DRINKLIGHT LTD

Executive Summary

Drinklight Ltd shows a stable but modest financial position typical of a young company with fixed assets and small working capital challenges. While the company maintains positive equity, it currently operates with negative reserves and slight liquidity pressure. Focused improvements in cash flow management and profitability will enhance its financial health and sustainability.

DRINKLIGHT LTD - Analysis Report

Company Number: 14120929

Analysis Date: 2025-07-29 14:15 UTC

Financial Health Assessment for DRINKLIGHT LTD as of 30 April 2024

---

1. Financial Health Score: C

Explanation:
DRINKLIGHT LTD presents a modest but stable financial position typical of an early-stage small company. The presence of tangible fixed assets with minimal liabilities suggests a conservatively managed balance sheet. However, the company shows small but notable net current liabilities and a negative retained earnings (profit and loss account) balance, indicating early operational losses or investments in growth. The overall financial condition is fair but with some symptoms of financial strain that need attention to improve liquidity and profitability.

---

2. Key Vital Signs

Metric	Value (£)	Interpretation
Total Fixed Assets	15,000	Stable investment in tangible assets (land/building).
Current Assets	Not explicitly stated; inferred minimal cash/debtors	Likely very low, given net current liabilities.
Current Liabilities	1,073	Small short-term debts owed.
Net Current Assets (Working Capital)	-1,073	Negative working capital indicates a cash flow strain.
Net Assets (Equity)	13,927	Positive but modest; equity base is intact.
Called-up Share Capital	15,000	Fully paid capital; indicates initial funding level.
Profit and Loss Reserve	-1,073	Negative reserves suggest accumulated losses or startup costs.
Number of Employees (incl. directors)	2	Very small workforce, typical for micro/small company.

Additional Context:

• No audit required as per small company exemption.
• Company is active and not in liquidation or any distress processes.
• Directors are experienced and the ultimate controlling party is Burnhart Limited, indicating some group support.
• Industry: Real estate letting and operating own or leased property (SIC 68209), which typically involves significant fixed assets and longer-term income streams.

---

3. Diagnosis: What the Financial Data Reveals About Business Health

• Balance Sheet Strength: The company holds tangible assets valued at £15,000 with no depreciation, consistent with land/buildings that are not depreciated. This fixed asset base is stable but small, reflecting a micro or small-sized business footprint.

• Liquidity Status: The company shows net current liabilities of £1,073. This "symptom of distress" in working capital implies that short-term obligations slightly exceed short-term assets, posing potential liquidity pressure. While the amount is small, it is a flag to monitor cash flow closely.

• Profitability and Reserves: The negative profit and loss account balance (-£1,073) signals that the company has not yet generated positive retained earnings. This is common for young companies investing in setup costs or early-stage losses but should be addressed as the company matures.

• Capital Structure: The entire equity is share capital (£15,000), with no reported retained profits, suggesting that the company is funded by initial shareholder investments rather than accumulated earnings. This is typical of start-ups or early-stage entities.

• Operational Scale: With only 2 employees including directors, the company is very lean, which can be healthy for controlling costs but may limit operational capacity and growth.

• Compliance and Governance: The company is up to date with filings, has no overdue accounts or returns, and has a coherent director and control structure, which supports good governance health.

---

4. Recommendations: Specific Actions to Improve Financial Wellness

1. Improve Working Capital Management:

   • Monitor cash flow closely to avoid liquidity crunches. Explore ways to increase current assets (e.g., better debtor collection, cash reserves).
   • Negotiate payment terms with creditors to better align outflows with inflows.

2. Focus on Profitability:

   • Review revenue streams and cost structure to identify opportunities for boosting profits or reducing expenses.
   • Prepare a detailed budget and forecast to track progress against profitability goals.

3. Build Financial Reserves:

   • Aim to generate positive retained earnings over time to strengthen equity and absorb shocks.
   • Consider reinvesting profits or securing additional funding if expansion is planned.

4. Asset Utilization:

   • Ensure fixed assets are being effectively utilized to generate income, especially since land/buildings are significant assets.
   • Evaluate if any assets can be leveraged or monetized to enhance cash flow.

5. Strategic Planning:

   • Develop a clear business plan aligned with the real estate sector to clarify growth strategy, market positioning, and risk management.
   • Engage professional financial advice periodically to optimize tax, funding, and investment decisions.

---

Medical Analogy Summary:
DRINKLIGHT LTD’s financial “vital signs” indicate a young business with a stable but small “heart” (equity and assets). The “symptom” of negative working capital is a mild liquidity strain, akin to mild dehydration that can be corrected with proper “fluid intake” (cash management). The “diagnosis” points to an early-stage company needing to build financial “muscle” through profitability and reserve accumulation. With attentive care and strategic management, the prognosis is positive for achieving healthier financial wellness.

---