EASTERN CORPORATE FINANCE LIMITED

Executive Summary

Eastern Corporate Finance Limited is experiencing financial strain, evidenced by a shift from positive to negative net assets over the last year, indicating underlying solvency issues despite maintaining short-term liquidity. Immediate remedial actions such as capital reinforcement and careful revenue recognition are essential to restore financial health and ensure sustainable operations.

EASTERN CORPORATE FINANCE LIMITED - Analysis Report

Company Number: 13815209

Analysis Date: 2025-07-29 14:25 UTC

Financial Health Assessment of Eastern Corporate Finance Limited

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1. Financial Health Score: D

Explanation:
The company’s financial health shows signs of distress primarily due to a negative net asset position in the latest year. While current assets exceed current liabilities—indicating some short-term liquidity—there is a concerning decline in net assets and shareholders’ funds from a positive £303 in 2022 to a negative £172 in 2023. This deterioration in equity signals underlying financial weakness, warranting a cautious outlook and remedial action.

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2. Key Vital Signs

Metric	2023 Value (£)	2022 Value (£)	Interpretation
Fixed Assets	249	450	Small, consistent asset base; slight decline.
Current Assets	522	766	Adequate liquid resources but reduced.
Current Liabilities	313	313	Stable short-term obligations.
Net Current Assets (Working Capital)	209	453	Positive but shrinking buffer; watch liquidity.
Total Assets less Current Liabilities	458	903	Declining; less cushion after short-term debts.
Accruals and Deferred Income	630	600	Increasing deferred income may mask earnings.
Net Assets (Equity)	-172	303	Negative equity signals financial distress.
Shareholders Funds	-172	303	Mirrors net assets; shareholders’ stake eroded.

What These Vital Signs Indicate:

• Healthy Cash Flow Symptom: Positive net current assets show some short-term liquidity, a good sign that the company can meet immediate obligations.
• Symptom of Distress: Negative net assets and shareholders’ funds reflect accumulated losses or liabilities exceeding assets, an unhealthy sign akin to a patient’s declining vital organ function.
• Shrinking Asset Base: Decline in fixed and current assets suggests the company may be using resources to cover losses or pay liabilities rather than investing or growing.
• Deferred Income Increase: Growing accruals and deferred income may indicate revenue received but not yet earned, requiring scrutiny to ensure it won’t cause future cash flow issues.

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3. Diagnosis

Eastern Corporate Finance Limited is currently showing symptoms of financial distress despite maintaining short-term liquidity. The key concern is the negative net asset position, which means the company's liabilities and obligations exceed its total assets—a critical warning sign analogous to a low red blood cell count in a patient that compromises overall health.

The steady current liabilities with declining current assets and net assets suggest that while the company can currently meet short-term debts, its long-term solvency is threatened. The increasing deferred income could be a symptom of revenue recognition timing issues that might affect cash flow sustainability.

The company is in the micro-entity category, which limits detailed disclosures, but available data indicates that the business is struggling to sustain equity and build a solid financial foundation.

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4. Recommendations

Immediate Actions:

• Strengthen Equity Base: Consider capital injection from shareholders or external investors to restore positive net assets and improve solvency.
• Review Deferred Income: Closely monitor the accruals and deferred income to ensure revenue recognition is accurate and does not hide cash flow issues.
• Improve Asset Utilisation: Evaluate fixed and current asset management to optimize asset base and prevent further erosion.
• Cost Control and Profitability: Implement stricter cost controls and explore revenue enhancement to prevent further losses.

Medium to Long-Term:

• Financial Forecasting: Develop robust cash flow forecasts and scenario planning to anticipate liquidity needs and prevent financial shocks.
• Strategic Review: Reassess business model and market positioning to identify growth opportunities and reduce financial strain.
• Stakeholder Communication: Maintain transparent communication with creditors, shareholders, and regulators to manage expectations and build trust.

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