RW ELECTRICAL (SOUTH WALES) LTD

Executive Summary

RW ELECTRICAL (SOUTH WALES) LTD exhibits a stable but modest asset base with improving equity, yet it faces liquidity challenges due to persistent negative working capital. While the company is currently solvent, focused actions on working capital management and cash flow monitoring are essential to strengthen its financial resilience and support sustainable growth.

RW ELECTRICAL (SOUTH WALES) LTD - Analysis Report

Company Number: 13120243

Analysis Date: 2025-07-20 11:25 UTC

Financial Health Assessment of RW ELECTRICAL (SOUTH WALES) LTD as of 31 March 2024

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1. Financial Health Score: C

Explanation:
The company demonstrates some positive aspects such as consistent shareholder equity growth and stable fixed assets. However, the persistent net current liabilities (negative working capital) indicate liquidity stress, lowering the overall financial health to a moderate "C" grade. This suggests the company is facing symptoms of financial strain that need monitoring and corrective action to avoid further deterioration.

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2. Key Vital Signs

Metric	2024 Value (£)	Interpretation
Fixed Assets	15,491	Stable investment in long-term assets, showing some capital base consistency.
Current Assets	23,486	Short-term resources (cash, receivables) increased, which is a positive sign for liquidity.
Current Liabilities	26,646	Obligations due within one year are higher than current assets, a warning sign of potential liquidity crunch.
Net Current Assets	-3,160	Negative working capital; current liabilities exceed current assets, indicating liquidity stress.
Total Assets less CL	12,331	Indicates net assets available after short-term liabilities, showing modest but positive equity.
Shareholders' Funds	12,331	Equity has increased compared to prior years, showing retained earnings or capital injections.

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3. Diagnosis: What the Numbers Reveal

• Liquidity Concerns ("Symptoms of Distress"): The company shows a consistent pattern of negative net current assets (working capital deficit) over recent years. This means it currently owes more in short-term liabilities than it holds in short-term assets, which could signal cash flow difficulties, especially if creditors demand payment quickly or if debtors delay payments.

• Stable but Small Capital Base: Fixed assets are modest but stable, indicating the company has some tangible resources to support ongoing operations.

• Equity Growth: Shareholders' funds have increased from £10,460 in 2023 to £12,331 in 2024, a positive sign that the company is either retaining profits or receiving additional capital, which helps absorb operational losses or support growth.

• Micro-Entity Status: Being a micro-entity means the company has limited financial complexity and reporting requirements but also suggests smaller scale operations and potentially tighter margins.

• Single Employee: The company operates with a very lean structure, which may help keep overheads low but could limit capacity for growth or diversification.

Overall, the company is showing clear signs of operational persistence but with liquidity vulnerabilities that could hamper its ability to meet short-term obligations without additional financing or improved cash flow management.

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4. Recommendations: Steps to Improve Financial Wellness

1. Improve Working Capital Management

   • Aim to reduce current liabilities or increase current assets. Negotiate longer payment terms with suppliers or faster collection of receivables.
   • Consider short-term financing options such as a business overdraft to bridge cash flow gaps.

2. Cash Flow Monitoring

   • Implement rigorous cash flow forecasting to anticipate and manage liquidity pressures proactively.
   • Maintain a cash buffer to absorb unexpected expenses or delays in payments.

3. Cost Control and Revenue Enhancement

   • Review operating costs to identify areas where expenses can be trimmed without impacting service quality.
   • Explore opportunities for increasing sales, possibly by diversifying client base or service offerings in the electrical installation sector.

4. Capital Injection Consideration

   • If feasible, consider additional equity investment to strengthen the balance sheet and provide more working capital.

5. Regular Financial Review

   • Establish monthly financial health checks focusing on key metrics such as current ratio, quick ratio, and cash conversion cycle to detect early warning signs.

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