R SHORT & SONS LTD

Executive Summary

R SHORT & SONS LTD is a young private limited company showing early signs of financial strain, particularly from negative working capital and minimal equity. While compliant with filings and operational, the company faces liquidity risks that require active management of cash flow and working capital. Strengthening cash reserves and equity, alongside better debtor and creditor management, will be critical to stabilizing and improving financial health.

R SHORT & SONS LTD - Analysis Report

Company Number: 14469019

Analysis Date: 2025-07-20 13:28 UTC

Financial Health Assessment for R SHORT & SONS LTD (as at 30 November 2023)

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1. Financial Health Score: D

Explanation:
The company exhibits warning signs of financial distress, primarily due to a negative working capital and minimal net assets. While it is still operational and compliant with filing requirements, the financial "vital signs" suggest liquidity pressures and limited financial cushion, warranting cautious monitoring and prompt remedial action.

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2. Key Vital Signs

Metric	Value	Interpretation
Current Assets	£30,802	Short-term assets available to cover immediate liabilities
Current Liabilities	£42,710	Short-term debts due within one year
Net Current Assets	-£11,908	Negative working capital ("symptom of liquidity strain")
Cash	£6,576	Limited cash "in the bloodstream" to cover urgent payments
Debtors	£20,026	Amount owed by customers, but may not be immediately collectible
Fixed Assets	£11,947	Long-term assets, relatively modest for business scale
Total Assets Less Current Liabilities	£39	Essentially "net assets" close to zero, indicating minimal equity
Shareholders' Funds	£100	Very low equity base, minimal buffer to absorb losses
Retained Earnings (P&L Reserve)	-£61	Negative accumulated profits, indicating losses or start-up phase
Director's Loan Account	£18,795	Funds advanced by director, potentially used to support liquidity

Interpretation:

• The negative net current assets is a clear "symptom of distress," meaning the company’s short-term obligations exceed its short-term assets. This situation can cause cash flow crunches if unpaid debts or creditors demand settlement.
• Cash on hand is low relative to current liabilities, increasing the risk of liquidity shortfalls.
• The director’s loan indicates that the company is relying on internal financing to maintain operations, which is common for new or small companies but may signal underlying cash flow issues.
• The very low net asset figure and negative retained earnings show the business is either in early loss-making stages or has not yet built a financial cushion.

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3. Diagnosis: Financial Condition Assessment

R SHORT & SONS LTD is a newly incorporated private limited company (since Nov 2022) operating in the building completion and finishing industry. Its financial "vitals" reveal a start-up or early-stage company profile with:

• Liquidity strain: Negative working capital suggests the company could struggle to meet short-term obligations without additional financing or improved cash inflows.
• Minimal equity buffer: Shareholder funds are essentially nominal (£100), and retained earnings are negative, implying limited ability to absorb operational shocks or losses.
• Dependence on director financing: The director's loan of nearly £19k indicates reliance on personal funds to sustain operations, which may not be sustainable long term.
• Asset base: Fixed assets and stock are modest and aligned with a small business stage.

In medical terms, the company presents "symptoms of financial stress" but is not yet in "critical condition." The lack of overdue filings ("no fever" from compliance perspective) is positive, but the financial state is fragile.

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4. Recommendations: Actions to Improve Financial Wellness

1. Improve Working Capital Management:

   • Accelerate debtor collections to convert receivables into cash faster.
   • Negotiate extended payment terms with suppliers to better align cash inflows and outflows.
   • Monitor and reduce stock levels where possible to free up cash.

2. Increase Cash Reserves:

   • Consider short-term financing options (e.g., overdraft, invoice factoring) to ease liquidity pressures.
   • Evaluate pricing and contract terms to improve cash conversion cycles.

3. Strengthen Equity Base:

   • Explore additional equity investment from shareholders or external investors to build a stronger capital buffer.
   • Retain profits as the business grows to improve retained earnings.

4. Monitor Director's Loan Account:

   • Formalize director loans with clear repayment terms to manage personal risk and maintain transparency.
   • Aim to reduce reliance on director advances by improving business cash flows.

5. Regular Financial Monitoring:

   • Implement monthly cash flow forecasts and management reporting to identify issues early.
   • Engage professional advice for financial planning and possible restructuring if needed.

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