SONYA DERVIZ STUDIO LTD

Executive Summary

SONYA DERVIZ STUDIO LTD is currently facing significant financial strain characterized by a liquidity crunch and negative equity, despite signs of sales growth. Immediate focus on improving cash flow, managing debts, and strengthening profitability is essential to stabilize the business and restore financial health.

SONYA DERVIZ STUDIO LTD - Analysis Report

Company Number: 13000680

Analysis Date: 2025-07-20 14:51 UTC

Financial Health Assessment of SONYA DERVIZ STUDIO LTD

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1. Financial Health Score: D

Explanation:
The company exhibits significant signs of financial distress, primarily due to a large net current liability position and negative shareholders' funds. While there is evidence of revenue generation and some growth in trade debtors, the overwhelming short-term obligations and negative retained earnings indicate a fragile financial condition. The score "D" reflects a concerning state that requires urgent attention to avoid deterioration.

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2. Key Vital Signs

Metric	2024 (£)	2023 (£)	Interpretation
Current Assets	1,301	33	Slight increase, driven by trade debtors.
Cash at Bank	51	32	Very low cash reserves, indicating limited liquidity ("poor pulse").
Debtors (Trade Receivables)	1,250	1	Sharp increase, showing sales growth but also potential cash collection risk.
Current Liabilities	9,632	3,039	Tripling of short-term debts, a critical "symptom of distress".
Net Current Assets (Working Capital)	-8,331	-3,006	Negative, indicating insufficient liquid resources to cover short-term debts ("breathing difficulty").
Net Assets / Shareholders' Funds	-8,331	-3,006	Negative equity, indicating accumulated losses and financial strain.
Share Capital	1	1	Minimal capital base, offering no cushion against losses.

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3. Diagnosis

• Liquidity Crisis:
  The company’s current liabilities have more than tripled in a year without a corresponding increase in cash or liquid assets. This creates a liquidity crunch, meaning the business may struggle to meet its immediate financial obligations ("heart struggling to pump cash").

• Negative Net Assets:
  The accumulated losses reflected in the negative profit & loss reserve have eroded shareholder equity significantly. This "financial anemia" suggests the business has been operating at a loss or has taken on liabilities beyond its asset base.

• Growth with Risk:
  Increased trade debtors indicate higher sales or invoiced amounts, which is a positive sign. However, the ability to collect these receivables timely is uncertain. If customers delay payments, the cash flow strain will worsen.

• Reliance on Director’s Current Account:
  A substantial part of current liabilities (approx. £2,769) is owed to the director, indicating reliance on informal funding. While this can be a lifeline, it is not a sustainable source for long-term financial health.

• Going Concern Statement:
  The director believes the company is experiencing good sales growth and profitability, but the financial numbers suggest caution is warranted here. The "clinical symptoms" point to internal stress that contradicts a fully "healthy" outlook without intervention.

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4. Recommendations

To improve the financial wellness of SONYA DERVIZ STUDIO LTD, the following actions are advised:

1. Improve Cash Flow Management:

   • Accelerate collection of outstanding trade debtors to convert sales into cash swiftly.
   • Negotiate better payment terms with creditors to ease short-term cash flow pressures.

2. Restructure Short-Term Debt:

   • Explore converting some current liabilities into longer-term obligations to reduce immediate repayment pressure.
   • Consider formal financing options or equity injection to strengthen the capital base.

3. Enhance Profitability:

   • Review pricing, cost controls, and operational efficiencies to turn around accumulated losses.
   • Focus on sustainable growth strategies to increase net income.

4. Director Support and Transparency:

   • Document and formalize any director loans to ensure clarity and proper accounting.
   • Maintain transparent communication with stakeholders about the financial recovery plan.

5. Regular Financial Monitoring:

   • Implement monthly cash flow forecasts and management accounts to detect early warning signs.
   • Seek professional financial advice to guide restructuring and turnaround efforts.

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Executive Summary