DECODING BUSINESS LIMITED

Executive Summary

Decoding Business Limited is showing clear signs of financial distress with negative working capital and shareholders' funds, indicating liquidity and solvency challenges. Immediate action is required to stabilize cash flow, inject capital, and restructure operations to prevent insolvency risk. Without intervention, the company’s financial health is likely to deteriorate further.

DECODING BUSINESS LIMITED - Analysis Report

Company Number: 12820593

Analysis Date: 2025-07-20 15:37 UTC

Financial Health Assessment Report for DECODING BUSINESS LIMITED

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1. Financial Health Score: D

Explanation: The company is exhibiting clear symptoms of financial distress, primarily due to persistent negative net current assets and shareholders' funds (equity). The balance sheet shows increasing liabilities that overshadow current assets, indicating liquidity challenges and a weakened capital base. While the company is still active and filing on time, its financial "vital signs" are unhealthy and warrant urgent attention.

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2. Key Vital Signs

Metric	2024 (£)	Interpretation
Current Assets	737	Very low; implies limited liquidity
Cash	54	Critically low cash reserves ("weak pulse")
Debtors	683	Small receivables, but insufficient to cover debts
Current Liabilities	31,289	High short-term debts ("heavy burden")
Net Current Assets	-30,552	Negative working capital ("symptom of distress")
Shareholders' Funds (Equity)	-29,637	Negative equity ("financial anemia")
Fixed Assets (Investments)	1,015	Small long-term assets, not sufficient to offset liabilities

Interpretation:

• Liquidity: The company’s ability to meet short-term obligations is severely compromised. With current liabilities over £31k and cash reserves of only £54, the "cash flow heartbeat" is very weak.
• Working Capital: Negative net current assets indicate that current debts exceed current assets by a large margin. This suggests an urgent need for working capital or refinancing.
• Solvency: Negative shareholders' funds show that the company’s liabilities exceed its assets, a major warning sign of insolvency risk.
• Trend: Over the last 3 years, these financial issues have worsened, with increasing liabilities and growing negative equity.

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3. Diagnosis

The company is in a financial distress phase. The persistent negative working capital and shareholders’ funds demonstrate that it is "unwell," with serious liquidity and solvency concerns. This condition implies the company is either relying heavily on external funding, delaying payments to creditors, or unable to generate sufficient operating cash flow.

The modest fixed assets investment (£1,015) and small shareholder capital (£100) mean there is limited buffer to absorb losses or manage financial shocks. Without corrective action, the company risks insolvency or forced restructuring.

No employees are recorded — possibly indicating minimal ongoing operations or a start-up phase without revenue generation.

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4. Recommendations

To improve financial wellness and restore health, DECODING BUSINESS LIMITED should consider the following actions, akin to medical treatment steps:

• Immediate Cash Flow Management ("Stabilizing the patient"):

  • Accelerate collection of receivables.
  • Negotiate with creditors for extended payment terms.
  • Assess possibility of short-term financing (e.g., overdraft, invoice discounting).

• Capital Injection ("Strengthening the immune system"):

  • Consider equity funding or shareholder loans to restore positive net assets.
  • Explore grant funding or government support if eligible.

• Cost Control and Revenue Growth ("Improving vital functions"):

  • Review operating expenses carefully.
  • Develop a clear business plan to increase revenues and cash inflows.

• Financial Restructuring ("Long-term therapy"):

  • Engage a financial advisor or insolvency practitioner to explore restructuring options.
  • Prepare for potential formal restructuring if liquidity issues persist.

• Governance and Monitoring:

  • Regular financial review meetings.
  • Implement robust cash flow forecasting.

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Executive Summary