CUSTOM CUT SPOKES LTD

Executive Summary

CUSTOM CUT SPOKES LTD is currently solvent but facing liquidity pressures as indicated by a sharp decline in net current assets and reduced equity. The company shows symptoms of financial stress primarily due to increased short-term liabilities outpacing current assets. Immediate focus on cash flow improvement, cost control, and debt management is essential to restore financial health and sustain operations.

CUSTOM CUT SPOKES LTD - Analysis Report

Company Number: 13569331

Analysis Date: 2025-07-29 16:40 UTC

Financial Health Assessment for CUSTOM CUT SPOKES LTD

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1. Financial Health Score: C

Explanation:
CUSTOM CUT SPOKES LTD exhibits a mixed financial profile. The company is currently maintaining a positive net asset position and positive shareholders’ funds, indicating solvency. However, the sharp decline in net current assets and net assets from the previous year signals emerging liquidity stress and working capital constraints. The company's financial "vital signs" suggest some symptoms of cash flow tightness and potential difficulty in meeting short-term obligations promptly, warranting cautious monitoring and remedial actions.

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2. Key Vital Signs

Metric	2024 Value (£)	2023 Value (£)	Interpretation
Fixed Assets	9,654	6,853	Moderate investment in long-term assets indicating some asset base development. Healthy sign.
Current Assets	19,826	14,909	Increased current assets suggest some improvement in liquidity resources.
Current Liabilities	19,110	9,161	Doubling of short-term debts raises concern over increased short-term obligations.
Net Current Assets	116	5,748	Critical: Net current assets (working capital) have drastically fallen, signaling tight liquidity.
Total Assets Less CL	9,770	12,601	Decline indicates reduced buffer after covering short-term debts.
Net Assets / Shareholders Funds	9,770	12,601	Decline reflects erosion of equity, reducing financial resilience.
Average Employees	2	2	Stable, indicating no significant changes in operational scale.

Interpretation:

• Liquidity: The drastic drop in net current assets from £5,748 to just £116 is a symptom of liquidity stress. Despite increased current assets, the near doubling of current liabilities means the company’s ability to cover short-term debts with current resources is severely compromised.
• Solvency: The company remains solvent, with positive net assets and shareholders’ funds, but the equity base has weakened by over 20% in the year, which is a cautionary sign.
• Asset Management: Increase in fixed assets suggests reinvestment in the business, potentially positive for future earnings but may have contributed to cash strain.
• Operations: Stable employee count and no audit requirement reflect small scale consistent with micro-entity status.

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3. Diagnosis

The financial "symptoms" show that CUSTOM CUT SPOKES LTD is currently solvent but exhibits signs of financial distress primarily related to liquidity and working capital management. The significant increase in current liabilities relative to current assets has caused net current assets to nearly vanish, resembling a "tight pulse" where the company may struggle to meet immediate financial obligations without additional cash inflows or refinancing.

This condition may result from increased short-term borrowing or delayed collections from customers, possibly due to operational challenges or strategic expansions funded by creditors. The decline in net assets also suggests that retained earnings or reserves have been drawn down, possibly due to operating losses or asset revaluation.

Overall, the financial "health" is fragile but not critical. The company is not in immediate danger of insolvency but is experiencing "symptoms of distress" that require intervention to avoid deterioration into crisis.

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4. Recommendations

To improve financial wellness and strengthen the company’s financial health, the following actions are advised:

• Improve Cash Flow Management:
  Conduct a detailed review of receivables and payables cycles. Accelerate customer payments and negotiate extended terms with suppliers to ease short-term cash demands.

• Reduce Current Liabilities:
  Prioritize paying down short-term debt and avoid accumulating further liabilities unless matched by liquid assets. Consider restructuring debts or seeking longer-term financing options.

• Monitor and Control Costs:
  Scrutinize operating expenses and discretionary spending to preserve cash. Maintain tight cost controls to improve profitability and rebuild reserves.

• Asset Utilization:
  Evaluate fixed asset investments for their contribution to revenue. Avoid unnecessary capital expenditures until liquidity improves.

• Engage Stakeholders:
  Keep open communication with shareholders and creditors about financial status and recovery plans to maintain confidence.

• Regular Financial Monitoring:
  Implement frequent financial reviews focusing on liquidity ratios and working capital trends to detect early warning signs.

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