HK ACCOUNTING LTD

Executive Summary

HK ACCOUNTING LTD is facing liquidity challenges and a very thin equity buffer, with negative working capital and minimal cash reserves. Immediate focus on improving cash flow and strengthening the capital base is critical to prevent further financial deterioration and ensure ongoing viability.

HK ACCOUNTING LTD - Analysis Report

Company Number: 14418102

Analysis Date: 2025-07-29 20:09 UTC

Financial Health Assessment of HK ACCOUNTING LTD

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1. Financial Health Score: D

Explanation: The company shows signs of financial distress with negative working capital and low net asset value relative to liabilities. While it remains active and solvent for now, the deterioration in net current assets and shareholders’ funds over recent years indicates vulnerability. The financial "vital signs" suggest the company is struggling to maintain healthy liquidity and capital buffers.

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2. Key Vital Signs

Metric	2024 Value	Interpretation
Current Assets	£2,088	Low level of liquid and short-term assets to cover liabilities.
Cash at Bank	£280	Very limited cash on hand — a symptom of tight liquidity.
Debtors	£1,808	Most current assets are tied up in receivables (including director's loan).
Current Liabilities	£2,253	Obligations due within one year exceed cash and debtors, creating a liquidity strain.
Net Current Assets (Working Capital)	-£165	Negative working capital signals potential difficulties meeting short-term obligations on time.
Total Assets Less Current Liabilities	£115	Very thin buffer after covering short-term debts, borderline solvency.
Shareholders’ Funds (Equity)	£115	Equity has recovered from negative in 2022 but remains very low, indicating minimal net worth.
Director's Loan Account	£1,708	Large amount owed by director to company; loan has no repayment terms, reflecting internal funding.

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3. Diagnosis: Financial Condition Overview

HK ACCOUNTING LTD is currently in a fragile financial state, resembling a patient showing early symptoms of distress. The company’s liquidity is tight, with current liabilities slightly exceeding current assets, leading to negative working capital. This means the company might struggle to cover its short-term debts without delay or additional financing.

The very low cash balance is akin to a “weak pulse” in financial terms, indicating the company may face difficulties paying immediate expenses or creditors promptly. The company’s net asset position has improved from a negative value in 2022 to just positive in 2024, but the equity base is still minimal, reflecting limited financial resilience or reserves to absorb shocks.

The significant amount recorded as a director’s loan to the company suggests reliance on internal funding rather than external capital or cash from operations. This could be a temporary support but is not a sustainable source of liquidity.

The absence of an audit and limited disclosures (typical for a small company) mean some financial details are not fully visible, but the balance sheet alone signals caution.

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4. Recommendations: Specific Actions for Financial Wellness

• Improve Cash Management: Focus on accelerating cash collections from debtors and reducing outstanding balances. Cash is the lifeblood; without healthy cash flow, the company risks “financial collapse.”

• Address Working Capital Deficit: Explore negotiating extended payment terms with creditors to ease immediate liquidity pressures. Consider short-term financing options if necessary to cover gaps.

• Strengthen Equity Base: Either through additional capital injection from the director or external investors, or by retaining profits if profitable operations can be achieved. A stronger equity buffer would improve solvency and business stability.

• Monitor Director’s Loan: Formalise clear repayment terms for the director’s loan or convert it into equity if possible to clean up the balance sheet and clarify financial position.

• Cost Control and Profitability: As the company trades in bookkeeping services, focus on reducing overheads and increasing client base to improve profitability, which will replenish reserves and cash.

• Regular Financial Reviews: Establish monthly cash flow forecasting and management reporting to detect and address symptoms of financial distress early.

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Medical Analogy Summary

HK ACCOUNTING LTD currently shows symptoms of financial distress such as poor liquidity (weak pulse) and low net worth (thin bloodline). Without prompt intervention—improving cash flow, strengthening equity, and managing liabilities—the company risks "financial fatigue" or insolvency. Immediate financial triage and ongoing monitoring are essential to restore health.

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