GREEN SHACK CAFE LTD

Executive Summary

Green Shack Cafe Ltd demonstrates a solid improvement in financial stability with increasing net assets and a reduction in working capital deficits, signaling positive momentum despite ongoing liquidity challenges. To maintain this recovery, the company should focus on enhancing cash flow management and building reserves to ensure a healthy financial future.

GREEN SHACK CAFE LTD - Analysis Report

Company Number: SC766215

Analysis Date: 2025-07-29 21:03 UTC

Financial Health Assessment for GREEN SHACK CAFE LTD

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1. Financial Health Score: B-

Explanation:
For a micro-sized company in its early years of operation, GREEN SHACK CAFE LTD shows promising improvement in financial stability, especially in its net assets and working capital. However, the company still exhibits signs of liquidity strain and reliance on fixed assets with modest current asset coverage, which slightly diminishes its overall financial health grade.

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2. Key Vital Signs

Metric	2025 (£)	2024 (£)	Interpretation
Fixed Assets	6,890	6,889	Stable investment in long-term assets; consistent base.
Current Assets	6,868	3,507	Strong growth; more liquid assets available.
Current Liabilities	8,147	9,089	Slight reduction; still higher than current assets.
Net Current Assets (Working Capital)	-1,279	-5,582	Negative but improving; indicates liquidity pressure easing.
Net Assets (Equity)	4,981	707	Significant improvement; company building equity.
Employees (Average)	4	4	Stable workforce size.

Interpretation of Vital Signs:

• Liquidity (Working Capital): The company’s net current assets remain negative, a symptom typically described as "tight cash flow." However, the improvement from -£5,582 to -£1,279 suggests the company is managing short-term obligations better, moving toward a "healthier cash flow" state.
• Solvency (Net Assets): The rising net assets from £707 to £4,981 is a positive sign of growing shareholder value and retained earnings, indicating the business is strengthening its financial base and reducing insolvency risk.
• Fixed Assets Stability: Fixed assets remain stable, showing no significant disposals or impairments, which suggests the company is maintaining its asset base possibly needed for its operations (e.g., equipment for café).
• Current Liabilities: A slight decrease indicates some improvement in managing debts due within one year, but liabilities still exceed current assets, posing a liquidity risk.

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3. Diagnosis

GREEN SHACK CAFE LTD is like a young patient showing initial symptoms of financial strain but responding well to treatment. The negative working capital signals a liquidity tight spot — the “symptom of distress” indicating the company must carefully manage its cash inflows and outflows to avoid cash shortages. However, the strong growth in net assets is the “sign of recovery,” reflecting retained profits or capital injections that have improved the equity position.

The business’s fixed assets are stable, implying no major operational disruptions or asset impairments. The consistent employee count suggests operational stability, which is positive for ongoing business activity.

The company’s status as a micro entity with exemption from audit also means that its financial data is simplified, which is typical at this stage but requires vigilance as the company grows.

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4. Recommendations

To improve financial wellness and build resilience, the following actions are advised:

• Enhance Liquidity Management:
  Focus on improving cash flow cycles by tightening credit control on receivables and negotiating better payment terms with suppliers to reduce current liabilities pressure. Consider short-term financing options if necessary to bridge working capital gaps.

• Build Cash Reserves:
  Prioritize creating a cash buffer to smooth out cash flow fluctuations. This “financial health reserve” will help manage unexpected expenses without risking insolvency.

• Monitor Cost Control:
  Keep a close eye on operating expenses and employee costs to ensure profitability is maintained or improved given the café's market and competitive environment.

• Plan for Growth:
  As the company matures, plan for scaling operations carefully with due diligence on capital investment and working capital needs.

• Regular Financial Reviews:
  Conduct periodic financial health “check-ups” to monitor vital signs, especially focusing on liquidity and solvency ratios to detect early signs of distress.

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