Company Number: 13132078

Analysis Date: 2025-07-20 12:24 UTC

Financial Health Assessment of GHARANA LTD

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1. Financial Health Score: B

Explanation:
GHARANA LTD demonstrates a generally sound financial condition with improving net assets and working capital over recent years. The company is maintaining positive shareholders’ funds and a growing asset base, indicating financial stability. However, some symptoms such as relatively tight liquidity and rising current liabilities suggest caution; hence, the score is a solid B rather than A.

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2. Key Vital Signs

Metric	2023 Value	Interpretation
Current Assets	£173,212	Healthy increase, reflecting better short-term asset base.
Cash at Bank	£14,112	Adequate, but low relative to liabilities—monitor liquidity.
Debtors	£86,100	Significant rise, may indicate increased sales or delayed collections.
Current Liabilities	£117,621	Increased liabilities; potential pressure on cash flow.
Net Current Assets	£55,591	Positive and improving working capital, a good sign.
Net Assets (Equity)	£63,287	Growing equity base, indicative of retained profits and financial strength.
Profit and Loss Reserve	£62,927	Accumulated profits suggest operational profitability.
Number of Employees	3	Small workforce consistent with company size and category.

Interpretation of Vital Signs:

• The company shows a healthy "pulse" in terms of net assets growth and improved working capital, which are signs of financial vitality.
• The "blood pressure" (liquidity) is somewhat elevated due to rising current liabilities exceeding cash on hand, potentially causing short-term "strain" on liquidity management.
• The significant increase in debtors ("accounts receivable") could be a symptom of longer customer payment cycles, which should be monitored to avoid cash flow "fatigue."

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3. Diagnosis

GHARANA LTD is in a stable financial condition with indications of growth and profitability. The net asset increase from £15,232 in 2022 to £63,287 in 2023 shows strengthened equity, likely due to retained earnings accumulation. The company’s working capital position improved, showing better liquidity buffer.

However, warning signs (symptoms) include:

• Current liabilities have grown sharply by over 70% year-on-year, which could tighten liquidity if not managed properly.
• Cash balances remain low relative to liabilities, which is a symptom of liquidity vulnerability.
• Debtors have more than doubled, suggesting either increased sales or slower payments from customers, which can strain cash flow if not addressed.

The company is currently not under any distress or insolvency risk but would benefit from closer attention to cash flow management to ensure healthy circulation of funds.

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4. Recommendations

• Improve Cash Flow Management:
  Consider tightening credit control policies and actively managing debtor collections to convert receivables into cash faster. This will address the symptom of rising debtors and help relieve liquidity pressure.

• Monitor and Manage Liabilities:
  Review terms with suppliers and aim to negotiate longer payment periods or stagger payments to smooth out cash outflows and avoid liquidity "spikes."

• Maintain Profitability and Retain Earnings:
  Continue focusing on operational efficiency to sustain profitability, which is the foundation of the company’s growing equity and "immune system" strength.

• Build Cash Reserves:
  Aim to increase cash holdings to provide a buffer against unexpected expenses or downturns, thereby reducing liquidity risk.

• Regular Financial Reviews:
  Establish monthly financial health check-ups to monitor vital signs such as cash levels, debtor aging, and liabilities to detect early symptoms of financial stress and act promptly.

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