CIRRUS PROJECTS LTD

Executive Summary

Cirrus Projects Ltd is showing signs of financial distress, with negative working capital and shareholders’ funds indicating liquidity and solvency challenges. Immediate actions to improve cash flow management, reduce costs, and strengthen the capital base are necessary to avoid further deterioration. Close monitoring and strategic adjustments will be vital for restoring financial health.

CIRRUS PROJECTS LTD - Analysis Report

Company Number: 12734677

Analysis Date: 2025-07-29 16:39 UTC

Financial Health Assessment for CIRRUS PROJECTS LTD (As of 31 July 2024)

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1. Financial Health Score: D

Explanation:
The company shows clear symptoms of financial distress, with persistent net current liabilities and negative shareholders’ funds over the past three years. The balance sheet reveals a "negative working capital" condition, indicating that short-term liabilities exceed short-term assets, which is a critical warning sign of cash flow strain. These factors combined suggest the company is struggling to maintain financial stability, earning it a below-average grade.

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2. Key Vital Signs

Metric	2024 (£)	2023 (£)	2022 (£)	Interpretation
Current Assets	220,983	358,346	358,346	Decreased significantly, reducing liquidity buffer
Cash at Bank	64,905	91,384	91,384	Cash reserves are declining, signaling tightening cash flow
Debtors (Receivables)	156,078	266,962	266,962	Debtor balances reduced but still significant; risk if not collected timely
Current Liabilities	225,217	359,973	359,973	Decreased but still outweighs current assets, causing working capital deficit
Net Current Assets (Working Capital)	(4,234)	(1,627)	(1,627)	Negative working capital—symptom of liquidity stress
Shareholders’ Funds (Equity)	(4,334)	(1,727)	(1,727)	Negative equity indicates accumulated losses, weakening financial foundation

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3. Diagnosis

The company is exhibiting symptoms of financial distress, primarily characterized by:

• Negative working capital: This means the company’s short-term debts exceed its short-term assets, leading to a potential inability to meet obligations as they fall due without additional financing or operational improvements.
• Negative shareholders’ funds: Accumulated losses over time have eroded the equity base, which reduces the company’s buffer against financial shocks and limits its ability to raise capital.
• Declining cash reserves: Reduced cash on hand heightens risk of cash flow crises, impacting day-to-day operations.
• Moderate debtor levels: While debtors have decreased, the sizeable amount still ties up cash and requires efficient collection to improve liquidity.
• Small scale operations: With only 2 employees and micro/small company status, the company likely has limited resources to manage financial distress.

Overall, the company’s financial "vital signs" resemble those of a patient with chronic liquidity issues and ongoing operational losses. Without intervention, these "symptoms" could worsen, risking insolvency.

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4. Recommendations

To improve CIRRUS PROJECTS LTD’s financial wellness, the following steps are advised:

a) Improve Cash Flow Management

• Accelerate collection of debtor balances through tighter credit control and incentives for early payment.
• Negotiate extended payment terms with suppliers to ease short-term cash outflows.
• Monitor weekly cash flow forecasts closely to anticipate shortages.

b) Cost Control and Efficiency

• Review operating expenses and overheads to identify possible reductions without compromising service quality.
• Consider operational restructuring to improve margins.

c) Capital Structure Reinforcement

• Explore options for equity injection or shareholder loans to restore positive net assets and strengthen the balance sheet.
• Alternatively, investigate short-term financing options (e.g., overdraft, invoice factoring) to cover working capital deficits.

d) Strategic Review

• Evaluate the viability of ongoing projects and the overall business model to ensure sustainable revenue streams.
• Consider diversifying client base or services to reduce dependency risks.

e) Regular Financial Monitoring

• Implement monthly management accounts to track key financial metrics and act swiftly on adverse trends.
• Engage with professional advisors for tailored restructuring or turnaround planning.

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Medical Analogy Summary:
CIRRUS PROJECTS LTD is currently experiencing "symptoms of financial distress," comparable to a patient with chronic liquidity depletion and a weakened "immune system" (equity base). Without "treatment" (improved cash flow, cost control, and capital support), the condition may deteriorate, potentially leading to "financial failure." Early interventions are critical to stabilize and restore financial health.

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