STANLEY'S ELECTRICAL CONTRACTORS LIMITED

Executive Summary

STANLEY'S ELECTRICAL CONTRACTORS LIMITED maintains a stable financial base with positive working capital and equity, reflecting a generally healthy financial status for a young small business. However, the sharp decline in cash reserves is a warning sign of potential liquidity strain that requires proactive cash flow management and growth strategies. With careful attention to cash flow, cost control, and equity preservation, the company's financial outlook can stabilize and improve over time.

STANLEY'S ELECTRICAL CONTRACTORS LIMITED - Analysis Report

Company Number: 14193323

Analysis Date: 2025-07-29 15:32 UTC

Financial Health Assessment for STANLEY'S ELECTRICAL CONTRACTORS LIMITED

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1. Financial Health Score: B-

Explanation:
The company shows solid equity and positive net current assets, indicating a fundamentally stable financial position akin to a "healthy pulse." However, the notable decline in cash and current assets over the latest financial year signals symptoms that warrant attention to prevent potential liquidity stress. The small scale and recent establishment of the company also suggest limited operational history, which impacts the overall robustness.

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2. Key Vital Signs

Metric	2024 (£)	2023 (£)	Interpretation
Fixed Assets	10,009	11,368	Slight reduction; depreciation and amortisation ongoing
Current Assets	39,272	70,112	Significant decrease, mainly cash flow contraction
Cash at Bank	30,719	55,829	Sharp cash reduction—potential liquidity tightening
Debtors	8,053	14,283	Decrease in receivables—might indicate improved collections or lower sales
Current Liabilities	21,449	39,046	Reduced liabilities—positive sign of debt management
Net Current Assets (Working Capital)	17,823	31,066	Healthy positive working capital but declining
Shareholders Funds (Equity)	27,832	42,434	Equity decreased—reflects retained losses or dividend payments

Interpretation:

• The company maintains a positive working capital, indicating it can cover short-term debts comfortably, a "steady heartbeat" in financial terms.
• The decline in cash reserves is a notable symptom that could indicate operational cash outflows exceeding inflows, or investments not yet yielding returns—akin to "shortness of breath" in financial health.
• Reduction in both debtors and current liabilities suggests activity on both receivables collection and creditor payments, possibly indicating tighter cash management.
• The decrease in equity is a sign of accumulated losses or withdrawals, which slightly weakens the company's capital base.

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3. Diagnosis: Overall Financial Condition

STANLEY'S ELECTRICAL CONTRACTORS LIMITED exhibits the financial "vital signs" of a relatively young, small-scale electrical installation business with a sound capital structure and positive working capital. However, there are early "symptoms of distress" visible in the sharp reduction of cash and current assets within a single year, suggesting tighter liquidity conditions.

The company’s amortisation of goodwill and depreciation of tangible assets are ongoing, reflecting normal wear and accounting conventions. The small number of employees (2) indicates a lean operation, which can be an advantage for flexibility but may limit scale.

The absence of audit requirements and full profit & loss disclosures is typical for a small company but means less transparency in profitability trends. The decline in equity could imply trading losses or owner draws, which, if persistent, may erode financial resilience.

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4. Recommendations to Improve Financial Wellness

• Enhance Cash Flow Management:
  Implement tighter monitoring of cash inflows and outflows to prevent liquidity crunches. Consider negotiating better payment terms with clients and suppliers to smooth cash cycles.

• Increase Revenue Streams:
  Explore expanding services or client base to boost turnover, which can replenish cash reserves and strengthen equity.

• Control Costs and Expenses:
  Regularly review operational costs to maintain lean operations, especially important given the company's small size and limited asset base.

• Build Financial Buffer:
  Aim to build a cash reserve equivalent to at least 3 months of operating expenses to safeguard against unexpected downturns—akin to building an immune system.

• Monitor Equity Position:
  Avoid further erosion of shareholders’ funds by managing dividends and withdrawals prudently, ensuring retained earnings support future growth.

• Plan for Growth Carefully:
  When investing in fixed assets or intangible assets (such as goodwill), perform thorough return-on-investment assessments to avoid overextension.

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