GREEN CIRCLE IT LTD

Executive Summary

GREEN CIRCLE IT LTD is facing significant financial challenges with negative working capital and shareholders' funds indicating liquidity and solvency risks. While the company has grown its assets, mainly debtors, the sharp rise in liabilities and low cash reserves highlight pressing cash flow issues. Immediate focus on receivables collection, debt restructuring, and capital injection is essential to stabilize and improve financial health.

GREEN CIRCLE IT LTD - Analysis Report

Company Number: 14124545

Analysis Date: 2025-07-20 15:47 UTC

Financial Health Assessment of GREEN CIRCLE IT LTD

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1. Financial Health Score: D

Explanation:
The company shows significant signs of financial distress, with negative net current assets (working capital) and negative shareholders' funds, indicating the business is technically insolvent on a balance sheet basis. While the company is still active and filing on time, the worsening negative equity position and increasing current liabilities relative to assets suggest urgent attention is needed to restore financial health.

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2. Key Vital Signs

Metric	2023 (£)	2022 (£)	Interpretation
Current Assets	182,789	57,851	Increased substantially, a positive sign
Cash	1,683	2,425	Very low cash balance, indicating tight liquidity
Debtors	175,908	42,869	Large increase, potential cash flow risk if not collected timely
Current Liabilities	234,156	88,359	Sharp increase, heavy short-term obligations
Net Current Assets (Working Capital)	-51,367	-30,508	Negative and worsening, symptomatic of liquidity stress
Shareholders' Funds (Equity)	-51,368	-30,509	Negative and deteriorating, indicating accumulated losses or undercapitalization

Vital Signs Interpretation:

• Negative Net Current Assets: The company’s current liabilities exceed current assets by over £51k, meaning it may struggle to meet short-term debts as they fall due — a key symptom of financial distress.
• Negative Shareholders' Funds: This suggests the business has accumulated losses exceeding its capital, a red flag for solvency and long-term viability.
• High Debtors vs. Low Cash: The company holds most of its assets in receivables rather than cash, risking cash flow crunch if collection is delayed.
• Rapid Growth in Liabilities: The near tripling of current liabilities in one year adds strain to liquidity and possibly reflects increased borrowing or unpaid creditors.

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3. Diagnosis

Underlying Financial Health:
GREEN CIRCLE IT LTD is currently in a fragile financial state. The balance sheet reveals symptoms of distress, particularly in liquidity and solvency. Despite a substantial rise in current assets driven by increased debtors and stock, the surge in current liabilities outpaces it, leading to a negative working capital position. This mismatch indicates the company may find it challenging to pay its short-term creditors without additional cash inflows or financing.

The negative shareholders’ funds highlight that the company has been operating at a loss or has not injected sufficient capital since incorporation. The absence of employees suggests a very lean operation, but the large amounts owed to group undertakings (over £211k) indicate reliance on intra-group funding, which may not be sustainable long term.

The low cash balance is a critical concern—it represents the company’s immediate liquidity and ability to cover pressing expenses. With significant debtors outstanding, the company’s financial health depends heavily on efficient receivables collection.

The company has maintained timely filings and remains active, which is a positive governance sign. However, without an income statement provided, it is difficult to assess profitability trends, but the accumulating negative equity implies ongoing losses or insufficient revenue to offset costs.

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4. Recommendations

To restore financial wellness and prevent further deterioration, the company should consider the following steps:

• Enhance Cash Flow Management: Prioritize collection of outstanding debtors to convert receivables into liquid cash. Negotiate payment terms and consider incentives for early payment.
• Restructure Short-term Obligations: Engage creditors, including intra-group lenders, to renegotiate payment schedules or convert some short-term liabilities into longer-term debt to ease immediate liquidity pressure.
• Capital Injection: Seek additional equity funding or shareholder loans to shore up negative equity and improve the balance sheet’s resilience.
• Cost Control: Review operating expenses carefully to identify and eliminate unnecessary costs, preserving cash reserves.
• Regular Financial Monitoring: Implement a cash flow forecasting system to detect liquidity issues early and take proactive measures.
• Explore Profitability Improvements: Although detailed income figures are unavailable, the company should analyze its revenue streams and margins to identify opportunities for improving profitability.
• Consider Professional Advice: Consult financial advisors or turnaround specialists to develop a strategic plan for recovery, particularly because negative net assets imply a risk to creditors and stakeholders.

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Medical Analogy Summary

GREEN CIRCLE IT LTD currently exhibits symptoms of financial distress, particularly a "liquidity deficiency" akin to a patient with insufficient blood flow to vital organs. The "negative equity" condition is comparable to a chronic disease that weakens the company’s resilience. Without timely intervention—such as "fluid resuscitation" through cash infusion and "debt management therapy"—the prognosis worsens. The company is at a crossroads where early diagnosis and treatment can restore health, but delay may lead to serious financial complications.

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