SHARMA1 MANAGEMENT LIMITED

Executive Summary

SHARMA1 MANAGEMENT LIMITED is currently solvent but faces liquidity challenges, evident from negative working capital. The financial condition is typical of a young micro-entity with tight cash flow margins, requiring focused management of short-term assets and liabilities. With strategic actions to improve cash flow, the company can strengthen its financial health and support sustainable growth.

SHARMA1 MANAGEMENT LIMITED - Analysis Report

Company Number: 14112471

Analysis Date: 2025-07-29 20:08 UTC

Financial Health Assessment: SHARMA1 MANAGEMENT LIMITED

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1. Financial Health Score: C

Explanation:
The company demonstrates some positive signs such as positive net assets and shareholders' funds, indicating overall solvency. However, the trend in current liabilities is concerning, with significant short-term obligations exceeding current assets, leading to negative net current assets. The company is still young (incorporated in 2022), which explains some instability, but it needs to address liquidity pressures to improve financial health. The grade "C" reflects a company with moderate financial wellbeing but notable symptoms of liquidity stress that require attention.

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2. Key Vital Signs

Metric	2024 Value (£)	Interpretation
Fixed Assets	5,987	Modest investment in long-term assets, stable but small.
Current Assets	4,657	Short-term resources available to meet immediate needs.
Current Liabilities	8,471	Debts due within a year are higher than current assets.
Net Current Assets	-3,814	Negative working capital indicates liquidity pressure.
Total Assets Less Current Liabilities	2,174	Positive figure showing assets exceed short-term debts.
Net Assets / Shareholders Funds	2,174	Positive equity, but modest in size for business stability.
Average Employees	0	No employees, indicating a very small or possibly owner-run operation.

Interpretation:

• Liquidity Symptoms: Negative net current assets (working capital) suggest the company may struggle to pay its short-term obligations promptly. This is a classic "symptom of distress" in cash flow management.
• Solvency: Positive net assets mean the company’s total assets exceed liabilities, signaling no immediate risk of bankruptcy but with limited buffer.
• Size and Activity: As a micro-entity with no employees, the business is likely small-scale, possibly service-oriented or consultancy, consistent with its SIC codes.

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3. Diagnosis

The company is financially solvent but shows signs of liquidity strain. The "healthy cash flow" indicator is weak due to negative working capital — current liabilities exceed current assets by £3,814 in 2024, though this is an improvement from a worse position in 2023. The asset base is modest, and the company does not employ staff, possibly relying on the director or subcontractors.

The financial condition suggests that while the company currently meets its obligations, it operates with tight cash flow margins, which can be risky if unexpected expenses arise or if receivables are delayed. Given its very recent incorporation and micro-entity status, this may reflect early-stage growing pains rather than chronic financial illness.

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4. Recommendations

To improve financial wellness and strengthen the "heart" of the business (cash flow and liquidity), the company should:

• Improve Working Capital Management:

  • Accelerate collection of any receivables.
  • Negotiate longer payment terms with suppliers to reduce current liabilities pressure.
  • Consider short-term financing options (e.g., overdrafts, invoice financing) to cover gaps.

• Build Cash Reserves:
  Retain earnings or inject additional capital to build a cash buffer for unforeseen expenses.

• Monitor Expenses Carefully:
  As a micro-entity, keep overheads minimal, and avoid unnecessary fixed asset purchases if liquidity is strained.

• Review Business Model and Revenue Streams:
  Ensure consistent and predictable income flow, especially important given the company’s consultancy and management focus.

• Plan for Growth Sensibly:
  Gradual scaling with attention to liquidity will prevent cash flow crises.

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