KAYN SOLUTIONS LIMITED

Executive Summary

KAYN SOLUTIONS LIMITED shows stable assets and positive equity but faces liquidity pressure due to rising current liabilities outpacing current assets, resulting in negative working capital. While the company is not in immediate danger, urgent attention to cash flow management and cost control is needed to prevent financial distress and support ongoing growth.

KAYN SOLUTIONS LIMITED - Analysis Report

Company Number: 13923469

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

Financial Health Assessment Report for KAYN SOLUTIONS LIMITED
(Financial Year Ending 28 February 2024)

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1. Financial Health Score: C

Explanation:
The company shows a stable asset base and positive shareholder equity, but the liquidity position has weakened notably over the year, signaling some financial strain. While not in immediate danger, the negative net current assets ("working capital") is a symptom of potential cash flow stress. Overall, the business is moderately healthy but requires close attention to improve short-term financial stability.

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2. Key Vital Signs

Metric	2024 Value (£)	2023 Value (£)	Interpretation
Fixed Assets	55,295	55,295	Stable investment in tangible assets; no recent additions.
Current Assets	26,305	15,206	Increased, mainly due to cash rise; positive sign.
Cash at Bank	25,777	15,033	Healthy growth in cash reserves, improves liquidity.
Debtors (Receivables)	528	173	Marginal increase; low value relative to liabilities.
Current Liabilities	36,179	18,976	Nearly doubled; indicates growing short-term obligations.
Net Current Assets (Working Capital)	-9,874	-3,770	Negative and worsening; a symptom of liquidity risk.
Net Assets (Equity)	45,421	51,525	Positive but decreased; equity cushion remains.
Share Capital	1	1	Nominal; typical for small private companies.
Profit & Loss Reserve	45,420	51,524	Decline suggests losses or drawings impacting retained earnings.

Interpretation of Vital Signs:

• Liquidity Concern: The company’s current liabilities have almost doubled while current assets have increased but not enough to cover these short-term debts, resulting in negative net current assets. This is akin to a patient whose blood pressure is rising (liabilities) faster than their heart rate can compensate (assets), indicating distress in cash flow management.
• Asset Base Stability: Fixed assets remain unchanged, signaling no recent capital investments or disposals, which may be positive for stability but could indicate lack of growth investment.
• Equity Decline: The reduction in net assets and profit reserves suggests the company may have encountered operational losses or withdrawals, a symptom of underlying business stress.

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3. Diagnosis

• Cash Flow Symptoms: Despite a good increase in cash reserves, the sharp rise in current liabilities presents a liquidity mismatch. This suggests that while some cash inflows are healthy, the company may be delaying payments or accumulating short-term debt, potentially creating strain on day-to-day operations.
• Working Capital Deficiency: Negative working capital is a classic symptom of financial distress that could lead to difficulties in meeting immediate obligations without additional financing or operational improvements.
• Profitability and Retained Earnings: The drop in profit and loss reserve indicates the company might be running operational losses or owner withdrawals, which weakens the equity buffer.
• Going Concern: The directors have expressed confidence in ongoing sales growth and profitability. However, the financial signs urge caution and proactive management of liabilities.

Overall, the company’s financial health resembles a patient with stable vital organs (assets and equity) but exhibiting symptoms of cardiovascular strain (liquidity and working capital issues) requiring intervention.

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4. Recommendations

1. Improve Working Capital Management:

   • Accelerate collection of receivables and possibly negotiate better payment terms with suppliers to reduce current liabilities.
   • Review payment schedules to avoid late payments and penalties which exacerbate short-term liabilities.

2. Cash Flow Forecasting:

   • Implement rigorous cash flow forecasting to anticipate liquidity crunches and secure short-term financing if needed.
   • Maintain a buffer of cash reserves to cover at least 3 months of current liabilities.

3. Cost Control and Profitability Analysis:

   • Conduct a detailed review of operating expenses to identify and cut unnecessary costs.
   • Explore pricing strategies or service offerings to improve profit margins and rebuild retained earnings.

4. Capital Investment and Growth:

   • Evaluate if investment in fixed assets or technology upgrades could enhance operational efficiency and revenue generation without overextending finances.

5. Stakeholder Communication:

   • Maintain transparent communication with creditors and investors regarding financial strategy and turnaround plans to build confidence.

6. Monitor Financial Ratios Regularly:

   • Track liquidity ratios (current ratio, quick ratio) monthly to detect early signs of distress.
   • Monitor profitability trends and adjust business plans accordingly.

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Summary

KAYN SOLUTIONS LIMITED maintains a stable asset base and positive equity but is showing early warning signs of financial strain due to rising short-term liabilities exceeding current assets. The company faces liquidity challenges reflected in worsening working capital, which could impair its ability to meet immediate obligations. Proactive cash flow management, cost control, and strategic planning are essential to restore financial health and secure sustainable growth.

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