R2K CONSULTING LONDON LTD

Executive Summary

R2K Consulting London Ltd exhibits clear symptoms of financial distress, including a drastic reduction in liquid assets and shareholder equity over the past year. The company’s current financial condition is fragile, with a high risk of liquidity shortages if corrective actions are not taken promptly. Immediate focus on cash flow management, equity restoration, and operational efficiency is critical to stabilizing and improving the company’s financial health.

R2K CONSULTING LONDON LTD - Analysis Report

Company Number: 14355570

Analysis Date: 2025-07-20 13:38 UTC

Financial Health Assessment for R2K CONSULTING LONDON LTD as of 30 September 2024

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1. Financial Health Score: D

Explanation:
The company shows significant signs of financial distress over the two-year period, with a sharp decline in net current assets, shareholders' funds, and total assets less current liabilities. The health score "D" reflects a fragile financial position indicating the company is struggling to maintain its financial stability and may face liquidity challenges if the current trajectory continues.

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2. Key Vital Signs

Metric	2024 (£)	2023 (£)	Interpretation
Fixed Assets	0	1,182	Complete write-off of fixed assets signals asset depletion; potential cutbacks or disposals.
Current Assets	4,385	48,705	Drastic drop (~91%) in current assets, mainly cash and receivables — severe liquidity concern.
Current Liabilities	0	20,453	No current liabilities reported in 2024, possibly due to restructuring or late recognition.
Net Current Assets	4,385	28,252	Sharp fall indicates weakened short-term financial cushion to cover obligations.
Total Assets Less Current Liabilities	4,385	29,434	Significant decline suggests deteriorating net asset base.
Shareholders' Funds (Equity)	2,550	26,074	Equity eroded by ~90%, indicating losses or withdrawals exceeding profits/capital input.

Other observations:

• The company is a Micro entity, with 1 employee (director) who is also the sole shareholder controlling 75-100% of shares and voting rights.
• Director’s advances and credits to the company have fluctuated, with a zero balance outstanding in 2024 after a significant repayment.
• No audit was required as per micro-entity exemption, which is common for a company of this size but means less external financial scrutiny.

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3. Diagnosis: What the Financial Data Reveals

• Symptoms of Financial Distress:
  The most alarming symptom is the near collapse of current assets from £48,705 to £4,385 in a single year, indicating a severe cash flow crunch or asset liquidation. This could signify the company is burning cash faster than it can generate income or is unable to collect receivables.

• Equity Erosion:
  The shrinkage of shareholders' funds from £26,074 to £2,550 signals accumulated losses or drawings by the director exceeding retained earnings, reducing the company’s net worth to a precariously low level.

• Fixed Assets Disappearance:
  The disappearance of fixed assets may reflect asset sales to raise cash or write-offs due to impairment, which further weakens the company’s operational base.

• Zero Current Liabilities in 2024:
  Reporting zero current liabilities compared to £20,453 the prior year could indicate delayed recognition of payables, reclassification, or successful debt repayment. However, it may also mask underlying obligations not yet accounted for.

• Director’s Financial Relationship:
  The director’s advances and repayments suggest active personal funding to support the business, which can be a lifeline but also a risk if the company remains unprofitable.

Overall, the company is experiencing significant financial strain, characterized by poor liquidity and diminished capital buffers. These "symptoms" indicate an urgent need to stabilize cash flow and rebuild equity to avoid insolvency risks.

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4. Recommendations: Specific Actions to Improve Financial Wellness

1. Improve Cash Flow Management:

   • Conduct rigorous cash flow forecasting and control expenses tightly.
   • Accelerate receivables collection and negotiate extended payment terms with suppliers to maintain short-term liquidity.

2. Restore Equity Base:

   • Consider capital injection either via shareholder loans or equity to strengthen the balance sheet.
   • Avoid excessive drawings or director repayments until profitability improves.

3. Asset Utilization Review:

   • Assess the necessity of fixed assets and current assets to optimize operational efficiency.
   • Avoid further asset disposals that compromise core business operations.

4. Financial Reporting and Monitoring:

   • Maintain timely and accurate financial records to detect early warning signs.
   • Consider professional financial advice to interpret trends and implement turnaround strategies.

5. Business Model Evaluation:

   • Review the consulting services offering (SIC: 71122) for profitability and market demand.
   • Explore diversification or cost restructuring to improve margins.

6. Engage with Stakeholders:

   • Transparent communication with creditors, customers, and investors about financial position and recovery plans to maintain trust.

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