Company Number: 13112228

Analysis Date: 2025-07-20 13:03 UTC

Financial Health Assessment of Roasted Café Limited (Year Ended 29 February 2024)

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1. Financial Health Score: D

Explanation:
Roasted Café Limited shows persistent negative net assets and significant working capital deficits over the last three years, indicating financial distress. While the directors provide ongoing support and the company remains a going concern, the financial "vital signs" point to a business struggling to maintain healthy liquidity and solvency levels. The overall financial condition is fragile, requiring immediate attention to improve sustainability.

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2. Key Vital Signs: Critical Metrics and Interpretation

Metric	2024 (£)	2023 (£)	Trend	Interpretation
Fixed Assets	43,918	61,645	↓	Declining investment in long-term assets, potential asset disposals or depreciation.
Current Assets (Cash, Debtors)	10,292	11,125	Slight ↓	Very low liquid assets, indicating weak cash reserves.
Current Liabilities	251,355	186,174	↑ (Worsening)	High short-term debts increasing rapidly, creating liquidity pressure.
Net Current Assets (Working Capital)	-241,063	-175,049	↓ (More Negative)	Severe working capital deficit; symptoms of cash flow strain and inability to cover short-term debts.
Total Assets Less Current Liabilities	-197,145	-113,404	↓ (More Negative)	Negative net assets indicate insolvency on a balance sheet basis.
Net Assets (Shareholders' Funds)	-200,145	-115,414	↓ (More Negative)	Accumulated losses exceeding capital; shareholders’ equity is deeply negative.
Staff Numbers	8	5	↑	Growth in headcount may increase fixed costs without corresponding revenue growth.

Summary of Vital Signs:
The company exhibits classic "symptoms of distress" — negative equity, worsening liquidity, and increasing liabilities outpacing assets. The deteriorating working capital position is a critical warning sign of potential cash flow crises.

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3. Diagnosis: Financial Condition Assessment

Roasted Café Limited is currently operating in a state akin to a patient with chronic illness. The financial statements reveal:

• Liquidity Crisis: The company’s current liabilities vastly exceed current assets, indicating an inability to comfortably meet short-term obligations without external support.
• Insolvency on Balance Sheet: Negative net assets reflect accumulated losses that have eroded all shareholder equity, a serious "symptom" indicating financial instability.
• Reliance on Director Support: The directors’ note ongoing financial backing to sustain operations. This "life support" is critical but not a sustainable solution long term.
• Asset Consumption: Declining fixed assets may suggest asset sales or depreciation, which could impair operational capacity if vital equipment or property is affected.
• Growth in Staff Numbers: Increasing employee count without clear evidence of revenue growth could exacerbate cash flow pressures.

Overall, the company's financial health is precarious, with clear signs of distress that, if unaddressed, could lead to insolvency or forced restructuring.

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4. Recommendations: Steps to Improve Financial Wellness

1. Immediate Cash Flow Management:

   • Conduct a detailed cash flow forecast to identify critical shortfalls.
   • Negotiate extended payment terms with creditors to ease immediate liquidity pressure.
   • Accelerate collection of receivables and optimize inventory levels.

2. Capital Structure Review:

   • Explore options for new equity injection or director loans to recapitalize the business.
   • Consider restructuring existing debts to reduce near-term liabilities.

3. Cost Control:

   • Review staffing levels and operational expenses to align costs with realistic revenue expectations.
   • Implement tight budget controls and monitor variances regularly.

4. Business Model and Revenue Enhancement:

   • Assess pricing strategy, menu offerings, and marketing to boost sales and improve margins.
   • Explore additional revenue streams or partnerships to diversify income.

5. Regular Financial Monitoring:

   • Establish monthly financial reviews focusing on liquidity, working capital, and profitability.
   • Use financial dashboards to detect early "symptoms" of distress and respond proactively.

6. Professional Advice:

   • Engage insolvency practitioners or financial advisors early if liquidity issues persist.
   • Directors should ensure compliance with their legal duties to avoid wrongful trading risks.

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