TWO SPARROWS STUDIO LTD

Executive Summary

Two Sparrows Studio Ltd has demonstrated a financial turnaround from previous losses to a positive net asset position with improved liquidity. The company’s micro-entity size and limited operational scale constrain its creditworthiness, but current financials support a conditional credit approval. Ongoing monitoring of profitability, liquidity, and governance practices is recommended to ensure continued repayment capacity.

TWO SPARROWS STUDIO LTD - Analysis Report

Company Number: 13139033

Analysis Date: 2025-07-20 14:30 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   Two Sparrows Studio Ltd demonstrates a modest but improving financial position typical of a micro-entity. The company shows positive net assets and working capital for the last two reporting years after previous losses. However, the business remains very small with limited financial resources and no employees, which constrains operational scale and resilience. The directors’ advance of £7.95 is negligible but indicates some related party transactions that require monitoring. Given the improving balance sheet but limited size and operating history, credit approval is conditional on continued positive trading and timely financial updates.

2. Financial Strength:

• The company’s net assets recovered from negative (£-14,269 in 2022) to positive £3,550 in 2025, indicating turnaround and capital injection or retained earnings.
• Current assets (£5,321) comfortably exceed current liabilities (£1,834), resulting in healthy net current assets (£3,550), supporting short-term debt coverage.
• Share capital remains minimal at £100, reflecting the micro company status and limited equity base.
• No fixed assets disclosed, implying most resources are liquid or short-term.
• The company has no employees, which limits fixed overhead but also business scale.
  Overall, financial strength is modest but improving, with no signs of distress or insolvency.

3. Cash Flow Assessment:

• Current asset to current liability ratio is approximately 2.9:1 (2025), indicating reasonable liquidity and ability to meet short-term obligations.
• Working capital has increased year-over-year, improving from £3,068 (2024) to £3,550 (2025).
• Absence of fixed assets and employees suggests low cash burn but also limited revenue generation capacity.
• The company made a small director advance (£7.95) to be repaid within the next accounting period – immaterial but should be monitored for related party transaction compliance.
• No detailed cash flow statement provided, but balance sheet data indicates liquid position is sufficient for current operations.

4. Monitoring Points:

• Continued profitability and positive cash flow generation to sustain and grow net assets.
• Timely submission of accounts and confirmation statements to ensure regulatory compliance.
• Watch for any significant increase in liabilities or related party transactions that could affect liquidity.
• Monitor any changes in business size, employee numbers, or operational scope that may impact financial risk.
• Directors’ management and governance as the company remains closely held and small scale.