SUPREME WAX HOLLAND LIMITED

Executive Summary

SUPREME WAX HOLLAND LIMITED, a newly incorporated wholesale textiles company, exhibits early signs of financial distress with negative working capital and equity. The company is reliant on director loans and faces significant fixed lease commitments, posing liquidity risks. Immediate actions to improve cash flow, manage costs, and strengthen capital are essential to ensure financial stability and sustainable growth.

SUPREME WAX HOLLAND LIMITED - Analysis Report

Company Number: 14692144

Analysis Date: 2025-07-29 12:08 UTC

Financial Health Assessment for SUPREME WAX HOLLAND LIMITED

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1. Financial Health Score: D

Explanation:
This young company, incorporated in early 2023, shows early-stage symptoms of financial strain despite operating within a typical wholesale textiles sector. The negative net current assets and shareholders’ funds indicate a fragile liquidity position and an equity deficit. While this is not uncommon for start-ups in their first year, the current financial state signals caution and the need for prompt management action to avoid worsening distress.

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2. Key Vital Signs

Vital Sign	Value (£)	Interpretation
Current Assets	80,882	Moderate short-term resources available
Cash	15,407	Limited immediate cash reserves
Debtors (Trade Receivables)	28,331	Amount owed by customers, moderate level
Stocks (Inventory)	37,144	Significant stock holding for a new company
Current Liabilities	92,471	Obligations due within one year
Net Current Assets (Working Capital)	-11,589	Negative working capital, indicating liquidity pressure
Shareholders Funds (Equity)	-11,589	Negative equity, company owes more than it owns
Director Loan	20,641 (interest-free)	Related party loan supporting liquidity
Operating Lease Commitment	144,225 (annual)	Significant fixed cost commitment

Interpretation of Vital Signs:

• Negative Working Capital: The company’s current liabilities exceed its current assets by £11,589, a classic symptom of liquidity distress. This means the company may struggle to meet short-term obligations without additional cash inflow or financing.
• Negative Equity: The shareholders’ funds are negative, reflecting accumulated losses or start-up expenses exceeding initial capital. This shows that the business is currently "under the skin," financially speaking, and relies on external support (notably a director loan) to stay afloat.
• Cash Position: Cash on hand is limited (£15,407), which restricts the company’s ability to cover immediate expenses or invest in growth opportunities.
• Stock Levels: Inventory is relatively high for a new company; this ties up cash and could risk obsolescence or slow turnover.
• Director Loan: The interest-free loan from a director provides valuable breathing space but is not a permanent solution and may signal reliance on insider funding.
• Fixed Lease Obligations: The annual lease commitment of £144,225 is a heavy ongoing cost that could strain cash flow, especially if sales volumes are low or delayed.
• Going Concern Statement: Directors believe the company will continue operating, but the financials show vulnerabilities that require close monitoring.

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3. Diagnosis

The financial "symptoms" suggest that SUPREME WAX HOLLAND LIMITED is in the early "incubation" phase typical of start-ups but is already showing signs of liquidity stress and negative equity. The negative working capital is a red flag indicating the company’s cash inflows are insufficient to cover short-term debts and operational costs. The company relies on director loans and possibly other financing to maintain operations, which is a precarious position.

The significant lease commitments introduce a fixed cost burden that may become unsustainable without steady revenue growth. The relatively high stock levels could be tying up essential cash in inventory. The absence of a profit and loss account in the filings limits detailed profitability analysis but the negative equity and working capital indicate losses or heavy upfront costs.

Overall, the financial health is at risk with symptoms of early financial distress, although this is not unexpected for a company in its first year of trading.

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4. Recommendations

1. Improve Liquidity ("Healthy Cash Flow")

   • Accelerate debtor collections and negotiate better payment terms with suppliers to reduce current liabilities.
   • Consider reducing stock levels by improving inventory turnover or negotiating just-in-time supply arrangements to free up cash.
   • Explore short-term financing options or equity injections to bolster working capital without increasing debt burden unsustainably.

2. Cost Management

   • Review and possibly renegotiate operating lease terms to reduce fixed commitments or consider alternative premises with lower costs.
   • Implement stringent cost controls to avoid unnecessary expenses during this fragile growth phase.

3. Capital Structure Strengthening

   • Engage with shareholders or external investors to inject fresh equity capital, improving the balance sheet and reducing reliance on director loans.
   • Formalize and document director loans with clear repayment plans if retained as financing.

4. Financial Monitoring and Reporting

   • Establish regular cash flow forecasting to anticipate liquidity gaps and take proactive action.
   • Prepare detailed profit and loss statements to diagnose operational profitability and identify loss-making areas.

5. Strategic Planning

   • Develop a clear business plan focusing on revenue growth, cost control, and operational efficiency to transition from the start-up phase to a sustainable business.

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