SARU 365 LTD
Executive Summary
SARU 365 LTD is a very young micro-entity currently facing liquidity challenges and negative net assets, reflecting a fragile financial position. The company relies on director funding to sustain operations but shows some signs of asset growth. With focused cash flow management, cost control, and business development, the company can improve its financial health and build resilience.
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This analysis is opinion only and should not be interpreted as financial advice.
SARU 365 LTD - Analysis Report
Financial Health Score: D
SARU 365 LTD shows signs of financial distress despite being a very young micro-entity. The company's net liabilities and negative shareholders' funds indicate a fragile financial position. However, the small scale and recent incorporation mean there is potential for turnaround with appropriate management.
Key Vital Signs
Metric | 2023 Value | Interpretation |
---|---|---|
Current Assets | £22,204 | Cash and short-term assets have increased, a positive sign. |
Current Liabilities | £22,212 | Current debts nearly equal current assets, indicating tight liquidity. |
Net Current Assets | -£8 | Negative working capital signals cash flow pressure. |
Net Assets (Shareholders' Funds) | -£8 | Company is technically insolvent on the balance sheet. |
Director Loan Account | £18,383 owed to company (repaid after year end) | Director financing business operations, a symptom of cash flow needs. |
Average Employees | 1 | Very small team, typical for micro-entity, limiting operational scale. |
Symptoms Analysis
- Negative Net Current Assets: The company’s current liabilities slightly exceed its current assets, a symptom of tight liquidity and potential difficulty in meeting short-term obligations without additional funding.
- Negative Net Assets: The company’s liabilities exceed its total assets, reflecting accumulated losses or initial funding shortfalls. This is a key indicator of financial fragility.
- Director Loan: The director had advanced significant personal funds to cover company needs, which were repaid post year-end. This indicates reliance on internal support to maintain operations.
- Growth in Current Assets: The increase from £11,657 to £22,204 in current assets shows some improvement in asset base or cash position, a positive but marginal development.
- Micro-Entity Status: Being a micro-entity limits financial complexity but also suggests limited resources and scale, which means financial resilience is low.
Diagnosis
SARU 365 LTD is currently in a precarious financial state. The company is operating with minimal working capital and negative net assets, akin to a patient showing mild symptoms of distress but not yet in critical condition. The director’s personal financial support has been crucial to keep the company afloat, highlighting a fragile cash flow situation.
While the company has not missed any filings and appears compliant, the underlying financials suggest a business that needs to stabilize its liquidity and build equity to avoid deeper distress. The small size and recent start offer some hope for recovery if operational efficiencies and revenue generation improve.
Prognosis
Without intervention, the company risks continued financial strain. However, with careful management, the prognosis can improve:
- Stabilizing cash flow through improved receivables or additional financing is critical.
- Reducing liabilities or converting short-term debts to longer-term arrangements could ease liquidity pressures.
- Enhancing profitability or securing new clients in the IT consultancy sector may build net assets over time.
- Continued director support or external investment might be necessary in the short term.
Recommendations
- Improve Cash Flow Management: Implement stricter credit control and collection policies to ensure timely receipt of payments. Explore short-term financing options to smooth working capital needs.
- Increase Equity Base: Consider additional capital injections from shareholders or new investors to improve net asset position and reduce reliance on director loans.
- Cost Control: Review operating expenses to identify and cut non-essential costs to conserve cash.
- Business Development: Focus on growing client base and project pipeline in the IT consultancy sector to increase revenue.
- Financial Monitoring: Establish regular financial reviews, including cash flow forecasts and working capital analysis, to detect symptoms early and take corrective action promptly.
- Director Loan Formalization: Ensure director loans are properly documented and terms agreed to avoid future disputes or regulatory issues.
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