CONVEX TECHNOLOGY LTD

Executive Summary

Convex Technology Ltd maintains a stable financial position with positive net assets and working capital but faces liquidity challenges evidenced by a sharp decline in cash reserves and rising tax liabilities. Immediate focus on cash flow management, debtor collection, and tax planning is essential to prevent potential distress and promote sustainable growth. Overall, the company’s financial health is sound but requires proactive management to maintain vitality.

CONVEX TECHNOLOGY LTD - Analysis Report

Company Number: 13807873

Analysis Date: 2025-07-29 20:44 UTC

Financial Health Assessment Report for CONVEX TECHNOLOGY LTD

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1. Financial Health Score: B

Explanation:
CONVEX TECHNOLOGY LTD shows a generally stable financial position with good net assets and positive working capital, indicating a "healthy pulse" in the company's financial circulation. However, the significant drop in cash reserves and a rising corporation tax liability are symptoms that warrant close monitoring and management intervention to prevent future distress.

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2. Key Vital Signs

Metric	2024 Figure (£)	2023 Figure (£)	Interpretation
Fixed Assets	69,341	89,038	Moderate reduction in fixed asset base; manageable but indicates asset utilization or disposal.
Current Assets	102,041	132,798	Decrease mainly due to lower cash and debtor composition changes; watch liquidity trends.
Cash at Bank	30,796	112,510	Sharp decline in cash reserves—possible cash flow tightening or capital use for operations.
Debtors	63,245	16,288	Increase in receivables, possibly due to sales growth or delayed customer payments (watch collectability).
Current Liabilities	62,237	72,585	Reduction in current liabilities is positive but offset by increased tax liabilities.
Net Current Assets	39,804	60,213	Working capital remains positive, indicating liquidity but has weakened from previous year.
Total Assets Less Current Liabilities	109,145	149,251	Overall asset base minus short-term debts has declined; needs attention to preserve asset health.
Deferred Tax Liability	13,175	20,309	Reduction in deferred tax liability relieves some future tax burden, beneficial for cash flow.
Net Assets (Shareholders’ Funds)	95,970	128,942	Reduction in net assets signals profit retention issues or asset write-downs; caution advised.
Corporation Tax Liability	54,543	28,141	Significant increase in tax payable, a stress symptom on cash outflows requiring management.
Share Capital	100	100	Minimal share capital, typical for micro/small private firms; equity base is from retained earnings.

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3. Diagnosis

CONVEX TECHNOLOGY LTD is currently in a stable but cautious state of financial health. The company maintains positive net current assets ("working capital") and solid net assets, which are fundamental indicators of financial vitality. However, the "symptoms of distress" include a substantial contraction in cash reserves from £112,510 to £30,796, and a marked increase in corporation tax liability, which could strain liquidity if not managed carefully.

The increase in debtors—from £16,288 to £63,245—suggests either accelerated sales or potential collection delays. This is a critical symptom that requires monitoring, as slow debtor turnover can choke the cash flow "arteries," leading to liquidity stress.

Depreciation expenses and asset disposals have reduced the fixed assets base by around £20k, which may reflect asset optimization or write-offs. While this is not immediately alarming, the reduction contributes to the overall decrease in net assets, highlighting a need to sustain profitability.

The company’s small share capital (£100) indicates that the bulk of the company’s value resides in retained earnings and reserves, making it sensitive to profit fluctuations and operational cash flow.

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4. Recommendations

To improve financial wellness and prevent progression towards distress, consider the following targeted actions:

• Enhance Cash Flow Management:
  Investigate the causes of reduced cash reserves. Implement tighter cash flow forecasting and controls to ensure liquidity remains healthy. Explore options to accelerate receivables collection or negotiate better payment terms with suppliers.

• Debtor Control and Credit Risk Assessment:
  Review debtor aging reports and enforce credit control procedures to reduce the risk of bad debts. Consider incentivizing early payments or applying stricter credit checks on customers.

• Tax Planning and Liability Management:
  Engage with a tax advisor to optimize corporation tax liabilities and explore payment plans if the current tax burden threatens cash flow. Accurate tax forecasting will help avoid surprises.

• Asset Utilization Review:
  Assess fixed asset usage and consider whether disposals or reinvestments are needed to support growth or operational efficiency. Ensure depreciation policies reflect asset condition accurately.

• Profit Retention and Cost Control:
  Investigate profit margins and expense structures to bolster retained earnings. Controlling costs will help rebuild net assets and strengthen financial resilience.

• Strategic Growth Planning:
  Given the company’s niche in manufacturing consumer electronics, ensure that investments in product development and market expansion are balanced against financial capacity to avoid overextension.

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Medical Analogy Summary

CONVEX TECHNOLOGY LTD shows a generally healthy financial "heartbeat" with good net assets and working capital. However, the sharp drop in cash resembles a "weak pulse," signaling the need for immediate intervention to avoid liquidity "shock." Rising tax liabilities and increased debtors are "symptoms" that, if left untreated, could develop into more serious financial "ailments." With appropriate financial "treatment" focusing on cash flow stabilization, credit control, and tax planning, the prognosis is positive for sustained business health.

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