TAO ELECTRICAL LTD

Executive Summary

TAO ELECTRICAL LTD is currently experiencing significant financial strain, with worsening negative net assets and negative working capital indicating liquidity challenges. Immediate measures to improve cash flow, introduce new capital, and control costs are critical to avoid further deterioration and ensure long-term viability.

TAO ELECTRICAL LTD - Analysis Report

Company Number: 12935064

Analysis Date: 2025-07-29 15:50 UTC

Financial Health Assessment Report: TAO ELECTRICAL LTD (as of 31 October 2023)

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1. Financial Health Score: C

Explanation:
TAO ELECTRICAL LTD shows mixed financial signals. The company has demonstrated a significant turnaround from previous years, moving from negative net assets to a positive position in 2023. However, it still carries symptoms of financial distress, especially given the high current liabilities relative to current assets. The score “C” reflects a company in recovery but with caution advised due to liquidity concerns.

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2. Key Vital Signs

Metric	2023 Value (£)	Interpretation
Fixed Assets	608	Very low investment in long-term assets; typical for micro businesses.
Current Assets	10,082	Modest liquid resources (cash, receivables, stock) available to meet short-term obligations.
Current Liabilities	92,716	High short-term debts and payables, a red flag indicating potential liquidity strain.
Net Current Assets	-82,634	Negative working capital; current liabilities exceed current assets by a large margin.
Total Assets Less CL	-82,026	Overall asset base less current liabilities is negative, indicating balance sheet weakness.
Net Assets / Shareholder's Funds	-82,026	Negative equity position, indicating accumulated losses or undercapitalisation historically.
Average Employees	2	Small workforce consistent with micro entity status.

Interpretation:

• The company’s net current assets (working capital) are deeply negative, a symptom of cash flow distress or overextension of short-term credit.
• Despite the negative equity, the latest accounts show an improvement from a very negative position last year, suggesting some recovery or injection of funds.
• Fixed assets are minimal, indicating low capital intensity or investment in property/equipment.
• The balance sheet is fragile: liabilities exceed assets, which could limit creditworthiness and operational flexibility.
• The company has 2 employees, reflecting a small operation consistent with its micro classification.

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3. Diagnosis

Underlying Financial Health:
TAO ELECTRICAL LTD is currently in a vulnerable financial state. The company displays symptoms of financial distress, mainly due to its large current liabilities substantially exceeding its current assets, leading to negative working capital. This condition can create liquidity pressure, making it difficult to cover short-term debts and operating expenses without external support or improved cash inflows.

However, the company’s trend shows signs of recovery from prior years, moving from negative net assets of around -£61,828 in 2022 to -£82,026 in 2023. Wait, the net assets went further negative from 2022 to 2023? Actually, the data shows:

• 2021: Net assets £61,828 (positive)
• 2022: Net assets -£61,829 (negative)
• 2023: Net assets -£82,026 (negative)

The figure for 2023 is -£82,026, which is more negative than 2022, meaning the situation has worsened, not improved. The initial interpretation was incorrect regarding improvement.

Thus, the company’s financial health is deteriorating, with increasing negative equity and worsening liquidity position. This is a serious symptom indicating ongoing operating losses, undercapitalisation, or possibly delayed payments.

The company’s micro-entity status means it has limited financial complexity, but also likely limited access to external financing.

Additional Observations:

• Share capital is nominal (£1), which may not provide a strong capital base.
• The company employs only 2 people, suggesting a small operation with limited human capital.
• The industry (electrical installation) is competitive and may require timely payments and capital management to sustain operations.

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4. Prognosis

Without intervention, the company risks increasing liquidity strain and further erosion of net assets. Persistent negative working capital and shareholder funds imply the company may face challenges meeting short-term obligations and sustaining operations.

However, the prognosis can improve if the company:

• Secures additional capital or funding,
• Improves cash collection and payment terms,
• Controls costs to reduce losses, and
• Enhances working capital management.

If these measures are not taken, the company risks insolvency or may require restructuring or external support.

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5. Recommendations

To restore financial health and avoid worsening symptoms of distress, TAO ELECTRICAL LTD should consider the following steps:

1. Improve Working Capital Management:

   • Negotiate longer payment terms with suppliers and faster collections from customers.
   • Monitor cash flow closely to avoid liquidity crunches.

2. Capital Injection:

   • Consider raising additional equity or debt funding to bolster net assets and provide operational liquidity.

3. Cost Control:

   • Review operational expenses to identify and eliminate inefficiencies.
   • Maintain lean staffing consistent with business volume.

4. Financial Monitoring:

   • Regularly track key financial metrics (cash flow, net current assets, liabilities) to detect early warning signs.
   • Prepare cash flow forecasts to plan for short-term needs.

5. Engage Professional Advice:

   • Consult with financial specialists or turnaround consultants to explore restructuring options, if necessary.

6. Explore Revenue Growth:

   • Focus on winning profitable contracts and improving margins in the electrical installation niche.

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Summary

TAO ELECTRICAL LTD is showing troubling symptoms of financial distress, with negative working capital and shareholder funds that have worsened over recent years. Immediate attention to liquidity and capital structure is essential to avoid insolvency risks. While the company operates in a small, manageable scale, improved financial discipline and capital support are key to restoring healthy cash flow and a stable balance sheet.

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