MASTER AUTO CENTER LTD

Executive Summary

MASTER AUTO CENTER LTD is currently experiencing severe financial distress, evidenced by large accumulated losses and negative net assets. Liquidity is critically weak with negative cash balances and growing liabilities, undermining the company's ability to service debt or sustain operations without external support. Given these factors, credit facilities are not recommended at this time without substantial mitigation measures.

MASTER AUTO CENTER LTD - Analysis Report

Company Number: 12902178

Analysis Date: 2025-07-29 20:51 UTC

1. Credit Opinion: DECLINE
   MASTER AUTO CENTER LTD exhibits significant financial distress despite being active and recently incorporated in 2020. The company’s net assets have deteriorated sharply from positive £5,105 in 2020 to a negative £139,005 in 2023, indicating accumulated losses and an eroded equity base. The large increase in current liabilities (£41,450) and especially non-current liabilities (£162,461) relative to minimal cash resources (-£474) raises serious concerns about the firm’s ability to meet short- and long-term obligations. The negative working capital position and reliance on substantial borrowing undermine its repayment capacity. Management has invested heavily in fixed assets (motor vehicles and machinery), but this has not translated into improved liquidity or net financial strength. The absence of an audit and limited staff (2 employees) further reduce transparency and raise operational risk. Given these factors, the company currently does not demonstrate adequate financial resilience or cash flow generation to support new credit facilities without significant mitigating controls or guarantees.

2. Financial Strength:
   The balance sheet reveals critical weakness. Fixed assets rose to £65,380, mainly motor vehicles, but cash dropped from £11,321 in 2022 to a negative £474 in 2023, suggesting overdrafts or accounting treatment of bank balances. Current liabilities have increased markedly, creating a negative net current asset position of -£41,924. Even after accounting for fixed assets, total liabilities exceed assets by £139,005, highlighting insolvency concerns. The company’s negative shareholders’ funds indicate that retained losses have overwhelmed initial capital. This weak capital structure limits the company’s ability to absorb shocks or secure further external funding on favorable terms.

3. Cash Flow Assessment:
   Cash flow is a major concern. The reported cash at bank is negative, indicating overdraft usage or restricted liquidity. The mismatch between current liabilities and current assets suggests working capital deficits that could impair day-to-day operations. The company’s operating cash generation is not evidenced in the accounts, and the heavy investment in fixed assets may have strained cash reserves. Without positive operational cash inflows or additional equity injections, the company faces difficulty in servicing debt and meeting supplier payments timely.

4. Monitoring Points:

• Liquidity ratios: Monitor cash balances and current ratio closely to track working capital adequacy.
• Debt servicing: Watch interest and principal repayments on borrowings to avoid covenant breaches or defaults.
• Profitability trends: Assess future income statements to determine if losses stabilize or reverse.
• Asset utilization: Evaluate the productivity and usage of fixed assets to justify capital employed.
• Director actions: Monitor for any changes in management or further capital injections that might improve the financial position.
• Filing compliance: Ensure timely submission of future accounts and confirmation statements for transparency.