LUCY'S MUSIC TIME LTD

Executive Summary

Lucy’s Music Time Ltd exhibits significant financial weakness with persistent negative equity and poor liquidity, relying solely on director loans for funding. The company is currently unable to support additional credit due to ongoing losses and negative working capital. Close monitoring of cash flow and management initiatives to stabilize the financial position is essential before reconsidering credit facilities.

LUCY'S MUSIC TIME LTD - Analysis Report

Company Number: 13888019

Analysis Date: 2025-07-20 16:38 UTC

1. Credit Opinion: DECLINE
   Lucy’s Music Time Ltd is currently showing persistent negative net assets and net current liabilities, with net liabilities worsening from £11,004 in 2023 to £12,748 in 2024. The company’s cash position has deteriorated significantly, down from £2,505 to £222, indicating a strained liquidity situation. The entire short-term liabilities are director loans, suggesting reliance on related party funding rather than external creditworthiness. Given the ongoing losses, negative equity, and lack of external funding, the company poses a high credit risk and is not currently capable of servicing additional debt.

2. Financial Strength:
   The balance sheet reveals a fragile financial position with net liabilities of £12,748 and net current liabilities of £14,924 as at 29 February 2024. Tangible fixed assets total only £2,176, which provides minimal collateral value relative to liabilities. Shareholders’ funds are negative, reflecting accumulated losses with no retained earnings. The company’s total liabilities are essentially director loans, highlighting a dependence on internal funding rather than sustainable operational cash flows or third-party credit.

3. Cash Flow Assessment:
   The cash balance has dropped from £2,505 to £222 over the year, indicating limited liquidity to meet immediate obligations. Negative working capital of nearly £15k confirms insufficient short-term resources to cover current liabilities. The business is not generating sufficient operational cash flows to improve liquidity and is reliant on director financing, which is not a sustainable source of cash flow for credit extension.

4. Monitoring Points:

• Monitor quarterly cash flow and liquidity improvement efforts.
• Watch for changes in director loan balances and any moves towards external financing or equity injection.
• Track profitability trends and whether the company can return to positive net assets.
• Observe any operational scaling or diversification that could improve revenue and cash inflows.
• Review management actions to reduce current liabilities or restructure debts.