FERNHURST LODGE LTD

Executive Summary

FERNHURST LODGE LTD shows promising financial health for a young management consultancy with positive working capital and clean shareholder equity. The main concern is the high debtor balance relative to cash reserves, which could strain liquidity if not managed carefully. Strengthening debtor collections and building cash reserves will be key to sustaining healthy financial "vital signs" as the company grows.

FERNHURST LODGE LTD - Analysis Report

Company Number: 14460609

Analysis Date: 2025-07-29 17:40 UTC

Financial Health Assessment for FERNHURST LODGE LTD

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1. Financial Health Score: B

Explanation:
FERNHURST LODGE LTD presents a strong balance sheet for a young company in its first full year of trading, with solid net current assets and positive shareholder funds. The company has no overdue filings and appears well-managed from a compliance perspective. However, it carries a high debtor balance relative to cash on hand, which could indicate some liquidity risk if collections slow. Overall, the company shows signs of financial stability but needs to focus on improving cash flow and debtor management to ensure long-term health.

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2. Key Vital Signs

Metric	Value	Interpretation
Current Assets	£94,273	Adequate short-term resources, mainly in debtors.
Cash at Bank	£15,788	Modest cash reserve; may be tight for unexpected expenses.
Debtors	£78,485	Large portion of assets tied up in amounts owed by clients.
Current Liabilities	£25,371	Short-term debts are manageable relative to assets.
Net Current Assets (Working Capital)	£68,902	Positive working capital indicates liquidity to cover short-term debts.
Shareholder Funds (Equity)	£68,902	Indicates retained earnings and capital, showing net positive value.
Employees	2	Small, manageable team size suitable for micro/small company.
Account Filing Status	Up to date	No overdue accounts or returns; compliance health is good.
Director Loan to Company	£78,484 (repaid post year-end)	Director provided significant funding, repaid with interest, indicating internal financial support.

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3. Diagnosis: Financial Health Insights

• Liquidity and Cash Flow:
  The company’s "pulse" shows a healthy net current asset position, meaning it has more current assets than current liabilities. However, the cash "heartbeat" is somewhat weak at £15,788, with a heavy reliance on debtors (£78,485). The large debtor balance could be a symptom of delayed payments or extended credit terms to clients. This creates a risk of cash flow "arrhythmia," where available cash might not meet immediate obligations if debtor payments are delayed.

• Capital Structure:
  Shareholder equity is positive and matches net current assets, reflecting a clean balance sheet without long-term liabilities. The director’s loan, which was repaid post year-end, shows that internal funding was used to support operations, which is a common practice in early-stage companies but should not become chronic.

• Business Model and Activity:
  The company operates in management consultancy (SIC 70229), a sector where cash flow can fluctuate and depend heavily on timely client payments. The company’s small size and limited number of employees are appropriate for its category and early stage.

• Compliance and Governance:
  No overdue filings or penalties, indicating a "healthy compliance" status. The director is actively engaged and the company adheres to small company accounting standards, which is suitable for its size.

• Risks and Symptoms of Potential Distress:
  The key "symptom" to monitor is the high debtor balance relative to cash, which may indicate slow collections that could stress liquidity. The company should ensure it has robust credit control and collection processes to prevent cash flow issues.

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4. Recommendations: Path to Stronger Financial Wellness

• Improve Debtor Management:
  Accelerate the conversion of debtors into cash by tightening credit terms, performing credit checks on clients, and following up promptly on overdue invoices. This will strengthen the cash "heartbeat."

• Build Cash Reserves:
  Aim to increase cash at bank to build a buffer against unexpected expenses or revenue fluctuations. Healthy cash reserves provide peace of mind and operational flexibility.

• Maintain Compliance Vigilance:
  Continue timely filing of accounts and returns to avoid penalties and preserve company reputation.

• Monitor Financial Ratios Regularly:
  Track liquidity ratios (e.g., current ratio, quick ratio) monthly to detect early warning signs of financial stress.

• Plan for Growth Prudently:
  As the company grows, consider diversifying funding sources to reduce reliance on director loans, which can be a "stopgap" but not sustainable long-term capital.

• Explore Profitability Details:
  While no income statement was included, ensure that revenue recognition policies are clear and that the company maintains profitability to build retained earnings.

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