COMMUTE AUTOMATION LTD

Executive Summary

Commute Automation Ltd shows promising asset growth driven by capitalized development costs but faces liquidity challenges with negative working capital. While the company is solvent with positive equity, managing cash flow and monitoring amortization of intangible assets will be critical for sustained financial health. Immediate focus on liquidity improvement and operational efficiency is recommended.

COMMUTE AUTOMATION LTD - Analysis Report

Company Number: SC671482

Analysis Date: 2025-07-20 15:07 UTC

Financial Health Assessment: COMMUTE AUTOMATION LTD

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1. Financial Health Score: C

Explanation:
The company shows signs of recovery and asset growth but continues to struggle with liquidity and working capital deficits. The capitalization of development costs strengthens the asset base, but current liabilities remain high relative to current assets, indicating ongoing short-term financial strain. Overall, the financial health is fair but requires attention to improve cash flow and reduce liabilities.

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2. Key Vital Signs

Metric	Value (2024)	Interpretation
Fixed Assets	£460,860	Healthy increase, reflecting capitalized development costs and investment in long-term assets.
Current Assets	£256,792	Moderate liquid resources; however, decreased from prior year, signaling tighter liquidity.
Current Liabilities	£266,878	High short-term debts; slightly reduced but still exceeds current assets.
Net Current Assets (Working Capital)	£-10,086	Negative working capital indicates a liquidity "symptom of distress"—potential cash flow issues.
Shareholders Funds (Equity)	£450,774	Positive equity reflecting net asset growth and improved capitalization; a sign of financial "resilience."
Average Employees	2	Small team consistent with micro entity status; lean operations.
Capitalization Policy Change	Capitalized R&D costs (£329k)	Intangible assets increase improves balance sheet strength but may delay expense recognition impacting short-term profitability.

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3. Diagnosis

Commute Automation Ltd exhibits a mixed financial "pulse." The company has successfully capitalized significant development costs, boosting fixed and intangible assets to a robust £460k. This is comparable to healthy "organ function," showing the company is investing in future revenue-generating products.

However, the liquidity "pulse" is weak. Current liabilities consistently exceed current assets, resulting in a negative working capital of around £10k as of the latest accounts. This suggests the company may face short-term cash flow challenges, potentially needing to rely on external financing or prompt collection of receivables to meet obligations.

The positive shareholders' funds of approximately £450k indicate the business is solvent and has a solid equity buffer, an encouraging sign of long-term viability. The restatement of R&D expenses into capitalized assets is a strategic accounting "treatment" that improves balance sheet health but requires careful monitoring to ensure future amortization does not strain profit margins.

Overall, the company is in a fragile but improving condition, showing signs of stabilization after earlier negative equity years.

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4. Recommendations

• Improve Liquidity Management:
  Address the negative working capital "symptom" by negotiating extended payment terms with suppliers, accelerating receivables collection, or securing short-term credit facilities to smooth cash flow.

• Monitor Capitalized Development Costs:
  Ensure that capitalized R&D costs are carefully tracked and amortized over appropriate periods to avoid future earnings volatility.

• Cost Control and Revenue Growth:
  With a small team, focus on scaling sales and improving operational efficiency to generate positive cash flows, reducing reliance on external funding.

• Regular Financial Monitoring:
  Implement monthly cash flow forecasting and scenario planning to detect early signs of distress and manage liquidity proactively.

• Stakeholder Communication:
  Keep investors and significant controllers informed about financial strategies and progress to maintain confidence and support.

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