E.D.O PROPERTY LIMITED

Executive Summary

E.D.O PROPERTY LIMITED holds a solid investment property base but faces liquidity challenges due to negative working capital and increased debt. While the company is stable, enhancing cash flow management and controlling liabilities is essential for sustained financial health. With targeted actions, the company can strengthen its financial resilience and support future growth.

E.D.O PROPERTY LIMITED - Analysis Report

Company Number: 14076884

Analysis Date: 2025-07-19 12:43 UTC

Financial Health Assessment Report for E.D.O PROPERTY LIMITED

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1. Financial Health Score: Grade C

Explanation:
E.D.O PROPERTY LIMITED shows signs of cautious operation with a solid fixed asset base but exhibits some symptoms of liquidity stress and working capital challenges. The company is not in immediate distress but requires attention to its short-term cash flow management and liability structure. The overall grade C reflects a stable but vulnerable financial position that needs proactive management to improve resilience.

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2. Key Vital Signs

Vital Sign	Value (2024)	Interpretation
Fixed Assets (Investment Property)	£252,800	Healthy asset base indicating long-term investment stability.
Current Assets	£274,674	Adequate but heavily weighted towards debtors (£234,623).
Cash at Bank	£40,051	Limited cash buffer; improvement from previous year but still low.
Current Liabilities	£348,690	Higher than current assets; risk of liquidity crunch.
Net Current Assets (Working Capital)	-£74,016	Negative working capital, a symptom of short-term financial strain.
Creditors due after one year	£160,000	Long-term debt introduced, increasing financial leverage.
Net Assets / Shareholders’ Funds	£18,784	Small equity base, but positive and growing from prior year.
Turnover	Not explicitly disclosed	Rents receivable as primary income source; stable but modest scale.
Employee Count	2	Small operation consistent with micro/small company profile.

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3. Diagnosis

• Asset Health: The company holds a significant investment property valued at £252,800, which forms the backbone of its asset strength. This "healthy long-term asset" provides a foundation for ongoing rental income and potential capital appreciation.

• Liquidity & Working Capital: The company is showing “symptoms of distress” in its working capital management. Current liabilities (£348,690) exceed current assets (£274,674), resulting in a negative net current asset position (-£74,016). This indicates potential difficulties in meeting short-term obligations without relying on cash inflows or refinancing.

• Cash Flow: Although cash improved markedly from £3,981 in 2023 to £40,051 in 2024, the cash buffer remains modest relative to current liabilities. The company’s cash flow is likely tight, with a heavy reliance on debtors (rents or other receivables) converting to cash in a timely manner.

• Leverage: The introduction of £160,000 in long-term bank loans during 2024 increases financial leverage. This "long-term borrowing" can be a double-edged sword—it provides capital but adds pressure for repayments and interest, potentially straining profitability if not managed well.

• Profitability & Retained Earnings: The company has small but positive retained earnings (£18,684), showing some accumulation of profit despite liquidity challenges. The absence of a detailed profit and loss account limits deeper profitability analysis but the modest equity growth is a good sign.

• Operational Scale & Risk: With only 2 employees and a niche in renting housing association real estate, the company operates on a small scale which can be both a strength (flexibility) and a weakness (limited diversification).

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4. Recommendations

To improve the financial wellness of E.D.O PROPERTY LIMITED, the following actions are advised:

1. Improve Cash Flow Management:

   • Accelerate collection of debtors to convert receivables into cash faster.
   • Negotiate extended payment terms with suppliers to ease current liabilities pressure.
   • Consider short-term financing options or overdraft facilities as a liquidity cushion.

2. Monitor and Manage Debt:

   • Carefully plan repayments on the £160,000 bank loan to avoid cash flow shocks.
   • Evaluate interest costs versus benefits of leverage; avoid excessive borrowing without clear return on investment.

3. Increase Equity Base:

   • Explore options for new equity injections or retained earnings growth to strengthen net assets and working capital.
   • Consider reinvestment of profits to build reserves.

4. Operational Efficiency:

   • Review operational costs and employee productivity to optimize profitability.
   • Explore diversification or additional revenue streams within the property rental sector to stabilize income.

5. Regular Financial Reviews:

   • Establish monthly monitoring of key financial metrics (cash, debtors, liabilities).
   • Use budgeting and forecasting to anticipate liquidity issues and plan accordingly.

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Medical Analogy Summary:
E.D.O PROPERTY LIMITED’s financial “heart” (investment property) is strong and steady, but the “circulatory system” (cash flow and working capital) shows signs of “congestion” with liabilities outpacing liquid assets. The company’s “immune system” (equity and retained earnings) is fragile but improving. Prompt “treatment” to improve liquidity and manage debt will help restore full financial health.

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