CHL TRADING LIMITED

Executive Summary

CHL Trading Limited’s financial health has deteriorated significantly as of June 2024, with negative net current assets and equity indicating liquidity and solvency concerns. Immediate cash flow management, operational cost review, and capital restructuring are critical to reversing this decline and safeguarding the company’s future viability.

CHL TRADING LIMITED - Analysis Report

Company Number: 13440350

Analysis Date: 2025-07-29 20:07 UTC

Financial Health Assessment for CHL TRADING LIMITED (as of 30 June 2024)

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1. Financial Health Score: D

Explanation:
CHL Trading Limited exhibits signs of financial distress in its latest financial year, primarily reflected by negative net current assets and shareholders' funds. While the company showed healthy liquidity and positive equity in previous years, the most recent figures indicate a worrying deterioration. This score signals caution and the need for urgent financial management intervention.

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2. Key Vital Signs

Metric	2024 Value (£)	Interpretation
Current Assets	25,934	Represents short-term resources available; decreased from £40,639 in the prior year.
Current Liabilities	29,321	Short-term obligations increased from £23,469, putting pressure on liquidity.
Net Current Assets	-3,387	Negative working capital indicates potential cash flow constraints and difficulty meeting debts.
Shareholders' Funds (Equity)	-3,387	Negative equity signals accumulated losses or excess liabilities over assets, a red flag.
Average Employees	4	Stable workforce size, indicating operational consistency despite financial strains.

Interpretation:

• Healthy cash flow is indicated by positive net current assets, but here the company shows symptoms of liquidity distress with negative net current assets. This means current liabilities exceed readily available current assets, risking payment delays or defaults.
• The negative shareholders’ funds is a serious symptom akin to a "weakening heartbeat" in the financial health, reflecting that the company owes more than it owns.
• The drop in current assets and increase in liabilities year-over-year suggests worsening short-term financial management or operational challenges.

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3. Diagnosis

CHL Trading Limited has shifted from a previously healthy financial state with positive net current assets and equity (2021-2023) into a state of financial strain by the 2024 year-end. The negative working capital and shareholders' funds imply the company may be experiencing cash flow problems and potentially operating at a loss or accumulating debts. This situation can jeopardize the company’s ability to meet creditor demands and sustain operations without corrective actions.

Given the company is a micro entity with a limited capital base (£1 share capital), these symptoms are critical because micro businesses generally have less financial buffer to absorb shocks. The stable employee number suggests operational continuity, but financial health is deteriorating beneath the surface.

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4. Recommendations

• Immediate Cash Flow Management:
  Conduct a thorough review of receivables, payables, and inventory to identify quick wins for improving liquidity. Negotiate extended payment terms with suppliers or seek short-term financing to alleviate immediate cash crunch.

• Cost Control and Efficiency:
  Assess operational costs, including employee expenses, to identify non-essential spending. Improving operational efficiency can reduce the burden on cash flow.

• Capital Injection or Debt Restructuring:
  Explore options for fresh equity investment or restructuring existing debts to strengthen the capital base and restore positive shareholders’ funds.

• Financial Forecasting and Monitoring:
  Implement rolling cash flow forecasts to anticipate future liquidity challenges and plan accordingly. Regular financial health checks can catch symptoms early.

• Strategic Business Review:
  Analyze revenue streams and market positioning in retail and wholesale sectors to identify growth opportunities or necessary pivots.

• Professional Financial Advice:
  Engage a financial advisor or turnaround specialist to assist with restructuring and recovery strategies.

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Executive Summary

CHL Trading Limited has transitioned from a stable financial position into a state of distress in the latest year, showing negative working capital and shareholders' funds. These symptoms indicate liquidity challenges and potential solvency risks that need urgent management focus on cash flow and capital structure. Prompt interventions including cost control, debt restructuring, and strategic review are essential to restore financial health and ensure business sustainability.