NAKFA RESTAURANT & BAR LTD

Executive Summary

Nakfa Restaurant & Bar Ltd is currently experiencing financial distress characterized by negative net assets and working capital deficits, indicating an urgent need for financial management intervention. As a young micro-entity in a competitive sector, it must focus on improving liquidity, restructuring liabilities, and boosting profitability to stabilize its financial health. Prompt action can help restore balance and ensure sustainable operations.

NAKFA RESTAURANT & BAR LTD - Analysis Report

Company Number: 14282756

Analysis Date: 2025-07-29 19:37 UTC

Financial Health Assessment for Nakfa Restaurant & Bar Ltd
Assessment Date: Financial year ended 31 August 2023

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1. Financial Health Score: D

Explanation:
The company exhibits several concerning signs including net liabilities (negative net assets) which point to financial distress. Although it maintains positive current assets, the overall net position is negative, indicating the company’s obligations outweigh its resources. This score reflects a fragile state, suggesting immediate financial attention is required to restore health.

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2. Key Vital Signs (Critical Metrics & Interpretation)

Metric	Value (£)	Interpretation
Current Assets	11,025	Represents short-term resources (cash, receivables, stock). The company has some liquid assets.
Current Liabilities	13,124	Debts due within one year. Slightly higher than current assets, indicating potential liquidity risk.
Net Current Assets	-2,099	Current assets minus current liabilities; negative value signals working capital deficiency.
Creditors Falling After 1 Year	13,124	Long-term liabilities, significant compared to assets, contributing to negative net assets.
Net Assets / Shareholders’ Funds	-2,099	Total assets minus total liabilities; negative figure shows the company owes more than it owns.
Number of Employees	1	Very small workforce, typical of micro-entity; operational scale is limited.

Interpretation Summary:

• The company’s working capital is negative, a key symptom of financial strain. This means day-to-day operations may face cash flow challenges.
• Net liabilities indicate insolvency on a balance sheet basis, which is a serious symptom akin to a patient having critical organ failure.
• The balance sheet shows long-term creditors exceeding tangible assets, amplifying financial stress.
• Being a micro-entity with only one employee, the business is likely in an early or fragile stage, increasing vulnerability to external shocks.

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3. Diagnosis: Overall Financial Condition Assessment

The company’s financial "vital signs" reveal symptoms of distress:

• Negative net assets suggest the company is technically insolvent, meaning if it ceased trading today, liabilities would be higher than assets. This is a serious red flag for investors and creditors.
• Negative net current assets (working capital deficit) imply insufficient short-term resources to cover immediate debts, risking operational disruptions such as inability to pay suppliers on time.
• The company is very young (incorporated in 2022) and small-scale, likely still in a growth or setup phase, but the financial position indicates it has yet to build sufficient equity or profitability.
• The absence of audit and reliance on micro-entity reporting provisions are typical but mean less external scrutiny, so financial discipline and controls should be carefully monitored.

Medical Analogy:
The company is akin to a patient with low blood pressure and weak pulse—its financial “circulation” (cash flow and working capital) is inadequate to sustain healthy business “organ” function. Without intervention, the risk of collapse (insolvency) increases.

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4. Recommendations: Specific Actions to Improve Financial Wellness

1. Improve Working Capital Management:

   • Accelerate receivables collection and manage payables to balance cash flow.
   • Consider negotiating longer payment terms with creditors to reduce short-term pressure.

2. Capital Injection or Debt Restructuring:

   • Seek additional equity investment or shareholder loans to restore positive net assets and provide a financial buffer.
   • Engage with creditors early to restructure or extend repayment terms on long-term liabilities.

3. Increase Profitability:

   • Review pricing, cost controls, and operational efficiencies to improve margins.
   • Explore marketing or customer acquisition strategies to boost revenue given the licensed restaurant sector’s competitive nature.

4. Financial Monitoring and Controls:

   • Implement regular cash flow forecasting and budgeting to anticipate liquidity needs.
   • Consider professional financial advice to ensure compliance and optimize financial structure.

5. Governance and Transparency:

   • Maintain timely filing and compliance to avoid penalties and maintain stakeholder confidence.
   • Transparent communication with investors and creditors about plans and risks.

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