Exceptionally Low Leverage (Debt-to-Equity Ratio: 0.018x) The company carries only £25,852 in current liabilities against £1,439,824 in equity. This is the financial equivalent of having an extremely low resting heart rate — the business is under virtually no financial strain from debt obligations. There are no long-term borrowings visible on the balance sheet, meaning the company operates debt-free.

b) Strong Net Asset Position Net assets of £1.44 million represent substantial wealth accumulation. The company has grown its net asset base by over £500,000 since 2016, demonstrating long-term value creation.

c) Dramatic Liability Reduction Current liabilities fell from £73,612 to £25,852 — a 64.9% reduction year-on-year. This indicates the company actively paid down obligations, strengthening its financial immune system. The "other creditors" category dropped from £63,752 to just £4,460, suggesting a significant trade payable or accrual was settled.

d) Profitable Operations The profit and loss reserves grew from £488,533 to £539,824, indicating retained profit of approximately £51,291 for the year. This is a healthy profit for a two-person property company with £1.47 million in assets.

e) Regulatory Compliance Accounts are filed on time (not overdue), the company is active, and there are no signs of disqualification proceedings against directors.

Symptoms Requiring Monitoring — "Preventative Health Observations"

a) Declining Cash Reserves Cash fell from £187,062 (2024) to £140,893 (2025) — a 24.7% decline. Over a longer period, cash has dropped from £252,534 (2022) to £140,893 (2025) — a 44.2% decline over three years. While still at healthy absolute levels, this downward trajectory is like a slowly declining blood pressure reading — not yet dangerous, but worth watching. The cash decline likely reflects the repayment of liabilities and director loan activity.

b) Significant Increase in "Other Debtors" Other debtors jumped from £12,901 to £65,256 — a five-fold increase. This warrants investigation. It could represent: - Loans or advances to related parties - Prepayments for property expenses - Tax-related receivables

While not necessarily problematic, a concentration in "other debtors" can sometimes indicate cash that is tied up and not readily accessible — akin to restricted blood flow.

c) Property Concentration Risk Of the £1,248,035 in tangible fixed assets, approximately £1,241,713 (99.5%) is in land and buildings. This includes: - Freehold land and buildings: £1,050,000 (including investment property) - Leasehold land and buildings: £191,713

The investment property was revalued upwards by £200,000 in 2024. While this strengthens the balance sheet, revaluation gains are undistributable — they represent paper gains, not cash available to the business. Of the £539,824 in P&L reserves, approximately £249,178 relates to investment revaluations (undistributable), meaning distributable reserves are approximately £290,646.

d) Director Loan Account The directors' loan account shows £50,000 outstanding. The account saw £50,000 advanced and £33,751 repaid during the year. Director loans require careful monitoring to ensure they don't represent excessive extraction of value or create tax implications.

e) Minimal Depreciation on Property Freehold and leasehold properties are not depreciated, which is acceptable under FRS 102 for investment properties. However, this means the carrying value may not reflect actual wear and tear, and any future impairment could create a significant one-off charge.

4. Recommendations

Prescriptions for Continued Financial Wellness

Priority 1: Monitor Cash Flow Trajectory

Action: Track cash generation quarterly rather than annually. The 44% decline in cash over three years, while manageable given the low liability base, could become concerning if the trend continues. Consider establishing a minimum cash threshold (e.g., £100,000) as a "financial early warning system."

Priority 2: Investigate Other Debtors

Action: Review the £65,256 in other debtors to understand its composition. If this represents amounts owed by related parties, ensure these are collectible and on arm's-length terms. If it represents prepayments, assess whether these will convert to value in the near term.

Priority 3: Diversify Asset Base

Action: The company's wealth is heavily concentrated in property. While this is typical for a real estate letting business (SIC 68209), consider whether a portion of rental income should be systematically allocated to more liquid investments or reserves. This would improve financial resilience — like building a more varied immune system.

Priority 4: Formalise Director Loan Arrangements

Action: Ensure the £50,000 director loan is documented with clear repayment terms, interest provisions (if applicable), and is compliant with the Companies Act. Consider whether this loan should be reduced or converted to formal debt with defined repayment schedules.

Priority 5: Review Property Valuation Sensitivity

Action: The 2024 revaluation added £200,000 to the balance sheet. Understand the sensitivity of net assets to property value changes. A 10% decline in property values could reduce net assets by approximately £124,000 — still leaving the company in a healthy position, but worth modelling.

Priority 6: Consider Succession Planning

Action: With only two directors/shareholders (both with 25-50% ownership), the company should ensure robust succession planning. Consider key-person insurance and a shareholders' agreement to protect business continuity.

Summary Financial Health Dashboard

Prognosis: Askham Motors Limited is in strong financial health with excellent solvency and a well-capitalised balance sheet. The company has demonstrated consistent wealth accumulation over the past decade. The primary risks are declining cash reserves and property concentration, neither of which currently presents a threat to financial viability. With proactive cash management and continued prudent operation, the company's financial outlook is positive.