PALE FOUNTAIN LTD

Executive Summary

Pale Fountain Ltd is currently in a fragile financial condition, with working capital nearly depleted and equity drastically reduced over the past year. This indicates liquidity stress and capital erosion, putting the company at risk of insolvency if no corrective actions are taken. Strengthening cash flow management, cost control, and securing additional funding are vital to restore financial health and ensure future viability.

PALE FOUNTAIN LTD - Analysis Report

Company Number: 14157191

Analysis Date: 2025-07-29 19:50 UTC

Financial Health Assessment for Pale Fountain Ltd (as of 30 June 2024)

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1. Financial Health Score: D

Explanation:
The company shows signs of financial distress compared to the prior year. While it is still active, key liquidity measures have deteriorated sharply, with net current assets (working capital) almost depleted and net assets significantly reduced. This indicates a fragile financial condition and limited cushion against operational or market shocks.

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2. Key Vital Signs

Metric	2024 Value (£)	2023 Value (£)	Interpretation
Fixed Assets	290	438	Minimal investment in long-term assets; stable but small base.
Current Assets	7,433	7,568	Slight decrease; cash and receivables relatively steady.
Current Liabilities	7,389	4,464	Significant increase in short-term obligations – symptom of cash flow pressure.
Net Current Assets	44	3,104	Critical drop; working capital nearly zero, indicating liquidity tightness.
Net Assets (Equity)	84	3,292	Equity almost wiped out; potential solvency concerns.
Shareholders Funds	84	3,292	Mirrors net assets, reflecting loss absorption and capital erosion.

Interpretation of Vital Signs:

• The net current assets dropping from £3,104 to £44 suggests the company’s short-term liquidity is nearly exhausted. This is like a patient whose blood pressure (cash flow) has fallen dangerously low, signaling distress.
• The dramatic reduction in net assets from £3,292 to £84 indicates accumulated losses or write-downs, reducing the company’s financial "immune system."
• Current liabilities rising sharply signal increasing immediate obligations, possibly due to delayed payments or mounting creditors.

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3. Diagnosis

The financial figures reveal a company struggling with liquidity and capital preservation in its second full year of operation. The near depletion of working capital suggests the business may be just managing to meet short-term obligations, with little buffer for unforeseen expenses or investment opportunities. The erosion of equity points to losses incurred, possibly from operating costs exceeding income or asset impairments.

While the company remains a going concern for now, these symptoms of financial stress—low net current assets and diminished shareholder funds—are warning signs that without intervention, the company risks insolvency or may face difficulty obtaining credit or investment.

The minimal fixed assets and stable current assets imply the business is service-oriented, consistent with its SIC code (other business support services). The small number of employees (1) further supports a micro-business profile.

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4. Recommendations

To improve financial wellness and restore vitality, the company should consider the following steps:

• Strengthen Cash Flow Management:
  Increase focus on timely collection of receivables, delay non-essential payments, and manage inventory or overheads tightly to avoid liquidity crunch.

• Review Cost Structure:
  Analyze operating expenses and identify areas for cost reduction or efficiency improvements to avoid further erosion of equity.

• Seek Additional Capital:
  Infuse fresh funds from shareholders or external lenders to rebuild shareholder funds and working capital, akin to a transfusion to restore strength.

• Monitor Creditors and Debtors:
  Negotiate extended payment terms with suppliers while accelerating customer payments to improve net current assets.

• Prepare for Contingencies:
  Develop a cash flow forecast and scenario plans to anticipate future shortfalls and take timely action.

• Professional Financial Advice:
  Engage an accountant or financial advisor for detailed cash flow analysis and restructuring options if necessary.

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Summary

Pale Fountain Ltd shows critical symptoms of financial strain with severely reduced working capital and equity, signaling a fragile financial state. Without swift corrective measures to improve liquidity and capital base, the company’s financial health could deteriorate further. Prompt action to manage cash flow, control costs, and secure funding is essential for recovery and sustainable operations.