ROOTS TO BRANCHES LIMITED

Executive Summary

Roots To Branches Limited shows moderate financial health with positive net assets but signs of liquidity strain and declining working capital. The company faces cash flow tightening due to increased liabilities and higher receivables, signaling the need for improved financial management. Proactive steps in cash flow control, cost management, and receivables collection are recommended to stabilize and improve the company’s financial wellness.

ROOTS TO BRANCHES LIMITED - Analysis Report

Company Number: 13798514

Analysis Date: 2025-07-20 15:57 UTC

Financial Health Assessment: ROOTS TO BRANCHES LIMITED (As of 31 December 2023)

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1. Financial Health Score: C

Explanation:
ROOTS TO BRANCHES LIMITED exhibits a moderate financial health profile. The company maintains positive net assets and working capital, indicating fundamental solvency and liquidity. However, there are clear symptoms of financial stress in the form of declining cash reserves, increasing current liabilities, and a significant drop in net current assets compared to prior years. These signs suggest caution and the need for proactive financial management to prevent deterioration.

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2. Key Vital Signs

Metric	2023 Value	2022 Value	Interpretation
Current Assets	£29,770	£32,797	Slight decrease; liquidity slightly reduced but still positive.
Cash at Bank	£13,759	£27,323	Cash reserves halved—indicates tightening liquidity.
Debtors (Receivables)	£16,011	£5,474	Increased debtor balance; risk of delayed cash inflows.
Current Liabilities	£19,318	£11,650	Significant increase; more short-term obligations to meet.
Net Current Assets	£10,452	£21,147	Working capital halved; liquidity cushion weakened.
Net Assets (Equity)	£11,550	£21,600	Equity reduced by nearly 47%; signals erosion of retained earnings.
Tangible Fixed Assets	£1,356	£559	Investment in fixed assets increased; potential capital expenditure.

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3. Diagnosis: Financial Symptoms and Underlying Health

• Liquidity Stress:
  The company’s cash balance has dropped sharply from £27,323 to £13,759 over the year, while current liabilities have increased by around 66%. This combination signals symptoms of tightening liquidity—a "weak pulse" in cash flow terms. The company must ensure timely collection of debts to maintain operational "vitality."

• Receivables Management:
  Debtors have nearly tripled, suggesting possible issues with credit control or extended payment terms. Rising receivables can be likened to "congestion" in the circulatory system, potentially restricting the free flow of cash.

• Working Capital Decline:
  Net current assets are down by over 50%, indicating a reduced buffer to meet short-term obligations. This is a critical "vital sign" and suggests the company’s short-term financial health is less robust than in the previous year.

• Equity Erosion:
  Shareholders’ funds or net assets have decreased significantly, mainly due to reduced retained earnings. This "loss of body mass" could be a result of operational losses or dividend payments exceeding profits. The detailed profit and loss account was not provided, but the trend suggests operating challenges.

• Modest Capital Investment:
  Increased tangible assets show some reinvestment in the business, possibly to support growth or efficiency, which could pay dividends in the medium term if managed carefully.

• Company Size and Filing:
  As a small company under the small companies regime with only 2 employees, the financial complexity is limited but the business remains vulnerable to cash flow shocks.

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4. Recommendations: Steps to Improve Financial Wellness

• Strengthen Cash Flow Management:

  • Prioritize faster collection of receivables to reduce debtor days. Consider stricter credit policies or incentives for early payment.
  • Monitor and control cash outflows carefully to avoid liquidity crunches.

• Manage Current Liabilities:

  • Negotiate longer payment terms with suppliers where possible to ease short-term cash pressure.
  • Avoid incurring additional short-term debts unless absolutely necessary.

• Review Profitability:

  • Analyze operational costs and revenue streams to identify areas for margin improvement.
  • Consider cost control measures to restore retained earnings and rebuild equity.

• Capital Expenditure Planning:

  • Ensure any fixed asset investments are aligned with clear business benefits and do not unduly strain cash resources.
  • Explore financing options if capital investments are essential but cash is limited.

• Regular Financial Monitoring:

  • Implement monthly financial reviews focusing on liquidity ratios and cash flow forecasts to catch early warning signs.
  • Engage with financial advisors if necessary to support turnaround strategies.

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Medical Analogy Summary:

ROOTS TO BRANCHES LIMITED currently shows "symptoms of financial distress" characterized by "weakening cash flow" and "shrinking working capital reserves." While it remains "solvent" with positive net assets, the company's "financial pulse" is weakening. Without intervention, these symptoms may progress to more serious conditions threatening business viability. Early and focused management actions can restore financial "health" and resilience.

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