CHESHIRE CYCLES (NANTWICH) LTD

Executive Summary

CHESHIRE CYCLES (NANTWICH) LTD shows a stable start with positive net assets but faces short-term liquidity challenges as current liabilities exceed current assets. The company’s financial health is cautious but not critical, with recommendations focused on improving cash flow management and building cash reserves to ensure future operational stability and growth.

CHESHIRE CYCLES (NANTWICH) LTD - Analysis Report

Company Number: 14503090

Analysis Date: 2025-07-29 12:11 UTC

Financial Health Assessment of CHESHIRE CYCLES (NANTWICH) LTD

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1. Financial Health Score: C

Explanation: The company shows a stable but fragile financial position typical for a micro-entity in its first full year of operation. While there are positive net assets and working capital, the current liabilities exceed current assets causing a negative net current assets figure. This indicates some short-term liquidity challenges. The grade C reflects a cautious but not alarming financial health status.

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2. Key Vital Signs

• Net Assets (£4,681): This is the company's equity or "net worth." Positive net assets suggest the company owns more than it owes, a fundamental sign of financial viability.

• Fixed Assets (£9,950): These long-term assets represent investment in equipment or property. The presence of fixed assets shows capital investment, important for operational capacity.

• Current Assets (£10,514) vs Current Liabilities (£15,783): Current assets include cash, receivables, and inventory expected to convert to cash within a year. Current liabilities are debts due within one year. Here, liabilities exceed assets by £5,269, indicating potential short-term liquidity strain.

• Net Current Assets (-£5,269): Negative working capital ("symptom of distress") suggests the company may face challenges meeting immediate obligations without additional cash inflows or financing.

• Share Capital (£6.00): Minimal share capital is typical for micro-entities but shows limited initial equity injection.

• Employees (2): Small workforce consistent with micro-sized operations.

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3. Diagnosis

Underlying Business Health:

• The company is young, incorporated in late 2022, so the financials reflect initial setup and early trading activities.
• Positive net assets indicate the business has started building value beyond just liabilities.
• However, the negative net current assets highlight a liquidity imbalance — current liabilities are greater than current assets. This could be due to timing differences in cash flows or outstanding short-term debts.
• The company's micro-entity status means limited disclosure and simplified accounts, so some financial details like profitability and cash flow specifics are not available.
• The presence of fixed assets suggests investment in operational infrastructure, a positive sign of business commitment.
• Directors and owners are closely involved, with control concentrated in two individuals, indicating a closely held business structure.

Overall, the company's "vital signs" suggest it is in a fragile but stable condition. The negative working capital is a warning symptom but not yet critical distress, assuming the business can manage cash flow effectively.

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4. Recommendations

• Improve Liquidity Management: Focus on improving cash flow and reducing short-term liabilities to alleviate negative working capital. This could involve negotiating longer payment terms with suppliers or accelerating receivables collection.

• Build Cash Reserves: Aim to increase current assets, particularly cash or equivalents, to create a buffer for operational expenses.

• Monitor and Control Expenses: Keep tight control on operating costs to preserve cash and protect margins, especially important for a small entity with limited resources.

• Plan for Growth Carefully: Investment in fixed assets should be balanced with available cash flow to avoid overextension.

• Regular Financial Review: Conduct monthly cash flow forecasts and financial monitoring to detect early signs of distress and respond promptly.

• Consider External Financing if Needed: If the liquidity gap persists, explore short-term credit facilities with favourable terms to bridge cash flow timing mismatches.

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