JOHN SMITH TYRES LIMITED

Executive Summary

John Smith Tyres Limited is in good financial health with solid liquidity, growing net assets, and prudent asset investments indicating a stable and expanding business. While current liabilities are significant, the company’s strong cash position and positive working capital provide comfort against short-term risks. To further enhance financial wellness, the company should focus on strengthening equity, managing payables, and maintaining robust cash flow controls.

JOHN SMITH TYRES LIMITED - Analysis Report

Company Number: 12932433

Analysis Date: 2025-07-29 14:44 UTC

Financial Health Assessment: JOHN SMITH TYRES LIMITED (As of 31 October 2024)

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1. Financial Health Score: B

Explanation:
The company demonstrates a solid financial position with improving net assets, positive working capital, and healthy cash reserves, indicating good liquidity and operational stability. However, the relatively high current liabilities and modest share capital signal moderate financial risk and room for strengthening equity and credit management.

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2. Key Vital Signs

Metric	Value (2024)	Interpretation
Net Assets	£274,859	Increased from £181,753 in 2023, showing growing equity base and retained earnings.
Net Current Assets (Working Capital)	£99,479	Positive and improving, suggests the company can meet short-term obligations comfortably.
Cash Reserves	£264,335	Strong cash position supports day-to-day operations and buffers against liquidity shocks.
Current Liabilities	£227,088	Elevated but managed with current assets; requires monitoring to avoid liquidity strain.
Fixed Assets (Net Book Value)	£175,380	Investment in long-term assets growing, reflecting business expansion or equipment upgrades.
Debtors	£62,232	Stable trade receivables indicate consistent sales and customer payments.
Share Capital	£100	Minimal share capital, typical for small private companies, but equity mostly from retained profits.
Employee Count	Average 4 employees	Small workforce, appropriate for a micro/small business scale.

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3. Diagnosis: Business Financial Health

"Healthy Cash Flow with Signs of Growth"

• The company exhibits strong liquidity, evidenced by a cash reserve exceeding £260k and positive working capital of nearly £100k, which are vital "vital signs" of a financially healthy business capable of covering short-term debts without distress.
• The increase in net assets by over 50% year-on-year reflects profitable operations and prudent retention of earnings. This is analogous to a patient whose vital parameters have shown sustained improvement.
• Fixed asset growth indicates the business is investing in its operational capacity, a positive sign of proactive management preparing for future demand.
• Trade debtors remain stable, suggesting reliable customer payment patterns with no unusual credit risk symptoms.
• However, the current liabilities remain substantial, and though currently covered by assets, they represent a potential "stress point" that management must monitor to prevent future liquidity crunches.
• The minimal share capital and reliance on retained earnings highlight that the company is self-financed but may have limited capital buffer to absorb shocks or fund rapid expansion.
• The unaudited abridged accounts and absence of an audit are typical for small companies but limit external assurance on financial robustness.

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4. Recommendations: Steps to Improve Financial Wellness

• Strengthen Equity Base: Consider increasing share capital or seeking external investment to build a more robust equity cushion, improving financial resilience.
• Manage Current Liabilities: Implement tighter controls on payables and negotiate longer payment terms to optimise cash flow and reduce liquidity risk.
• Monitor Debtor Days: Maintain or improve credit control processes to ensure receivables remain collectible and do not become overdue, preserving cash health.
• Plan Asset Investments Carefully: Continue investing in fixed assets judiciously, ensuring acquisitions align with business growth forecasts and do not overextend cash resources.
• Prepare for Audit or Enhanced Reporting: As the company grows, consider moving beyond abridged accounts to audited financial statements to enhance credibility with lenders, suppliers, and stakeholders.
• Maintain Adequate Cash Buffers: Preserve strong cash reserves to weather market fluctuations or unexpected expenses, akin to maintaining a healthy immune system.
• Review Employee Productivity: With a small team, ensure employee roles are optimized for efficiency to support business operations and growth.

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