K2 ORIGINAL LTD

Executive Summary

K2 ORIGINAL LTD is currently in a financially weak condition characterized by significant negative working capital and shareholders' funds. The company’s liquidity is strained with cash insufficient to meet liabilities, signaling urgent need for cash flow management and cost control. Without intervention, the risk of insolvency is high, but proactive measures including financing restructuring and operational improvements can stabilize the business.

K2 ORIGINAL LTD - Analysis Report

Company Number: 13861222

Analysis Date: 2025-07-20 17:39 UTC

Financial Health Assessment for K2 ORIGINAL LTD
Date of Latest Financials: 31 January 2024
Industry: Unlicensed restaurants and cafes (SIC 56102)

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1. Financial Health Score: D

Explanation:
K2 ORIGINAL LTD exhibits clear signs of financial distress with persistent negative net current assets and net liabilities, indicating an inability to cover short-term obligations with available current assets. The company’s shareholders' funds are substantially negative (£-40,862), reflecting accumulated losses and a strained equity base. The score "D" signals that the company is financially weak and requires urgent attention to avoid potential insolvency.

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2. Key Vital Signs

Metric	2024	2023	Interpretation
Cash at Bank	£1,042	£542	Very low liquidity—cash reserves are minimal to meet immediate expenses.
Current Liabilities	£41,904	£22,886	Significant and growing short-term debts and obligations.
Net Current Assets (Working Capital)	(£40,862)	(£22,344)	Negative working capital—symptom of financial strain and potential liquidity crisis.
Net Assets / Shareholders’ Funds	(£40,862)	(£22,344)	Negative equity indicates accumulated losses have eroded shareholder capital.
Loans from Directors	£10,386	£10,386	Reliance on director loans to support operations; an informal debt obligation.
Average Employees	5	5	Stable staffing level, but payroll could be a financial burden if revenues are weak.

Interpretation of Vital Signs:

• Healthy cash flow is lacking; cash reserves are minimal and insufficient to cover immediate liabilities.
• Negative working capital suggests the company cannot meet its short-term debts with current assets, a classic "symptom of distress" in liquidity management.
• The near doubling of current liabilities in one year without a corresponding increase in current assets or cash heightens solvency risk.
• Negative shareholders' funds indicate the company has been operating at a loss or drawing down equity, weakening its financial foundation.
• Dependence on director loans points to potential external financing challenges and a reliance on insider funding.

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3. Diagnosis

K2 ORIGINAL LTD is currently in a financially distressed state, characterized by illiquidity and negative equity. The company is unable to cover its short-term liabilities with available liquid assets, signaling a liquidity crunch. The growing gap between liabilities and assets over the last year worsens the prognosis. The director’s loans suggest the business is relying on internal funding to sustain operations rather than generating sufficient internal cash flow.

Given the nature of the business (unlicensed restaurant/cafe), margins can be thin, and the sector is competitive and sensitive to economic conditions. The company’s financial statements are unaudited and prepared under a small entities regime, which limits the depth of external assurance.

The financial "symptoms" resemble those seen in companies heading toward insolvency if corrective measures are not taken promptly. However, the company remains active, and the director has control over strategic decisions.

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4. Prognosis

If current trends continue without intervention, K2 ORIGINAL LTD faces a high risk of insolvency or the need for formal restructuring. Negative working capital and increasing liabilities suggest cash flow problems will intensify. However, the company's small size and director involvement provide some flexibility to implement rapid corrective actions.

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5. Recommendations

To improve financial wellness and avert potential failure, the following actions are advised:

1. Urgent Cash Flow Management:

   • Implement strict cash flow forecasting and control.
   • Prioritize payment of critical suppliers and negotiate extended credit terms where possible.
   • Consider short-term financing options to bridge liquidity gaps, but cautiously to avoid over-leveraging.

2. Cost Reduction:

   • Review all operating expenses and reduce non-essential costs.
   • Evaluate staffing levels and operational efficiency to improve margins.

3. Increase Revenue:

   • Explore promotional activities or new offerings to boost sales in the competitive restaurant sector.
   • Enhance marketing efforts targeting local customers.

4. Equity Injection or Debt Restructure:

   • The director or external investors might consider injecting additional equity to strengthen the balance sheet.
   • Restructure existing loans to more manageable terms or convert some debt to equity if feasible.

5. Professional Advice:

   • Engage a financial advisor or insolvency practitioner early to explore restructuring options before financial distress escalates.

6. Monitoring & Reporting:

   • Adopt regular financial health reviews akin to “check-ups” to detect early warning signs and address issues proactively.

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Medical Analogy Summary

K2 ORIGINAL LTD is currently exhibiting “symptoms of financial distress” with dangerously low liquidity (“healthy cash flow” impaired) and negative equity (“weakened financial immune system”). Without prompt treatment—improved cash management, cost control, and possible capital infusion—the company risks entering a critical state akin to “financial failure” or insolvency.

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