Company Number: 13620238

Analysis Date: 2025-07-29 14:54 UTC

Financial Health Assessment for DJA LS8 LTD (as of 30 September 2023)

---

1. Financial Health Score: C

Explanation:
The company shows some concerning signs such as negative working capital and reliance on director loans, but it maintains positive net assets and shareholder equity. This indicates early-stage financial strains but with underlying value and potential for recovery. The score reflects a cautious middle ground — not healthy enough for an A or B, but not distressingly poor.

---

2. Key Vital Signs

Metric	Value (£)	Interpretation
Current Assets	3,884	Low liquidity; mostly cash (3,784) which is positive but limited overall.
Current Liabilities	5,673	Higher than current assets, causing a working capital deficit.
Net Current Assets	-1,789	Negative working capital ("symptom of cash flow stress").
Net Assets	3,527	Positive net assets indicate the company owns more than it owes overall.
Shareholders' Funds	3,527	Reflects accumulated profits and capital; small but positive.
Director Loans	4,923	Significant short-term liability owed to directors, indicating internal financing reliance.
Average Employees	3	Small workforce typical for a micro/small company.
Fixed Assets (Net)	5,316	Tangible assets present, showing investment in plant/machinery.

---

3. Diagnosis

Symptoms Analysis:

• Negative Working Capital: The company’s current liabilities exceed current assets by £1,789, meaning it may struggle to cover short-term debts with its available liquid assets. This is a classic symptom of liquidity pressure and potential cash flow difficulties.
• Director Loans as a Lifeline: The £4,923 owed to directors is a significant portion of current liabilities, indicating reliance on internal financing rather than external credit. While common in small companies, it may indicate difficulty accessing traditional funding.
• Positive Net Assets: Despite short-term liquidity issues, the company’s balance sheet shows positive net assets (£3,527), suggesting it has underlying value and has accumulated some retained earnings (profit and loss reserve of £3,427).
• Recent Asset Acquisition: The addition of tangible fixed assets (£6,645 cost, £5,316 net book value) suggests investment in the business’s operational capacity, which could improve future revenue streams but may also strain cash flow if not well managed.
• Small Scale and Sector: Operating in the take-away food sector with only 3 employees, the company is a micro/small entity, which can often face volatile cash flows and margins, especially post-pandemic.

Overall Condition:
The company exhibits early-stage signs of financial strain, primarily in short-term liquidity and working capital, but it is not in distress. The positive equity base and investment in assets provide a foundation for growth if cash flow management improves.

---

4. Recommendations

• Improve Working Capital Management:

  • Explore ways to increase current assets or reduce current liabilities. For example, accelerate receivables collection or negotiate longer payment terms with creditors.
  • Consider inventory management improvements if applicable to free up cash.

• Reduce Reliance on Director Loans:

  • Formalize repayment plans to reduce short-term liabilities owed to directors.
  • Investigate external financing options (e.g., small business loans or grants) to diversify funding sources.

• Monitor Cash Flow Closely:

  • Implement a rolling cash flow forecast to anticipate liquidity shortages and avoid surprises.
  • Maintain a healthy cash buffer to cover at least 1-2 months of operating expenses.

• Leverage Tangible Assets:

  • Ensure the fixed assets acquired are optimally used to generate increased revenue.
  • Consider whether asset financing or leasing could be more cash-flow friendly in the future.

• Strategic Business Review:

  • Given the company’s sector, assess sales trends, pricing strategies, and cost control measures to improve profitability and build reserves.

• Compliance & Reporting:

  • Continue timely filing of accounts and confirmation statements to maintain good standing and creditworthiness.

---