AVOS DEVELOPMENT LIMITED

Executive Summary

AVOS DEVELOPMENT LIMITED’s financial position reveals critical liquidity constraints and minimal equity, indicating a fragile financial state. Immediate focus on debtor management, cash reserve building, and equity strengthening is essential to improve the company’s financial resilience and support future growth.

AVOS DEVELOPMENT LIMITED - Analysis Report

Company Number: 14751965

Analysis Date: 2025-07-20 11:35 UTC

Financial Health Assessment for AVOS DEVELOPMENT LIMITED

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1. Financial Health Score: D

Explanation:
The company shows a borderline financial condition with net current assets of just £1 and net assets also at £1, indicating a precariously balanced working capital situation. The extremely low equity and minimal net assets suggest financial fragility and potential liquidity risk. Although the company is not in distress or overdue on filings, the financials reveal symptoms that warrant close monitoring and corrective action.

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2. Key Vital Signs

Metric	2024 Figure	Interpretation
Current Assets	£897,597	Healthy asset base but heavily concentrated in debtors.
Cash at Bank	£82,103	Low cash reserves relative to current liabilities.
Debtors	£815,494	High debtor balance; potential cash flow risk if uncollected.
Current Liabilities	£897,596	Almost equal to current assets, indicating tight liquidity.
Net Current Assets (Working Capital)	£1	Barely positive; indicates minimal buffer to meet short-term debts.
Net Assets / Shareholders Funds	£1	Extremely low equity; signals weak financial foundation.
Average Number of Employees	9	Small workforce, consistent with small company classification.

Interpretation of Vital Signs:

• The company’s current assets nearly equal its current liabilities, leaving almost no margin for unexpected expenses or delays in receivables collection.
• Cash is a small fraction of current liabilities, indicating potential difficulties in immediate outflows.
• The large debtor balance (over 90% of current assets) suggests reliance on timely payments from customers. Any delay could trigger symptoms of financial distress similar to "poor circulation" in a patient.
• The equity base is minimal (£1), meaning the company has virtually no retained earnings or capital cushion, increasing vulnerability to shocks.
• The company has grown its debtor base substantially from 2023 to 2024, which may signal growth but also increased credit risk.

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3. Diagnosis

AVOS DEVELOPMENT LIMITED’s financial condition shows symptoms of borderline liquidity and fragile capital structure. The "heartbeat" of the business — its working capital — is barely sustaining it with net current assets at £1, which is akin to a patient with dangerously low blood pressure. The company is currently solvent but walking a tightrope.

The large debtor balance relative to cash and liabilities suggests a risk of cash flow "blockage" if customers delay payments. This represents a critical "symptom" of potential financial distress that could escalate if not managed.

The minimal net assets and shareholders’ funds indicate that the company is at an early stage or has not yet generated retained profits. This lack of "financial reserves" reduces the company's ability to absorb shocks or invest in growth.

The company is classified as a small private limited company engaged in business and domestic software development, a sector that can have variable cash flow patterns but typically benefits from intellectual assets rather than heavy fixed assets. The absence of fixed assets data suggests a primarily intangible asset base.

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4. Recommendations

Immediate Actions:

1. Improve Cash Flow Management:

   • Accelerate debtor collections to convert receivables to cash faster. Consider offering early payment discounts or implementing stricter credit controls.
   • Monitor debtor aging reports closely to identify and address overdue accounts promptly.

2. Build Cash Reserves:

   • Maintain a buffer of cash to cover at least 1-3 months of current liabilities to avoid liquidity crises.

3. Strengthen Equity Base:

   • Consider capital injection from shareholders or reinvestment of profits to build retained earnings and improve net assets.

4. Financial Monitoring:

   • Institute regular financial health checks focusing on liquidity ratios and working capital trends to detect early signs of financial stress.

5. Cost Control:

   • With a small workforce of 9 employees, ensure staffing costs align with revenue and cash flow realities.

6. Transparency and Reporting:

   • Although the company has filed abridged accounts, consider preparing full profit and loss accounts internally for better insight into operational performance.

Long Term Strategies:

• Diversify customer base to reduce debtor concentration risk.
• Explore opportunities to enhance profitability and generate retained earnings.
• Evaluate potential for scaling operations cautiously without jeopardizing liquidity.

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Summary:
AVOS DEVELOPMENT LIMITED currently exhibits financial health characterized by extremely tight liquidity and minimal equity, posing risk of cash flow distress. While not in immediate danger, the company must prioritize improving cash flow management, building cash reserves, and strengthening its equity base to ensure sustainable operations and growth.