B A L 27716 LTD
Executive Summary
B A L 27716 LTD has a strong asset foundation but faces significant liquidity challenges with negative net assets and high short-term liabilities. Immediate corrective actions in cash flow management and liability restructuring are essential to prevent further financial deterioration and secure business continuity.
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This analysis is opinion only and should not be interpreted as financial advice.
B A L 27716 LTD - Analysis Report
Financial Health Assessment Report for B A L 27716 LTD
1. Financial Health Score: D
Explanation:
The company exhibits clear symptoms of financial distress with negative net assets and net current liabilities far exceeding current assets. While it owns tangible fixed assets, the working capital situation is unhealthy, indicating liquidity challenges. Given the company's early stage (incorporated in 2023) and the financial snapshot, the overall condition is weak but not yet critical insolvency.
2. Key Vital Signs
Metric | Value (£) | Interpretation |
---|---|---|
Fixed Assets | 170,000 | Strong asset base in tangible fixed assets (property). Good foundation for business operations. |
Cash at Bank | 8,385 | Low cash reserves; insufficient for covering short-term liabilities comfortably. |
Current Liabilities | 180,000 | High short-term debt; major concern as it exceeds current assets by a large margin. |
Net Current Assets (Working Capital) | -171,615 | Negative working capital indicates liquidity stress; company may struggle to meet short-term obligations. |
Net Assets (Total Equity) | -1,615 | Negative net assets shows company’s liabilities exceed assets, an indicator of financial distress. |
Shareholders' Funds | -1,615 | Negative equity signals accumulated losses or undercapitalisation. |
3. Diagnosis: Financial Condition Analysis
"Vital Signs" Analysis:
B A L 27716 LTD possesses a substantial fixed asset in land and buildings valued at £170,000, which is promising as a long-term resource. However, the company’s "circulatory system" — its liquidity — is severely compromised. The company holds only £8,385 in cash against current liabilities of £180,000, leading to a net current asset deficit of £171,615. This is akin to a patient with a strong skeletal structure but a dangerously weak cardiovascular system unable to supply necessary blood flow (cash) to sustain life (operations).
Symptoms of Distress:
- Negative net assets indicate the company’s liabilities slightly exceed its total assets, suggesting insolvency risk if the situation persists.
- Excessive current liabilities relative to cash and other current assets may hinder the company’s ability to pay creditors on time, potentially leading to creditor pressure or insolvency proceedings.
- No depreciation charged on the fixed asset might suggest the asset is land (not depreciable) or a conservative accounting approach, but it does not offset liquidity issues.
Underlying Causes:
- The company is very young (just over one year old), which often means initial capital injections and asset acquisitions are still in progress, and operational cash inflows may not yet be stable.
- Current liabilities likely include loans or payables taken to acquire the fixed asset, indicating significant leverage and financial risk.
4. Prognosis: Future Financial Outlook
Without intervention, the company’s liquidity issues pose a serious threat to its survival, much like a patient with blocked arteries risking a heart attack. The fixed asset provides collateral value and a potential source of refinancing or sale to alleviate pressure, but this is not a sustainable solution for ongoing operations.
If the company can generate positive operating cash flow or restructure its liabilities to improve working capital, the prognosis improves significantly. Conversely, failure to improve liquidity may lead to insolvency or forced asset disposals.
5. Recommendations: Improving Financial Wellness
Enhance Cash Flow Management:
Develop a clear plan to increase cash inflows through rental income, sales, or other operational revenue streams to build a healthy cash reserve.Liability Restructuring:
Negotiate with creditors to extend payment terms or refinance current liabilities to reduce immediate pressure on cash.Capital Injection:
Consider increasing equity by new shareholder funding or director loans to shore up working capital.Asset Utilisation Review:
Explore leasing or partial sale of fixed assets if liquidity does not improve, to convert illiquid assets into cash.Regular Financial Monitoring:
Implement monthly cash flow forecasting and financial review to detect early signs of distress and act promptly.
Executive Summary
B A L 27716 LTD shows a solid fixed asset base but suffers from severe liquidity problems and negative net equity, indicating financial distress. Immediate focus on improving cash flow and restructuring liabilities is critical to stabilise the business. Without intervention, liquidity issues may threaten the company’s viability despite its asset strength.
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