ECOHANCE GROUP LTD

Executive Summary

ECOHANCE GROUP LTD is in a stable but fragile financial position typical of a newly established small company. It maintains a modest positive net asset position and healthy cash reserves, but working capital is tight, necessitating vigilant cash flow and receivables management. With disciplined financial practices and growth planning, the company has a fair outlook to strengthen its financial health over time.

ECOHANCE GROUP LTD - Analysis Report

Company Number: SC769185

Analysis Date: 2025-07-19 12:47 UTC

Financial Health Assessment for ECOHANCE GROUP LTD (As of 31 May 2024)

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1. Financial Health Score: C

Explanation:
Given ECOHANCE GROUP LTD is a newly incorporated small private limited company with minimal operating history, the financial data shows modest positive net assets and working capital, indicating initial financial stability. However, the scale is very small, and the company is still in early stages, with limited financial buffer or profitability evidence. The score "C" reflects a cautious but stable start, with room for growth and improvement in financial robustness.

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2. Key Vital Signs

Metric	Value (£)	Interpretation
Current Assets	21,848	Includes cash and receivables; a small but positive asset base.
Cash	13,988	Healthy cash position relative to liabilities, indicating liquidity.
Debtors	7,860	Amount owed by customers; manageable but needs monitoring for timely collection.
Current Liabilities	21,029	Short-term debts nearly equal to current assets, indicating tight liquidity.
Net Current Assets	819	Slightly positive working capital, a sign of short-term financial balance but with limited cushion.
Net Assets (Equity)	819	Positive equity indicates the company’s assets exceed liabilities, but margin is thin.
Share Capital	300	Initial equity investment from shareholders, modest base capital.
Profit & Loss Reserve	519	Accumulated retained earnings (or losses) showing early operational profit or retained funds.

Additional Context:

• The company qualifies as a "Small" company under UK filing standards but is just starting operations (incorporated May 2023).
• The industry (SIC 43210 - Electrical installation) typically involves project-based revenues and working capital management challenges.

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3. Diagnosis: Financial Condition Assessment

Positive Signs ("Healthy Cash Flow"):

• The company holds nearly £14k in cash, which is a good liquidity "pulse" for a start-up.
• Slightly positive net current assets mean it can cover short-term debts without immediate funding stress.
• Shareholders’ funds are positive, which is crucial for ongoing creditworthiness.

Symptoms of Early-Stage Business:

• The net current asset margin (£819) is very thin, indicating limited buffer against unexpected expenses or slow payments.
• Debtors form a significant portion of current assets, suggesting the company is extending credit or awaiting payment, which could strain cash if delayed.
• The company’s financial scale is very small, reflecting limited operational history and capital base.

Risk Factors ("Symptoms of Distress"):

• Current liabilities almost match current assets, leaving little room for error in cash flow management.
• No fixed assets reported, possibly due to early stage or asset-light business model, but this means limited collateral for borrowing.
• Profit and loss reserve is positive but very small, so profitability is modest or just beginning.

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4. Recommendations to Improve Financial Wellness

• Enhance Working Capital Management:
  Focus on accelerating debtor collections and negotiating longer payment terms with suppliers to improve net current assets "buffer zone" and avoid liquidity crunches.

• Build Cash Reserves:
  Maintain or grow cash holdings beyond immediate liabilities to create a stronger safety net against unforeseen costs or slow revenue periods.

• Monitor Profitability closely:
  Track profit margins on contracts carefully, given the thin profit and loss reserve, to ensure sustainable earnings growth.

• Consider Small Asset Investments:
  Evaluate acquiring essential tools or equipment (fixed assets) if it supports operational efficiency and long-term business growth, balancing with cash flow needs.

• Plan for Growth Capital:
  Explore options for additional equity injection or small business loans once a track record of profitable operations develops to fuel expansion.

• Regular Financial Reviews:
  Implement monthly cash flow forecasts and financial performance reviews to catch early warning signs ("symptoms") and respond proactively.

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Summary

ECOHANCE GROUP LTD displays a stable but delicate financial condition typical of a new small enterprise, with positive but minimal net assets and working capital. The company’s healthy cash position is a positive vital sign, yet the narrow liquidity margin and limited operational history require careful financial management to avoid cash flow distress. Strategic focus on working capital and profitability will be essential for a healthy financial prognosis and sustainable growth.

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