SPARROW ENGINEERING LIMITED

Executive Summary

Sparrow Engineering Limited shows solid short-term financial stability but a noticeable reduction in working capital and equity over the past year, typical of a young micro-entity balancing growth and expenses. While current financial health is adequate, proactive cash flow management and strategic growth initiatives are recommended to build resilience and ensure future financial wellness.

SPARROW ENGINEERING LIMITED - Analysis Report

Company Number: 13838179

Analysis Date: 2025-07-20 11:34 UTC

Financial Health Assessment: SPARROW ENGINEERING LIMITED

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1. Financial Health Score: C

Explanation:
Sparrow Engineering Limited shows some positive signs of financial stability but also exhibits symptoms of cautiousness typical of a very young micro-entity. The company maintains positive net current assets and shareholders’ funds, indicating it is solvent and can cover short-term liabilities. However, the decline in net current assets and shareholders' funds over the latest year signals a mild deterioration in financial health that warrants monitoring.

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2. Key Vital Signs

Metric	2024 (£)	2023 (£)	Interpretation
Current Assets	32,850	34,266	Liquid assets available to meet short-term needs
Current Liabilities	25,460	22,490	Obligations due within one year
Net Current Assets	7,390	11,776	Working capital; positive but declining
Shareholders’ Funds	7,390	11,776	Owner’s equity; positive but decreased
Average Number of Employees	1	1	Small scale operation, minimal staffing

• Healthy cash flow indicator: The company has more current assets than current liabilities, a sign it can meet short-term debts.
• Symptom of distress: The reduction in net current assets and shareholder funds by about 37% year on year suggests some erosion in financial buffer.
• Micro-entity status: Filing under micro-entity provisions means limited complexity but also limited financial depth.
• No audit requirement: Indicates low risk from regulatory perspective but also limited external financial scrutiny.

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3. Diagnosis

SPARROW ENGINEERING LIMITED appears to be a very small engineering business operating at a micro scale with limited staff and financial resources. The positive net current assets and shareholders' funds indicate the company is currently solvent and has a basic buffer to cover short-term obligations—a "healthy pulse" in financial terms.

However, the decline in these figures year over year acts as a "warning signal." This could reflect either increased liabilities, reduced cash inflows, or investment in operations without immediate returns. Given the company’s young age (incorporated 2022), this can be typical of early-stage companies balancing growth and cash flow.

The absence of significant fixed assets or long-term liabilities (not explicitly stated but inferred from total assets less current liabilities equating net current assets) suggests a light asset base, which is common but also limits collateral for borrowing or investment.

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4. Recommendations

To improve financial wellness and strengthen the company’s financial health, the following actions are advised:

• Monitor cash flow closely: Ensure that the company maintains positive working capital and track trends in current assets and liabilities monthly, not just annually.
• Control liabilities: Avoid unnecessary increases in short-term liabilities that could strain liquidity.
• Build reserves: Aim to rebuild shareholders’ funds through retained earnings by improving profitability or reducing costs.
• Explore revenue growth: As a micro-engineering company, growth in client base or diversification of services could improve income and buffer financial resilience.
• Consider professional financial advice: Engage a finance expert to help with budgeting, forecasting, and identifying efficiency gains.
• Prepare for scaling: If growth is planned, consider moving beyond micro-entity status for better financial reporting and access to finance.
• Maintain compliance: Continue timely filing of accounts and confirmation statements to avoid penalties and maintain good standing.

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