COGNATE DESIGN LTD

Executive Summary

COGNATE DESIGN LTD, a young private limited company, shows early signs of financial strain marked by negative working capital and limited cash reserves. The business must prioritize cash flow improvement and working capital management to stabilize and strengthen its financial health. With prudent financial oversight and strategic growth efforts, the company has potential to improve its condition and secure a healthier financial future.

COGNATE DESIGN LTD - Analysis Report

Company Number: 14719895

Analysis Date: 2025-07-29 17:29 UTC

Financial Health Assessment: COGNATE DESIGN LTD (Year ended 31 March 2024)

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1. Financial Health Score: D

Explanation:
COGNATE DESIGN LTD is a newly incorporated private limited company with its first financial year ending 31 March 2024. The company shows signs of early-stage operational challenges, with a net current liability position and minimal net asset value (£530). The financial "vital signs" indicate cash flow strain and working capital deficiency, typical "symptoms" for a young business still establishing its market presence and revenue streams. The score D reflects caution due to liquidity concerns despite an active status and no overdue filings.

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2. Key Vital Signs

Metric	Value (£)	Interpretation
Current Assets	19,598	Includes cash and trade debtors; represents short-term resources available to meet liabilities.
Cash at Bank	7,797	Relatively low cash reserves indicating limited immediate liquidity ("healthy cash flow" absent).
Trade Debtors	10,200	Amount owed by customers; moderate but not yet converted to cash.
Current Liabilities	30,013	Debts due within one year exceed current assets, causing working capital deficit.
Net Current Assets (Working Capital)	-10,415	Negative working capital ("symptom of distress") indicates potential difficulty in meeting short-term obligations.
Net Assets (Shareholders’ Funds)	530	Very low net asset base, reflecting minimal equity cushion or retained earnings.
Fixed Assets (Tangible)	10,945	Investments in equipment, helping support operations but not immediately liquid.
Share Capital	100	Minimal initial equity injection from shareholders.
Retained Earnings	430	Small accumulated profits or losses; company is in early stage with limited operational history.

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3. Diagnosis

Underlying Financial Health:
COGNATE DESIGN LTD is in the infancy phase of its business life cycle, having operated just over one year. The financial "symptoms" reveal a company with limited liquidity and an inability to cover short-term debts with current assets alone. The negative working capital (-£10,415) is a warning sign that the company may face cash flow difficulties if it cannot convert debtors to cash quickly or secure additional financing.

The very low net asset value (£530) indicates minimal equity buffer to absorb potential losses or unforeseen expenses. The company’s tangible fixed assets provide some operational foundation but are not easily liquidated to cover immediate liabilities.

Operational Context:
As a management consultancy (SIC 70229), the business likely relies heavily on human capital and receivables from client contracts. The current debtor balance suggests some revenue has been earned but cash collection may be slow, impacting liquidity.

Risk Factors:

• Over-reliance on short-term creditor funding (taxation and other creditors total £30,013).
• Limited cash reserves create vulnerability to operational disruptions or delayed client payments.
• Early stage companies commonly face these "financial symptoms" but will need to manage cash flow prudently to survive.

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4. Recommendations

To improve financial wellness and move toward a healthier financial state, the company should consider the following actions:

• Enhance Cash Flow Management:
  Accelerate collection of trade debtors by implementing stricter credit control and incentivising early payment. Consider negotiating extended payment terms with suppliers to ease immediate cash outflows.

• Increase Working Capital:
  Explore short-term financing options such as a revolving credit facility or business overdraft to cover the working capital gap and avoid liquidity crises.

• Monitor and Control Expenses:
  Keep operating costs under tight control, especially discretionary spending, to conserve cash during this growth phase.

• Build Equity Base:
  Consider further equity injections or reinvest retained earnings to strengthen net assets and provide a buffer against future losses.

• Strategic Business Development:
  Focus on acquiring new clients and contracts to increase turnover and improve cash inflows, reducing dependency on credit.

• Regular Financial Reviews:
  Establish monthly cash flow forecasting and financial health monitoring to detect early signs of distress and respond swiftly.

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Medical Analogy Summary

COGNATE DESIGN LTD currently exhibits "symptoms of financial stress," notably negative working capital and low liquidity—akin to a patient with low blood pressure and weak pulse, signaling the need for immediate supportive care. With careful management and timely interventions (improved cash flow, financing, and expense control), the company can recover and build a "healthy financial heartbeat" to sustain and grow its operations.

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