RAE DESIGN SOLUTIONS LTD

Executive Summary

RAE DESIGN SOLUTIONS LTD has a solid asset base and positive net worth, indicating solvency. However, the company exhibits symptoms of liquidity distress with negative working capital, highlighting the need for improved cash flow management and potential financing. With careful attention to short-term obligations and operational cash flow, the company’s financial health outlook is cautiously optimistic.

RAE DESIGN SOLUTIONS LTD - Analysis Report

Company Number: 15352339

Analysis Date: 2025-07-20 16:09 UTC

Financial Health Assessment for RAE DESIGN SOLUTIONS LTD

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1. Financial Health Score: C

Explanation:
RAE DESIGN SOLUTIONS LTD is a newly incorporated private limited company, active in the engineering-related scientific and technical consulting sector. The company shows a moderate financial footing with positive net assets, but there are clear signs of liquidity strain due to significant current liabilities exceeding current assets. The financial position is stable but with symptoms of working capital stress requiring attention.

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2. Key Vital Signs

Metric	Value (£)	Interpretation
Fixed Assets	67,511	Healthy investment in long-term assets, mainly property.
Current Assets	4,575	Limited short-term liquid resources available.
Cash	3,735	Cash on hand is low relative to current liabilities.
Current Liabilities	41,876	High short-term obligations, indicating pressure on liquidity.
Net Current Assets (Working Capital)	-37,301	Negative working capital, a symptom of liquidity distress.
Net Assets (Shareholders' Funds)	30,169	Positive net worth, indicating overall solvency at balance sheet date.
Share Capital	100	Minimal share capital, typical for new startups.
Retained Earnings	30,069	Accumulated profits or reserves, possibly reflecting initial capital or revaluation.

Interpretation:

• The company holds substantial fixed assets, largely investment property, which supports long-term stability but is not easily converted to cash in the short term.
• The current assets, including cash and debtors, are insufficient to cover current liabilities, indicating a liquidity mismatch.
• Negative working capital signals a "symptom of distress" in meeting short-term financial obligations without resorting to external financing or asset liquidation.
• Positive net assets and shareholder funds suggest the company is solvent and has a good "balance sheet pulse," but the liquidity strain must be managed carefully.

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3. Diagnosis

RAE DESIGN SOLUTIONS LTD's financial health shows a mixed picture:

• Strengths:

  • The company has invested in tangible and investment property assets, providing a solid foundation.
  • Net assets are positive, indicating the company’s total assets exceed total liabilities, a sign of solvency.
  • No audit requirement due to small company status reduces compliance costs.

• Symptoms of Distress:

  • Negative net current assets (working capital) point to potential cash flow difficulties. The company owes £41,876 due within a year but holds only £4,575 in current assets.
  • Reliance on loans from key management personnel (£33,099) classified as current liabilities suggests internal funding to bridge liquidity gaps.
  • No employees currently, which may limit operational capacity or reflect early-stage business development.

• Underlying Issues:

  • The liquidity crunch could stem from timing differences in cash receipts and payments or from the capital structure focusing on fixed asset investment rather than operational cash flow.
  • Since the company was incorporated late in 2023 and the accounts cover just over one year, the financial history is limited, and the strain may be temporary during the startup phase.

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4. Prognosis

• Without intervention, the liquidity strain could worsen, risking delayed payments to suppliers or tax authorities.
• The investment property may provide collateral for borrowing or future sale to improve cash flow if necessary.
• The company’s solvency and asset base provide a good foundation for recovery once operational cash inflows increase.
• Monitoring working capital closely and improving cash conversion cycles will be critical for financial wellness.
• Continued support from directors or external funding may be required in the short term.

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5. Recommendations

• Improve Cash Flow Management:

  • Prioritize timely invoicing and collections to increase current assets.
  • Negotiate extended payment terms with creditors to alleviate immediate cash pressures.

• Review Current Liabilities:

  • Assess the nature and urgency of the £41,876 current liabilities, including tax and other creditors.
  • Explore restructuring or refinancing options to stagger payments.

• Capital Injection or External Financing:

  • Consider additional equity funding or bank loans to bolster working capital.
  • Utilize investment property as leverage if necessary.

• Operational Planning:

  • Develop a detailed cash flow forecast to anticipate and manage liquidity needs.
  • Evaluate operational costs carefully before expanding staff or overheads.

• Regular Financial Monitoring:

  • Establish monthly financial health checks focusing on liquidity ratios and cash flow.
  • Engage professional advice periodically to ensure compliance and optimize financial structure.

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Medical Analogy Summary:
RAE DESIGN SOLUTIONS LTD’s financial "vitals" show a robust long-term "skeleton" of asset investment but a "weak pulse" in liquidity, akin to a patient with a strong heart but low blood pressure. Immediate care to improve cash flow and reduce short-term liabilities will stabilize the condition and promote healthy growth.

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