DECERNA PROPERTY LIMITED
Executive Summary
DECERNA PROPERTY LIMITED shows a solid asset base but suffers from liquidity challenges indicated by negative working capital and low cash reserves. The company’s financial health is fragile, requiring focused action to improve cash flow management and working capital. With appropriate support and operational adjustments, the company can strengthen its financial position and sustain ongoing operations.
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This analysis is opinion only and should not be interpreted as financial advice.
DECERNA PROPERTY LIMITED - Analysis Report
Financial Health Assessment Report for DECERNA PROPERTY LIMITED
1. Financial Health Score: D
Explanation:
DECERNA PROPERTY LIMITED exhibits signs of financial strain primarily characterized by persistent negative working capital and a very low cash balance relative to its current liabilities. While the company’s net assets are positive, the liquidity position is a significant concern. The financial structure suggests vulnerability to short-term cash flow challenges, resulting in a below-average financial health grade.
2. Key Vital Signs
Metric | Value (2023) | Interpretation |
---|---|---|
Cash at Bank | £28,990 | Low cash reserves, limited buffer for expenses |
Current Liabilities | £374,835 | High short-term obligations |
Net Current Assets | -£345,845 | Negative working capital indicates liquidity stress |
Total Assets Less Current Liabilities (Net Assets) | £16,849 | Positive equity but minimal buffer |
Shareholders Funds (Equity) | £16,849 | Low but positive capital base |
Tangible Fixed Assets | £362,694 | Significant investment in fixed assets |
Debt to Group Undertakings | £366,875 | Large intra-group liabilities increasing current liabilities |
Interpretation:
- Liquidity: Negative net current assets reveal that the company does not have enough short-term assets to meet its short-term liabilities. This is a symptom of financial distress and a warning sign of potential cash flow difficulties.
- Cash Flow: The cash position is meager compared to current liabilities, signaling low financial flexibility.
- Solvency: Despite liquidity issues, the company holds positive net assets due to substantial fixed assets, implying that the company is solvent but potentially illiquid.
- Related Party Debt: A large portion of current liabilities is owed to group undertakings, which may reflect internal financing rather than external debt, but still requires careful management.
3. Diagnosis
DECERNA PROPERTY LIMITED is currently in a fragile financial state resembling a patient with a healthy skeletal structure (fixed assets and equity) but suffering from poor circulation (cash flow and liquidity). The negative working capital (net current assets) is a symptom indicating the company may struggle to pay bills on time without additional financing or improved cash inflows.
The company was incorporated recently (December 2021) and appears to be in an early growth or asset accumulation phase, investing heavily in tangible fixed assets (property). However, the large current liabilities—mostly amounts owed to related parties—are a ticking clock on short-term solvency if they become due imminently without the ability to generate cash.
The directors have stated a going concern basis, which suggests confidence in future cash flow or support from the parent group. Nonetheless, the financial snapshot shows symptoms of operational liquidity stress that requires active management.
4. Recommendations
To improve the financial wellness and stabilize the company’s financial health, the following steps are recommended:
Improve Liquidity Management:
- Increase cash reserves through better cash flow forecasting and control.
- Consider short-term financing options or renegotiate payment terms with creditors, especially related parties, to smooth cash flow.
Working Capital Optimization:
- Actively manage payables and receivables to reduce the negative net current assets.
- Explore opportunities to convert fixed assets into more liquid forms if necessary, though this must be balanced against operational needs.
Financial Support and Capital Injection:
- If feasible, secure additional equity funding from the parent company or external investors to bolster the equity base and improve liquidity.
- Alternatively, restructure intercompany debt to long-term to ease short-term pressure.
Operational Review:
- Review business operations and expenditure to identify cost savings.
- Accelerate revenue generation or diversify income streams to improve cash inflows.
Regular Monitoring:
- Implement monthly financial health checks focusing on cash position and working capital metrics to detect distress early.
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