BRYWEL ASSOCIATES LIMITED

Risk Rating: MEDIUM Justification: While the company benefits from a long operating history and positive overall net assets, the recent shift to negative working capital and a significant year-on-year decline in net assets warrant caution. The financial structure shows a deterioration in short-term liquidity, and the limited disclosure provided by micro-entity accounts obscures the underlying causes of this decline.

Key Concerns: * Negative Working Capital: As of November 30, 2024, the company's current liabilities (£103,389) marginally exceeded its current assets (£103,163), resulting in negative net current assets of -£226. This is a significant deterioration from the positive working capital of £19,255 reported in 2023 and indicates potential short-term liquidity strain. * Significant Decline in Net Assets: Net assets dropped by approximately 41% from £62,149 in 2023 to £36,779 in 2024. Current assets also saw a notable decrease of 26% year-on-year. Without a Profit & Loss statement, it is impossible to determine if this is driven by trading losses or funds being extracted by the directors, but the magnitude of the drop is a financial warning sign. * Emergence of Long-term Liability: The 2024 balance sheet introduces a new creditor falling due after more than one year (£10,000), whereas no such long-term debt existed in 2023. This sudden appearance of long-term debt could indicate a shift in financing structure or a reclassification of liabilities.

Positive Indicators: * Operational Longevity: Incorporated in 2001, the company has over two decades of operational continuity, suggesting resilience and an established market presence as an accounting practice. * Regulatory Compliance: The company is actively compliant with Companies House filing requirements. Accounts were approved and filed on time, and confirmation statements are up to date, with no overdue flags. * Growth in Fixed Assets: Despite the drop in current assets, fixed assets increased from £42,894 to £47,005, suggesting continued investment in the long-term operational capacity of the business.

Due Diligence Notes: * Composition of Current Liabilities: It is necessary to determine the nature of the £103,389 in current liabilities. For an accounting firm, it is common for current liabilities to include large sums of VAT, PAYE, and corporation tax awaiting payment, which can temporarily inflate current liabilities without indicating distress. * Nature of the £10,000 Long-term Debt: Investigation is required into whether this new long-term liability is a commercial bank loan, a director's loan, or a reclassification of an existing obligation, and what terms are attached to it. * Cause of Net Asset Decline: The micro-entity accounts do not disclose whether the reduction in net assets is a result of operating losses or capital distributions (dividends) to the two director-shareholders. Reviewing the P&L reserve movements or obtaining management accounts will be essential to confirm ongoing profitability.