KAWA HAND CAR WASH LTD

Executive Summary

KAWA HAND CAR WASH LTD is a newly formed micro-entity with positive net assets but facing liquidity challenges due to negative working capital. Immediate focus on cash flow management and creditor negotiations is needed to strengthen short-term financial health. With prudent financial stewardship, the company’s outlook can improve as it scales operations.

KAWA HAND CAR WASH LTD - Analysis Report

Company Number: SC798148

Analysis Date: 2025-07-19 12:13 UTC

Financial Health Assessment for KAWA HAND CAR WASH LTD (Year ending 28 February 2025)

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1. Financial Health Score: C

Explanation:
The company exhibits some foundational strengths such as positive net assets and equity, but there are clear warning signs in liquidity and working capital that suggest financial strain. The overall financial condition is stable but fragile, requiring attention to cash flow and liabilities management to avoid distress.

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2. Key Vital Signs

Metric	Value (£)	Interpretation
Fixed Assets	6,488	Investment in tangible assets (fixtures & fittings) shows initial capital deployment.
Current Assets	3,320	Includes cash (£2,793) and stock (£527) - moderate liquidity buffer but modest overall.
Current Liabilities	5,161	Short-term obligations exceed current assets, leading to negative working capital.
Net Current Assets (Working Capital)	-1,841	Negative figure indicates potential liquidity issues; company may struggle to meet short-term debts on time.
Net Assets / Shareholders’ Funds	4,647	Positive equity suggests the company is solvent and has retained earnings.
Cash at Bank	2,793	Cash reserves are limited relative to liabilities, indicating a tight cash flow situation.
Share Capital	100	Minimal capital injection, typical for a newly incorporated company.
Number of Employees	1	Small scale operations, typical for a micro-entity.

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3. Diagnosis: Financial Health and Underlying Business Condition

• Liquidity Symptoms: The most prominent "symptom of distress" is the negative net current assets (-£1,841), meaning the company’s short-term debts exceed liquid assets. This suggests a strain on working capital and potential difficulty in funding day-to-day operations without additional finance or cash inflow.

• Solvency Status: Despite tight liquidity, the company has positive net assets (£4,647) and shareholders’ funds (£4,647), indicating solvency and that the business is not over-leveraged overall. Equity is supported largely by the profit and loss reserve, which may reflect retained earnings or accumulated capital contributions.

• Asset Base: The company has invested in tangible assets (fixtures and fittings) worth £6,488, which supports operational capacity but also ties up cash in fixed assets that are less liquid.

• Scale and Growth Stage: As a micro-entity incorporated less than a year ago, the company is in its formative phase. The small scale (one employee) and modest capital base are consistent with a startup or early-stage business.

• Operational Cash Flow: With limited cash reserves (£2,793) and current liabilities of £5,161, the company is operating with a tight cash flow margin. This could be manageable if revenue and cash inflows increase steadily, but any delay in receivables or unexpected expenses could exacerbate liquidity issues.

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4. Recommendations to Improve Financial Wellness

1. Improve Working Capital Management:

   • Negotiate extended payment terms with creditors to reduce immediate cash pressure.
   • Accelerate customer payments or introduce upfront payment models to boost current assets.

2. Build Cash Reserves:

   • Consider additional capital injection or short-term financing to strengthen cash buffers.
   • Monitor cash flow closely with rolling forecasts to anticipate cash shortages early.

3. Control Costs and Optimize Asset Utilization:

   • Review fixed asset usage to ensure investments are generating adequate returns.
   • Minimise overheads and variable costs until a more stable cash flow position is achieved.

4. Strengthen Revenue Generation:

   • Focus on marketing and customer acquisition to increase turnover and inflows.
   • Explore complementary services or pricing adjustments to enhance profitability.

5. Regular Financial Monitoring:

   • Establish key performance indicators (KPIs) for liquidity and profitability.
   • Keep financial accounts up to date and review them monthly to detect early signs of distress.

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Medical Analogy Summary:

KAWA HAND CAR WASH LTD’s financial “vital signs” show a company with a healthy core (positive net assets) but with “symptoms of distress” in its liquidity—akin to a patient with a strong heart but low blood pressure. Immediate attention to “hydrating” cash flow and managing short-term liabilities is critical to avoid the risk of financial “collapse.” With timely intervention and careful monitoring, the company has a fair prognosis to stabilize and grow.

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