Company Number: 12850903

Analysis Date: 2025-07-20 15:00 UTC

Financial Health Assessment of YELLOW TREE WELLNESS LTD (as of 30 September 2024)

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1. Financial Health Score: D

Explanation:
The company shows symptoms of financial distress, evidenced by a significant negative net current asset position and negative shareholders’ funds. While turnover has increased, the company is operating with a working capital deficit and net liabilities, indicating unhealthy liquidity and solvency conditions. This score reflects vulnerability and a need for urgent financial attention.

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2. Key Vital Signs

Metric	2024 Value	Interpretation
Turnover	£30,773	Positive growth vs prior year (£16,095) – good “appetite” for business but still low absolute scale.
Current Assets	£409	Extremely low short-term liquid resources — “dry tank” symptom.
Current Liabilities	£12,575	Substantial short-term debts due within a year — “looming obligations.”
Net Current Assets	-£12,166	Negative working capital — “cash flow distress” warning sign.
Net Assets (Shareholders' Funds)	-£12,166	Negative equity — indicates accumulated losses and financial weakness.
Profit for Period	£6,392	Positive profit, signaling operational improvement despite balance sheet stress.

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3. Diagnosis

• Liquidity & Working Capital: The company’s net current assets position has deteriorated markedly from a small positive £562 in 2023 to a negative £12,166 in 2024. This indicates a severe liquidity crunch where current liabilities far exceed current assets. The company risks being unable to meet short-term obligations without external support or improved cash flow management.
• Solvency: Negative shareholders’ funds signal that the company’s liabilities exceed its assets, a symptom of financial strain or accumulated losses. This weakened balance sheet reduces resilience against shocks and could restrict access to credit or investment.
• Profitability: Despite the balance sheet weakness, the company has reported a profit of £6,392 in 2024, nearly triple the previous year’s profit. This suggests some operational improvement or better cost control, which is a positive sign—a “healthy pulse” amidst distress.
• Scale & Growth: Turnover nearly doubled year-on-year, showing market traction but the financial base has not kept pace. The business remains micro-sized with low absolute revenue and asset base.
• Employee Count: No employees recorded, indicating a sole trader or contractor-based model, which may limit growth but potentially keeps fixed costs low.

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4. Recommendations

• Strengthen Liquidity: Immediate focus on improving cash flow to address the negative working capital. This could include negotiating extended payment terms with creditors, accelerating debtor collections if any, or injecting cash via shareholder loans or equity.
• Balance Sheet Repair: Consider recapitalisation options to restore positive equity. This may involve fresh investment or converting some liabilities into equity if possible.
• Cost Control & Profitability: Continue to monitor and optimise costs to maintain and grow the positive profit trend. Analyze cost drivers to sustain margins as turnover increases.
• Financial Planning & Reporting: Implement regular cash flow forecasting and budgeting to detect liquidity risks early. Seek professional financial advice to improve financial management systems.
• Business Model Review: Since the company is in “other service activities not elsewhere classified,” ensure clear service offerings, pricing strategy, and customer acquisition to scale revenue sustainably.
• Compliance & Governance: Maintain timely filing of accounts and returns (currently on track), and ensure transparency with stakeholders regarding financial health.

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Medical Analogy Summary:

The company’s financial “vital signs” show a “weak heart” in terms of liquidity and solvency, with a dangerously low “blood pressure” (working capital). However, a “steady heartbeat” in profitability suggests potential for recovery if liquidity issues are addressed promptly. Without intervention, the company risks “financial shock” due to inability to meet short-term debts.

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