G&H PLASTERING LTD
Executive Summary
G&H PLASTERING LTD currently maintains positive net assets but faces significant liquidity stress due to sharply increased current liabilities and reduced liquid assets, reflected in negative net current assets. While the company has invested in fixed assets, which may benefit operations, urgent measures are needed to improve cash flow and working capital. Addressing these financial symptoms will be critical to maintaining business health and ensuring future stability.
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This analysis is opinion only and should not be interpreted as financial advice.
G&H PLASTERING LTD - Analysis Report
Financial Health Assessment for G&H PLASTERING LTD as at 31 October 2024
1. Financial Health Score: C
Explanation:
The company shows a mixed financial picture with some concerning signs of liquidity stress alongside modest growth in net assets. While it maintains a positive net asset position, recent financial data reveals a sharp decline in current assets and a significant rise in current liabilities, pointing to cash flow strain. This score reflects a company that is currently solvent but experiencing symptoms of financial stress that warrant monitoring and remedial action.
2. Key Vital Signs
Metric | 2024 Value | Interpretation |
---|---|---|
Fixed Assets | £18,519 | Increase from zero last year suggests investment in long-term assets, which may improve capacity. |
Current Assets | £704 | Drastic reduction from £3,272 in 2023 indicates a decline in liquid resources—symptom of cash flow issues. |
Current Liabilities | £16,818 | Sharp increase from £2,739 in 2023 signals growing short-term obligations—potential liquidity risk. |
Net Current Assets | -£16,114 | Negative working capital, a critical symptom of potential short-term solvency problems. |
Total Net Assets | £2,405 | Positive but modest equity base, up from £533, indicating retained earnings but limited buffer. |
Share Capital | £100 | Minimal capital injection; growth mainly from retained earnings or asset revaluation. |
Average Employees | 1 | Very small workforce consistent with micro-entity status—limited operational scale. |
3. Diagnosis
Liquidity Stress (Symptoms of Distress):
The most alarming symptom is the negative net current assets of £16,114 in 2024, down from a positive £533 the previous year. This suggests the company’s current liabilities now substantially exceed its current assets, indicating potential difficulty meeting short-term obligations as they become due. This is akin to a patient whose blood pressure suddenly spikes unpredictably—urgent attention is required.Asset Investment and Capital Structure:
The introduction of £18,519 in fixed assets is a positive sign of investment, potentially enhancing operational capacity or efficiency. However, the lack of corresponding liquid assets to cover liabilities could offset this benefit if it strains cash flow.Equity and Financial Cushion:
Net assets have grown from £533 to £2,405, showing some resilience and retained profits. However, the absolute value remains low, providing a thin margin for absorbing shocks.Operational Scale and Risk:
As a micro-entity with one employee, the company's scale is very small, which limits financial flexibility and exposes it to higher operational risks from any disruption.
Overall, while still solvent (positive net assets), the company exhibits pronounced liquidity issues that could impair its ability to operate smoothly in the near term without addressing these imbalances.
4. Recommendations
Improve Cash Flow Management:
Immediate focus should be placed on boosting liquid assets or reducing current liabilities to restore positive working capital. This could involve negotiating extended payment terms with creditors, accelerating debtor collections, or considering short-term financing options.Review and Prioritize Fixed Asset Investments:
Assess whether the fixed asset additions are generating sufficient returns or if some assets can be liquidated or deferred to improve liquidity.Strengthen Capital Base:
Consider capital injection to increase shareholders’ funds, providing a financial buffer and improving solvency ratios.Regular Financial Monitoring:
Implement tighter financial controls and forecasting to detect and address emerging cash flow issues promptly.Seek Professional Advice:
Given the liquidity warning signs, consulting with a financial advisor or accountant to develop a tailored cash management plan would be prudent.
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