PROP IT STUDIO LTD

Executive Summary

PROP IT STUDIO LTD is a new company showing early-stage financial strain, including negative working capital and equity, indicating a fragile condition common in startups. Immediate action on cash flow management, equity injection, and liability monitoring is recommended to improve financial health and ensure sustainability.

PROP IT STUDIO LTD - Analysis Report

Company Number: 15146250

Analysis Date: 2025-07-29 16:39 UTC

Financial Health Assessment for PROP IT STUDIO LTD

As of 30 September 2024

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1. Financial Health Score: D (Poor)

Explanation:
The company shows early-stage financial strain with net current liabilities and negative shareholders’ funds. While it is common for a startup or newly incorporated company to have some financial imbalance initially, the current figures suggest caution. The negative working capital and equity indicate the company is "suffering symptoms of financial distress," needing careful management to avoid liquidity issues.

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2. Key Vital Signs

Metric	Value (£)	Interpretation
Current Assets	5,317	Low asset base; mainly debtors and cash
Cash at Bank	984	Very limited cash "in the bloodstream"
Debtors (Receivables)	4,333	Majority of current assets; risk if not collected timely
Current Liabilities	5,767	Slightly higher than current assets; short-term obligations exceed assets
Net Current Assets	-450	Negative working capital; liquidity stress sign
Shareholders’ Funds	-452	Negative equity; company’s liabilities exceed assets
Called Up Share Capital	2	Minimal initial capital injection
Operating Lease Commitments	1,083	Fixed cash outflows to be managed

Vital Signs Interpretation:

• Negative Working Capital: Indicates potential difficulty meeting short-term liabilities with available liquid assets. This is akin to a patient whose vital signs show dehydration — immediate attention is required to restore balance.
• Negative Equity: Shareholders’ funds below zero signal that accumulated losses or liabilities outstrip the capital invested, a warning of financial fragility.
• Low Cash Reserves: Cash of only £984 is a "weak pulse," limiting the company’s ability to absorb shocks or fund daily operations without external support or rapid receivables collection.
• Debtors Concentration: High reliance on receivables for liquidity can be risky if customers delay payments.

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3. Diagnosis

PROP IT STUDIO LTD is a newly established company (incorporated Sept 2023), operating in specialised design activities (SIC 74100). The financial "symptoms" reveal that the company is in its infancy, with very limited capital and negative net current assets indicating a fragile financial condition. The company has not generated retained earnings yet (no profit and loss reserve), and the minimal share capital (£2) reflects a common small start-up approach but also a thin capital buffer.

The current liabilities slightly exceed current assets, primarily due to amounts owed to group undertakings (£4,567) and other creditors (£1,200). This dependence on intra-group debt may mask liquidity issues if these loans are not easily accessible or convertible to cash.

The directors’ statement affirms going concern, relying on creditor support, which is analogous to a patient stabilized through external intervention but not yet fully recovered.

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4. Recommendations

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

• Enhance Cash Flow Management:
  Prioritize prompt collection of debtors and maintain tight control over cash outflows. Cash is the lifeblood; without sufficient reserves, the company risks "circulatory failure" (inability to pay obligations).

• Increase Capital Injection:
  Inject additional equity to strengthen shareholders’ funds and reduce reliance on short-term borrowings, especially from group undertakings. This will improve the balance sheet and investor confidence.

• Monitor and Manage Liabilities:
  Negotiate longer payment terms where possible to ease immediate pressure on cash flow, and review operating lease commitments to ensure they are sustainable relative to expected revenues.

• Develop Profitability:
  Focus on generating positive net income to build reserves and improve equity position over time. Early and effective business development activities are key.

• Regular Financial Reviews:
  Establish monthly financial health checks, monitoring liquidity ratios and cash flow forecasts to detect early signs of distress and adjust plans accordingly.

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Executive Summary

PROP IT STUDIO LTD’s financial health is currently fragile, with negative working capital and equity reflecting typical start-up challenges. Immediate focus on cash flow management, capital strengthening, and liability control is essential to stabilize and build a financially healthy foundation. With careful stewardship and operational progress, the company can improve its financial vitality over the coming periods.