OPTIMAL GRAPHICS LTD

Executive Summary

Optimal Graphics Ltd exhibits a generally healthy financial status with strong cash reserves and positive working capital, supporting operational stability. However, the rise in current liabilities and a slight reduction in retained earnings suggest the need for improved cash flow management and profitability focus. With targeted improvements in receivables collection and liability management, the company is well-positioned for sustained financial wellness and growth.

OPTIMAL GRAPHICS LTD - Analysis Report

Company Number: 13050133

Analysis Date: 2025-07-20 13:03 UTC

Financial Health Assessment for Optimal Graphics Ltd

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1. Financial Health Score: B

Explanation:
Optimal Graphics Ltd demonstrates a generally solid financial position with healthy liquidity and positive net assets, indicating good overall financial wellness. The slight decline in net current assets and net assets in the latest year, along with increased current liabilities, signals some caution but no immediate distress. The company is maintaining positive working capital and shareholder equity, suggesting stability but with room for improving operational efficiency and cash flow management.

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2. Key Vital Signs

Vital Sign	2023 Value	Interpretation
Current Assets	£83,024	Adequate liquid and near-liquid assets to cover short-term obligations.
Cash	£41,861	Strong cash reserve, supporting liquidity and operational flexibility.
Debtors	£38,663	Substantial trade receivables; timely collection is important to maintain cash flow health.
Current Liabilities	£57,730	Increased significantly from prior year; demands vigilant cash management.
Net Current Assets	£25,294	Positive working capital, though decreased from £32,590 in 2022; watch for tightening liquidity.
Net Assets	£43,467	Solid equity base reflecting accumulated retained earnings and positive net worth.
Provisions for Liabilities	£6,000	Reasonable buffer for potential liabilities, indicating prudent risk management.
Share Capital	£100	Minimal share capital; company relies on retained earnings and reserves for capital.
Director Loan (Other Creditors)	£18,113	Notable director creditor balance; reflects internal financing support.

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3. Diagnosis

Healthy Cash Flow:
The company maintains a strong cash position (£41,861), which is about 72% of current liabilities (£57,730), a good sign that it can meet short-term obligations without stress. The positive net current assets (£25,294) indicate the company has more liquid assets than short-term debts, supporting operational stability.

Symptoms of Increasing Liability Pressure:
Current liabilities have risen sharply by ~75% from £32,943 in 2022 to £57,730 in 2023, primarily due to higher taxation/social security and other creditors, including a significant amount owed to a director (£18,113). This suggests increased obligations or delayed payments potentially putting pressure on cash flow if not managed carefully.

Asset Investment and Depreciation:
The increase in tangible fixed assets to £24,173 shows reinvestment in plant, machinery, and vehicles, which is positive for growth and operational capacity. However, depreciation charges are also increasing, which will affect profitability in future years.

Retained Earnings and Equity:
Retained earnings have dropped from £47,656 in 2022 to £43,367 in 2023, indicating the company may have incurred a loss or reduced profits, which warrants monitoring. However, net assets remain positive and substantial relative to share capital, implying the company is still on a sound equity footing.

Single Employee Operation:
With only one employee on average, the company is likely lean and focused, which can be efficient but may limit capacity for scaling or diversification.

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4. Recommendations

1. Enhance Receivables Management:
   Improve debtor collection processes to convert trade receivables more quickly into cash, reducing exposure to bad debts and enhancing liquidity.

2. Manage and Reduce Current Liabilities:
   Prioritize paying down current liabilities, especially director loans and other creditors, to reduce financial pressure and avoid liquidity crunches.

3. Monitor Profitability and Costs:
   Analyze the drop in retained earnings to identify whether costs are rising disproportionately or if revenue growth is slowing, and take corrective action to restore profitability.

4. Plan for Asset Depreciation:
   Account for increasing depreciation in financial planning and ensure capital expenditures are aligned with revenue generation potential.

5. Strengthen Cash Flow Forecasting:
   Develop detailed cash flow projections to anticipate periods of tight liquidity and prepare contingency plans.

6. Consider Growth Opportunities:
   With solid equity and cash reserves, explore ways to expand customer base or services within their niche of vehicle graphics and signage to improve revenue.

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