SKETCHBOOK STUDIOS LTD

Executive Summary

Sketchbook Studios Ltd demonstrates a healthy financial position with strong cash reserves and positive net assets, reflecting solid early-stage growth. To ensure sustained financial wellness, the company should focus on scaling operations, maintaining liquidity, and establishing contingency reserves. These steps will build resilience and support future expansion in the specialised design sector.

SKETCHBOOK STUDIOS LTD - Analysis Report

Company Number: 13887641

Analysis Date: 2025-07-20 17:06 UTC

Financial Health Assessment of Sketchbook Studios Ltd (as of year ended 31 March 2024)

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1. Financial Health Score: B

Explanation:
Sketchbook Studios Ltd demonstrates a solid financial footing for a young company within the specialised design sector. The company shows healthy liquidity, positive net current assets, and steady growth in shareholder funds. However, as it is only two years old, with a sole director and limited asset base, some caution is warranted. The B grade reflects good early-stage financial health with room for strengthening operational scale and resilience.

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2. Key Vital Signs

Metric	Value (2024)	Interpretation
Current Assets	£39,894	Indicates good short-term resources, primarily cash.
Cash at Bank	£38,394	Very healthy cash position, critical for meeting short-term needs.
Debtors	£1,500	Low receivables, showing efficient cash collection or low credit sales.
Current Liabilities	£16,090	Manageable short-term obligations relative to assets.
Net Current Assets	£23,804	Positive working capital, a sign of liquidity and operational health.
Net Assets / Shareholders’ Funds	£23,804	Equity base has more than doubled from prior year, showing retained profits and growth.
Number of Employees	1 (director)	Small operational scale, typical for micro/small companies.
Company Age	2 years	Early-stage, growth phase with evolving financial profile.

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3. Diagnosis

Sketchbook Studios Ltd is displaying symptoms of a financially healthy young business:

• Healthy Cash Flow: The company has a strong cash balance (£38k) relative to its liabilities (£16k), indicating the ability to meet immediate debts and operational expenses without distress.
• Positive Net Current Assets: A net current asset position of £23,804 signals that the company maintains a buffer of liquid assets over short-term obligations, which is like a healthy pulse rate showing good operational liquidity.
• Growing Equity Base: The shareholders’ funds have increased from £11,143 in 2023 to £23,804 in 2024, implying the business is retaining earnings rather than incurring losses—akin to a patient gaining strength.
• Low Debtor Risk: Debtors are minimal (£1,500), reducing risk of bad debts and indicating tight credit control or cash sales.
• Small Scale & Limited Diversification: The company’s one-person operation and modest asset base suggest limited operational scale and potential vulnerability to market fluctuations, comparable to a young patient still developing built-in resilience.
• No Audit Requirement: Due to small company status, accounts are unaudited but comply with UK accounting standards, which is typical but means less external validation.

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4. Recommendations

To improve financial wellness and build resilience, the company should consider the following actions:

• Diversify Revenue Streams & Scale Operations: Explore opportunities to increase client base and diversify income to reduce dependency on limited projects or clients, thereby strengthening financial robustness.
• Maintain Strong Cash Management: Continue to monitor cash flow carefully, ensuring that the healthy cash position is preserved and working capital remains positive.
• Build a Contingency Reserve: Allocate some profits to a contingency fund to buffer against unforeseen expenses or market downturns, enhancing financial stamina.
• Formalise Financial Controls: As the business grows, introduce more rigorous financial reporting and budgeting processes to detect early signs of distress.
• Plan for Growth Investment: Consider reinvesting profits into marketing, technology, or additional skills to accelerate growth and competitiveness.
• Review Credit Policy: Even though current debtor levels are low, establish clear credit terms to prevent future cash flow strains.
• Prepare for Compliance Growth: Monitor thresholds that might require audit or more extensive filing, ensuring readiness for increased regulatory responsibility.

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Summary

Sketchbook Studios Ltd is currently in good financial health with strong liquidity, positive working capital, and growing equity, indicating a healthy financial pulse for a young specialised design business. While the company exhibits good financial control and cash management, expanding operational scale and building financial resilience will be key to sustaining long-term wellness.