LITTLE WORDS LIMITED

Executive Summary

LITTLE WORDS LIMITED has improved its financial position notably in the latest year, moving from negative working capital to positive net current assets and increasing shareholder equity. Despite this progress, cash reserves remain modest, and prudent cash and creditor management will be key to sustaining this recovery. With continued focus on liquidity and profitability, the company is on a path toward stronger financial health.

LITTLE WORDS LIMITED - Analysis Report

Company Number: 13559564

Analysis Date: 2025-07-19 12:54 UTC

Financial Health Assessment Report for LITTLE WORDS LIMITED

---

1. Financial Health Score: C

Explanation:
LITTLE WORDS LIMITED demonstrates signs of recovery and improving financial health after previous years of distress. The company’s net current assets have turned positive in the latest year, and net assets have increased significantly, indicating a move towards a healthier financial position. However, the relatively modest cash balance and lingering creditor obligations suggest caution. The overall grade "C" reflects a business in transition—showing improvement but not yet fully robust or free of financial vulnerability.

---

2. Key Vital Signs:

Metric	2024 (£)	Interpretation
Cash at Bank	8,209	Modest but improving cash reserves—healthy cash flow is emerging.
Debtors (Trade Receivables)	9,829	Lower than prior year, indicating better collections or smaller sales volume.
Current Liabilities	21,347	Reduced significantly from previous high levels, lowering short-term pressure.
Net Current Assets	1,870	Positive working capital—sign of improved liquidity and operational health.
Net Assets / Shareholders’ Funds	3,752	Positive equity after previous marginal position—building company value.
Stock (Work in Progress)	5,179	Introduction of stock signals business activity and project pipeline.
Provisions for Liabilities	500	Deferred tax provision is manageable and stable.

---

3. Diagnosis: Business Financial Health Overview

• Liquidity & Cash Flow:
  The increase in cash from £3,674 in 2023 to £8,209 in 2024 suggests better cash management and healthier cash flow. The positive net current assets (£1,870) indicate the company can cover its short-term liabilities without distress, a significant turnaround from a negative position last year.

• Working Capital Management:
  The company has improved its working capital position by reducing current liabilities and managing debtors more efficiently. The introduction of stock worth £5,179 implies active work-in-progress projects, which require careful monitoring to convert to cash.

• Capital Structure and Solvency:
  Shareholders’ funds have increased from £1 to £3,752, reflecting retained earnings or capital injections that strengthen the company’s solvency and cushion against shocks.

• Operational Performance:
  While profit and loss details are not disclosed, the movement in balance sheet items suggests the company is stabilizing after earlier periods of financial stress, likely due to better operational control and cost management.

• Risk Factors:
  The company still carries deferred tax provisions and modest creditor balances, which require ongoing management to avoid liquidity squeezes. The relatively low cash balance means there is limited buffer for unexpected expenses.

---

4. Recommendations for Financial Wellness Improvement:

• Strengthen Cash Reserves:
  Continue to focus on improving cash flow by accelerating debtor collections and managing payment terms with creditors. A healthy cash buffer is vital to avoid liquidity crises.

• Optimize Working Capital:
  Regularly review stock levels and work in progress to ensure they are not tying up excessive capital. Convert stock to revenue efficiently.

• Profitability Monitoring:
  Track profit margins closely once profit and loss data becomes available. Focus on increasing profitability to build retained earnings and long-term resilience.

• Debt and Credit Management:
  Negotiate longer payment terms with creditors if possible and ensure no overdue liabilities. Maintain transparent communication with suppliers and tax authorities to avoid penalties.

• Strategic Planning:
  Develop a forward-looking financial plan that anticipates cash needs, tax liabilities, and investment requirements. This includes scenario planning to prepare for any downturns.

• Professional Advice:
  Engage regularly with financial advisors or accountants to ensure compliance, optimize tax planning, and gain insights into financial trends.

---

Medical Analogy Summary:

LITTLE WORDS LIMITED is currently showing "signs of recovery" from previous "financial distress." Its "vital signs" such as positive working capital and improved cash flow indicate a "stabilizing heartbeat." However, the company remains "somewhat vulnerable," akin to a patient out of intensive care but still requiring ongoing treatment and monitoring to regain full health.

---