FORMULASCO LTD

Executive Summary

FORMULASCO LTD is a young retail company currently experiencing liquidity challenges and negative equity, primarily sustained by a director loan. Immediate focus on improving cash flow, raising capital, and growing revenue is essential to restore financial health and avoid insolvency risks. With prompt action, the company has potential to stabilize and progress towards profitability.

FORMULASCO LTD - Analysis Report

Company Number: 14719687

Analysis Date: 2025-07-29 18:50 UTC

Financial Health Assessment for FORMULASCO LTD

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1. Financial Health Score: D

Explanation:
The company currently exhibits signs of financial distress, primarily due to its negative net assets and working capital deficit. While it remains operational and compliant with filing deadlines, the negative equity and current liabilities exceeding current assets indicate a fragile financial position. This score suggests caution and a need for remedial action to restore financial wellness.

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2. Key Vital Signs

Metric	2025 (£)	Interpretation
Current Assets	0	No liquid or short-term assets available to cover immediate liabilities.
Current Liabilities	381	Short-term debts that must be settled soon, exceeding current assets.
Net Current Assets	-381	Negative working capital indicates potential liquidity issues.
Net Assets	-381	Negative equity shows liabilities exceed total assets — a red flag.
Shareholders’ Funds	-382	Negative equity base, indicating accumulated losses or loans.
Director Loan	382	Unsecured, interest-free loan from the director, critical for solvency.
Employees	0	No staff costs, which reduces overhead but may limit operational capacity.

Interpretation:

• Negative Working Capital: The company has no cash or equivalent short-term assets and owes £381 in liabilities due within one year, signaling a "symptom of distress" in liquidity.
• Negative Net Assets: The company's balance sheet shows that it owes more than it owns, reflecting a "chronic illness" in financial health.
• Director Loan: The loan of £382 from the director is effectively keeping the company afloat, acting like a "life support" system. This reliance on director funding is a potential risk if the loan is called in or not renewed.
• No Employees: The absence of staff may reduce fixed costs but could also limit growth or ability to generate revenue.

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3. Diagnosis

FORMULASCO LTD is a very young company (incorporated in March 2023) operating in the retail sale via mail order/Internet sector. The latest accounts reveal:

• Early-stage operational challenges: Negative net assets suggest the company has yet to generate sufficient revenue or profits to cover its liabilities. This is common in startup phases but requires close financial management.
• Liquidity strain: With current liabilities but no current assets, the company faces immediate liquidity pressure, potentially jeopardizing its ability to pay short-term debts.
• Dependence on director funding: The director’s loan is the sole buffer preventing insolvency, indicating a fragile financial structure.
• No audit requirement: The company benefits from audit exemption, typical for small companies, but this means less external scrutiny which might delay detection of financial issues.
• No employees: The absence of staff suggests low operational scale or outsourcing, which may be a strategic choice to control costs.

Overall, the company shows "symptoms of financial stress" but is still "alive" with potential to recover if the underlying issues are addressed promptly.

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4. Recommendations

• Improve Liquidity:
  The company must seek to increase current assets, especially cash or receivables, to cover short-term liabilities and avoid insolvency risk. Consider accelerating customer payments or securing short-term financing.

• Address Negative Equity:
  Explore opportunities to raise equity capital or restructure the director loan to strengthen the balance sheet. Injection of fresh capital would act like a "nutritional boost" to the company’s finances.

• Enhance Revenue Generation:
  As a retail business via the internet, focus on marketing, sales channels, and customer acquisition to drive turnover and profitability.

• Cost Control and Operational Planning:
  Maintain lean operations to avoid increasing liabilities. Evaluate if hiring staff is necessary or if outsourcing remains the optimal approach.

• Financial Monitoring:
  Implement tight cash flow monitoring and forecasting to detect early warning signs of distress and manage working capital prudently.

• Seek Professional Advice:
  Consider consulting financial advisors or turnaround specialists to develop a recovery plan and manage creditor relationships.

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