PAV ELECTRICAL CONTRACTORS LIMITED

Executive Summary

PAV Electrical Contractors Limited demonstrates a stable but cautious financial position with positive equity and solid cash reserves. However, a very tight working capital and significant current liabilities suggest liquidity risks that require close monitoring. By enhancing cash flow management and debtor collection, the company can improve its financial health and support sustained growth.

PAV ELECTRICAL CONTRACTORS LIMITED - Analysis Report

Company Number: 14078153

Analysis Date: 2025-07-29 18:58 UTC

Financial Health Assessment: PAV ELECTRICAL CONTRACTORS LIMITED (as of 31 March 2024)

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1. Financial Health Score: B-

Explanation:
The company shows signs of a stable but cautious financial position. It has positive net assets, a modest working capital surplus, and reasonable cash reserves indicating operational viability. However, the very tight net current assets, substantial current liabilities, and deferred tax provision indicate some financial stress symptoms. Overall, the company is in fair health but with areas requiring close monitoring and improvement.

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2. Key Vital Signs: Critical Metrics and Interpretation

Metric	Value (£)	Interpretation
Fixed Assets	40,968	Represents investment in tangible assets (vehicles, plant). Healthy for a newly established firm.
Current Assets	152,766	Includes cash, debtors, and stock. Strong liquidity base, especially cash (£85,062).
Current Liabilities	150,985	High short-term obligations almost equal to current assets, indicating tight liquidity balance.
Net Current Assets (Working Capital)	1,781	Minimal buffer; symptoms of tight liquidity risking cash flow stress if receivables delayed.
Net Assets (Equity)	32,507	Positive equity base showing capital and retained earnings supporting solvency.
Shareholders’ Funds	32,507	Reflects owner’s stake; good increase from initial £100, indicating retained profits.
Deferred Tax Liability	-10,242	Non-cash liability due to timing differences; requires future tax payments, reducing net assets.
Average Employees	10	Indicates operational scale; relatively small workforce consistent with a micro/small company.

Additional Observations:

• Stocks of £20,000 indicate inventory presence; must be managed carefully to avoid obsolescence.
• Debtors of £47,704 suggest some credit sales; timely collection critical to maintain cash flow.
• Cash balance is healthy for the company size, providing a cushion for day-to-day operations.

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3. Diagnosis: What the Financial Data Reveals About Business Health

The company is in an early stage of growth with investments in vehicles and equipment supporting its electrical installation operations. The presence of positive net assets and shareholders’ funds signals that the business is solvent and generating retained profits, a healthy sign akin to a patient gaining strength after initial treatment.

However, the very slim net working capital (only £1,781) amid substantial current liabilities points to potential liquidity strain—a symptom of financial tightness. This could lead to cash flow bottlenecks if payments from debtors are delayed or unexpected expenses arise. The deferred tax liability of over £10k, while a non-cash item, suggests future tax payments that need to be planned for prudently.

The company’s financial statements are prepared under the small companies regime, unaudited, which is typical but means less external assurance on figures.

Overall, the financial health is stable but fragile, resembling a patient who is recovering but still requires careful monitoring and management of cash flows and liabilities to avoid relapse into distress.

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4. Recommendations: Specific Actions to Improve Financial Wellness

• Strengthen Working Capital:
  Improve collection cycles on trade debtors to boost liquidity buffer. Consider negotiating better payment terms with suppliers to ease short-term cash outflows.

• Cash Flow Management:
  Implement rigorous cash flow forecasting and monitoring to anticipate and manage payment obligations, especially given current liabilities nearly equal current assets.

• Inventory Control:
  Regularly review stock levels and turnover to avoid excess inventory tying up cash or becoming obsolete.

• Tax Planning:
  Prepare for deferred tax payments by setting aside reserves and engaging with tax advisors to optimize tax liabilities and timing.

• Profitability Tracking:
  Since profit and loss figures are not disclosed, ensure regular internal financial reviews to monitor margins and operational efficiency.

• Growth and Investment:
  As the company expands, consider formal audit or review processes to enhance credibility with lenders and investors.

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Medical Analogy Summary:
PAV Electrical Contractors Limited shows signs of a recovering patient with a solid foundation of assets and equity. However, the company’s "circulatory system" — its cash and working capital — is currently under mild strain, indicating the need for careful management to avoid cash flow "blockages" that could impair its health. With attentive care — improving cash inflows and managing outflows — the company’s financial wellness can strengthen, supporting sustainable growth.

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