STEPHEN FARRANT ADVISORY LTD

Executive Summary

STEPHEN FARRANT ADVISORY LTD shows strong financial health characterized by excellent liquidity, positive profitability, and steadily increasing equity. The company maintains a comfortable buffer of cash and working capital, minimizing risks of financial distress. Continued focus on managing receivables and prudent dividend policies will support ongoing financial wellness and growth.

STEPHEN FARRANT ADVISORY LTD - Analysis Report

Company Number: 12523028

Analysis Date: 2025-07-29 18:28 UTC

Financial Health Assessment for STEPHEN FARRANT ADVISORY LTD

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1. Financial Health Score: B+

Explanation:
The company demonstrates a generally healthy financial position with strong liquidity, positive net assets, and consistent growth over the past years. There are clear signs of prudent cash management and profitability. However, some caution remains due to relatively modest fixed assets and a small equity base, which is typical for a micro to small advisory firm. Overall, it is financially sound but with room for strengthening resilience.

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2. Key Vital Signs

Metric	Value (2024)	Interpretation
Current Assets	£95,032	Healthy short-term resource base
Cash at Bank	£84,247	Excellent liquidity, "healthy cash flow"
Debtors	£10,785	Moderate receivables; manageable but monitor aging
Current Liabilities	£23,003	Short-term obligations are manageable
Net Current Assets (Working Capital)	£72,029	Strong positive working capital, good short-term financial health
Net Assets (Equity)	£72,897	Solid net worth for a small advisory firm
Profit for Year	£60,432	Indicates profitable operations
Dividends Paid	£41,000	Healthy return to shareholders but ensure cash flow remains robust
Fixed Assets	£1,072	Low capital investment; typical for service industry
Deferred Tax Provision	£204	Minor liability; reflects prudent accounting

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3. Diagnosis: Interpretation of Financial Symptoms

• Liquidity ("Healthy Cash Flow"):
  The company holds a significant cash buffer (£84k) relative to its current liabilities (£23k), indicating it can comfortably meet short-term obligations without stress. This is a positive vital sign akin to a strong pulse and good oxygen saturation in a patient.

• Working Capital ("Vital Sign of Operational Health"):
  Net current assets of £72k show that the company has more than three times the current liabilities in liquid and near-liquid assets, a symptom of good operational health and minimal risk of short-term financial distress.

• Profitability ("Energy Levels"):
  The reported profit of £60k for the year shows that the business is generating surplus from its activities, which is essential for sustaining operations and growth. This is like a patient having good energy and strength.

• Capital Structure ("Structural Integrity"):
  The equity base (£73k) has grown steadily from £1.7k in 2020, indicating reinvestment and retention of earnings. Share capital remains nominal (£100), reflecting a typical structure for an advisory firm. This suggests a stable foundation but also the need to monitor for any over-reliance on a few sources.

• Receivables Management ("Symptom Check"):
  Debtors have decreased from previous years but still represent a notable part of current assets. Efficient collection processes will help maintain liquidity.

• Deferred Tax and Provisions ("Minor Ailments"):
  A small deferred tax provision (£204) is present, indicating awareness of tax timing differences and prudent accounting practices.

• Dividends ("Medication"):
  Dividends of £41k were paid, a substantial distribution relative to profit, which suggests confidence but also requires careful cash flow management to avoid liquidity strains.

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4. Recommendations: Prescriptions for Financial Wellness

• Maintain Robust Cash Reserves:
  Continue to monitor cash flow closely to ensure the company can cover liabilities comfortably, especially if dividend payouts remain significant.

• Optimize Debtor Collections:
  Implement or maintain efficient credit control measures to reduce days sales outstanding (DSO) and improve liquidity further.

• Strengthen Capital Base Gradually:
  Consider reinvesting a portion of profits back into the business or reserves to build a stronger equity buffer for future growth and unexpected expenses, akin to building muscle strength over time.

• Monitor Liabilities:
  Keep a close eye on current liabilities and provisions to avoid any build-up that could signal financial distress.

• Plan for Growth Investments:
  While fixed assets are minimal, strategic investments in technology or resources may enhance long-term competitiveness and operational efficiency.

• Review Dividend Policy:
  Ensure dividend distributions align with sustainable profit levels and do not compromise working capital or future investment needs.

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Executive Summary