BAFFLED AZIMUTH LTD
Executive Summary
Baffled Azimuth Ltd demonstrates regulatory compliance and modest net asset growth but faces liquidity challenges with a significant reduction in cash reserves and negative net current assets. The rising deferred tax provision and current liabilities warrant scrutiny to assess short-term solvency risks. Investors should conduct further due diligence on cash flow management, tax liabilities, and debtor quality to evaluate operational sustainability.
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This analysis is opinion only and should not be interpreted as financial advice.
BAFFLED AZIMUTH LTD - Analysis Report
Risk Rating: MEDIUM
The company is active and appears compliant with filing deadlines, but its financial position shows some concerns relating to liquidity and solvency. The net assets are positive but modest (£525), and net current assets have deteriorated to a negative position (-£1,525), indicating working capital constraints.Key Concerns:
- Liquidity Pressure: Cash at bank decreased significantly from £7,093 in 2022 to £762 in 2023, while current liabilities remain high (£5,606), suggesting tight short-term cash flow management.
- Deferred Tax Liability: Provisions for liabilities increased to £481, all deferred tax, which could crystallize and affect cash flows.
- Negative Net Current Assets: The company shows a worsening net current asset position from -£405 in 2022 to -£1,525 in 2023, implying current liabilities exceed current assets and potential short-term solvency risk.
- Positive Indicators:
- Compliance and Governance: No overdue filings for accounts or confirmation statements, indicating good regulatory compliance to date.
- Modest Net Asset Growth: Net assets increased from £180 in 2022 to £525 in 2023, showing some equity build-up despite challenges.
- Ownership and Management Stability: Directors and persons with significant control are consistent since incorporation, suggesting stable governance.
- Due Diligence Notes:
- Investigate the nature and timing of deferred tax liabilities and whether sufficient provisions and cash flow forecasts are in place to manage potential tax outflows.
- Review the composition of debtors (£3,319) and prepayments to assess collectability and impact on cash flow.
- Confirm operational cash flows and whether the company has sufficient access to credit facilities or other liquidity sources given the reduced cash balance.
- Validate whether the increase in tangible fixed assets (£2,531) relates to capital expenditure critical to business operations or if it impacts liquidity.
- Assess the business model sustainability given the SIC code (renting and leasing of media entertainment equipment) and market conditions.
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