SANCAK CAFE LTD

Executive Summary

Sanacak Cafe Ltd shows solid asset growth and expanding operations but faces liquidity challenges due to negative working capital and increased debt. Addressing cash flow management and controlling debt will be essential to maintain financial wellness and support continued growth.

SANCAK CAFE LTD - Analysis Report

Company Number: 13243786

Analysis Date: 2025-07-29 18:45 UTC

Financial Health Assessment: SANCAK CAFE LTD (as at 31 March 2024)

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1. Financial Health Score: B-

Explanation:
SANCAK CAFE LTD shows solid growth in net assets and fixed assets over the past three years, indicating investment in business infrastructure. However, recent signs of working capital stress (negative net current assets) and the introduction of long-term liabilities detract from liquidity health. Overall, the company is financially stable but showing early symptoms of cash flow strain that require management attention.

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2. Key Vital Signs

Metric	2024 Value	Interpretation
Fixed Assets	£77,051	Significant investment in long-term assets, up from £22,532 (2023). Indicates expansion or capital improvement.
Current Assets	£62,762	Increase from previous year (£42,317), showing improved short-term asset base (cash, stock, receivables).
Current Liabilities	£68,280	Marked increase from £19,375 in 2023, now exceeding current assets, leading to negative working capital. A symptom of liquidity stress.
Net Current Assets (Working Capital)	£-5,518	Negative working capital signals potential difficulty in meeting short-term obligations promptly; an early warning of cash flow issues.
Creditors (Long-term Liabilities)	£19,181	New long-term debt introduced this year, increasing financial leverage and fixed obligations.
Net Assets (Equity)	£52,352	Healthy and growing equity base, up from £45,474 in 2023, reflecting retained earnings and investment.
Average Number of Employees	26	Growth from 10 employees in 2023, indicating operational expansion.

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3. Diagnosis: What the Numbers Reveal

• Healthy Asset Base: The company has increased its fixed assets substantially, depicting growth and capital investment likely aimed at strengthening operational capacity. This is a positive sign akin to building stronger "bones" in the business structure.

• Liquidity Strain: The shift from positive to negative net current assets is a significant symptom of financial distress akin to "poor blood circulation." Current liabilities now exceed current assets, which may constrain the company's ability to pay short-term debts and operational expenses timely.

• Increased Financial Obligations: The addition of long-term liabilities introduces fixed financial commitments that reduce financial flexibility. While not inherently negative, this "long-term debt load" must be carefully managed to avoid overburdening cash flows.

• Scaling Up Operations: The increase in average employees from 10 to 26 suggests the business is growing, but this also increases fixed costs such as salaries, which must be supported by proportionate revenue growth.

• Equity Growth: Net assets and shareholder funds are growing, indicating retained profits or capital injections, providing a healthy buffer or "immune system" for the business.

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4. Recommendations: Actions to Improve Financial Wellness

• Improve Working Capital Management:
  The key priority is to reverse negative working capital. This can be achieved by accelerating receivables collection, reducing inventory holding periods, and negotiating extended payment terms with suppliers. These steps will help improve liquidity and ensure the company can meet short-term obligations without stress.

• Monitor and Manage Debt Levels:
  Careful management of long-term liabilities is crucial. Consider refinancing options to reduce interest costs or stagger repayments to avoid cash flow bottlenecks. Avoid taking on additional debt unless strategically justified.

• Enhance Cash Flow Forecasting:
  Implement robust cash flow forecasting and monitoring processes to anticipate liquidity shortfalls and plan accordingly. This is comparable to regularly monitoring vital signs to catch symptoms before they escalate.

• Align Cost Growth with Revenue:
  As the company scales operations (increased staff), ensure revenue growth supports the increased expenses. Regularly review operational efficiency and consider productivity improvements or cost controls.

• Consider Profitability Reporting:
  As the company grows beyond micro-entity thresholds, preparing full profit and loss accounts will provide deeper insight into operational performance and help diagnose profitability health.

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Summary

SANCAK CAFE LTD is in generally good financial health with growing equity and asset base, reflecting business expansion. However, the recent shift to negative working capital and new long-term debt are early symptoms of liquidity stress that need proactive management. Timely improvements in cash flow management and debt control will be essential to maintain a healthy financial condition and support sustainable growth.