DEEP PIXEL STUDIO LTD

Executive Summary

Deep Pixel Studio Ltd is a micro-entity with a modest but increasingly strained financial position characterized by reduced liquidity and reliance on director loans. While the company is currently solvent with positive net assets, the sharp contraction in working capital signals potential cash flow challenges. Proactive management of cash flow, capital structure, and operational efficiency will be critical to stabilizing and strengthening the business’s financial health.

DEEP PIXEL STUDIO LTD - Analysis Report

Company Number: NI671519

Analysis Date: 2025-07-20 15:16 UTC

Financial Health Assessment for Deep Pixel Studio Ltd

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1. Financial Health Score: C

Explanation:
Deep Pixel Studio Ltd exhibits a modest financial position typical of a micro-entity in its early years. While it maintains positive net assets, the sharp decline from previous years and reliance on director loans suggest underlying liquidity and funding challenges. The score "C" reflects a stable but fragile condition requiring close monitoring and active management to avoid financial distress.

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2. Key Vital Signs (Core Financial Metrics)

Metric	2023 Value (£)	Interpretation
Fixed Assets	3,649	Modest investment in long-term assets; slightly decreased
Current Assets	1,270	Low short-term asset base, sharply down from £10,317 in 2022
Current Liabilities	825	Debts due within one year, manageable relative to current assets
Net Current Assets	445	Positive but significantly lower than prior years (8,966 in 2022)
Long-term Liabilities	2,556	Director loan account; represents external/internal borrowing
Net Assets (Equity)	230	Very low equity base, decreased slightly from £211 in 2022
Share Capital	1	Minimal share capital typical for micro-entities
Employee Count	1	Very small workforce, typical for micro business

Interpretation of Vital Signs:

• Healthy cash flow appears compromised given the steep drop in current assets, especially cash or receivables, from 2022 to 2023.
• The working capital (net current assets) remains positive but has eroded drastically, signaling potential liquidity strain to meet short-term obligations.
• The director loan of £2,556 is a key funding source, indicating reliance on insider financing rather than external credit. This is a symptom often seen in early-stage or cash-constrained companies.
• Net assets and shareholders’ funds are very low, indicating minimal buffer to absorb financial shocks.

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3. Diagnosis: Underlying Business Health

Symptoms of Financial Distress:

• The drastic reduction in current assets (from £10,317 to £1,270) and net current assets (from £8,966 to £445) within a year signals a significant contraction in liquidity. This may be due to declining sales, delayed receivables, or increased cash burn.
• The persistent director loan balance shows dependency on internal funding, which, while supportive, may not be sustainable long-term.
• Low net assets suggest limited equity cushion, increasing vulnerability to unforeseen expenses or downturns.
• Single employee operation implies a lean structure but also potential capacity constraints impacting growth or resilience.

Overall Condition:
The company is in a fragile but not critical state. It shows signs of financial strain primarily on liquidity and funding fronts but has no immediate insolvency indicators such as negative net assets or overdue filings. The business appears to be in a stabilisation or early growth phase, but without action, liquidity pressures could worsen.

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4. Recommendations for Financial Wellness Improvement

• Enhance Cash Flow Management:

  • Improve receivables collection and/or diversify income sources to rebuild current assets.
  • Tighten control on payables and expenses to preserve working capital.

• Strengthen Capital Structure:

  • Consider injecting additional equity or securing external financing to reduce reliance on director loans and build a stronger equity base.
  • Explore grants or funding options relevant to creative and digital media sectors.

• Operational Efficiency:

  • Maintain lean staffing but evaluate if strategic hires or outsourcing could increase revenue generation or operational capacity.
  • Monitor fixed assets and ensure investments align with business growth plans.

• Regular Financial Monitoring:

  • Establish monthly financial reviews focusing on liquidity ratios and cash flow forecasts to detect early warning signs.
  • Engage professional advisors periodically for financial planning and compliance.

• Transparency & Governance:

  • Continue timely and accurate filings to maintain good standing and stakeholder confidence.
  • Document director loan arrangements clearly and consider formalising terms to manage risk.

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