Company Number: 13837425

Analysis Date: 2025-07-20 11:25 UTC

Financial Health Assessment of YU & HE LIMITED as at 30 April 2024

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1. Financial Health Score: C

Explanation:
YU & HE LIMITED shows some signs of financial strain, especially in liquidity, but also evidence of modest improvement compared to the previous year. The company’s net current assets position is negative, indicating a working capital deficiency, which is a symptom of cash flow distress. However, net assets have increased, reflecting some accumulated retained earnings or capital injections. Overall, the financial condition is stable but fragile, warranting careful monitoring and action to strengthen liquidity.

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2. Key Vital Signs

Metric	2024 Value	Interpretation
Fixed Assets	£209,701	Represents investment in long-term assets; stable position.
Current Assets	£263,837	Includes cash and stock; slightly improved over last year.
Cash at Bank	£150,552	Healthy cash reserves, increased from £131,513 last year.
Debtors	£8,000	Low level of receivables, manageable.
Current Liabilities	£445,785	High short-term debts, mainly directors’ loans.
Net Current Assets (Working Capital)	-£181,948	Negative; indicates insufficient current assets to cover short-term liabilities—sign of liquidity stress.
Net Assets (Equity)	£27,753	Positive and improved from previous year, indicating retained earnings or capital infusion.
Shareholders’ Funds	£27,653	Equity backing is low but improving.
Directors’ Loan Accounts	£399,446	Significant reliance on loans from directors to fund operations; potential risk if not repayable or convertible.
Stock Levels	£105,285	Decreased from last year; could indicate better stock management or sales.

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3. Diagnosis: What the Financial Data Reveals About Business Health

• Liquidity Concerns (Symptoms of Distress):
  The company has a persistent negative working capital position (net current liabilities of approximately £182k). This means YU & HE LIMITED does not have enough short-term assets (cash, stock, receivables) to cover its immediate debts. This is a classic symptom of liquidity strain. The large current liabilities figure is heavily influenced by directors’ loans (£399k), which indicates the company is relying on internal funding rather than external borrowing or operational cash flow.

• Cash Flow Condition:
  Despite the negative net current assets, the company holds a fairly healthy cash balance (£150k), which has improved over the year. This “healthy cash flow” is crucial to meet short-term obligations and may provide a buffer to the working capital deficiency. However, the overall liquidity remains vulnerable if cash outflows increase or if directors’ loans are called in.

• Asset Base and Capital Structure:
  Fixed assets remain stable, composed mainly of goodwill (£170k) and tangible assets (£40k). The intangible goodwill asset suggests acquisition or investment in business value, but this is non-liquid and cannot be used to pay liabilities. The company’s equity position has improved but remains low (£27k), which suggests limited cushion against losses or downturns.

• Reliance on Directors’ Funding:
  The high directors’ loan balances reflect a dependency on internal financing to support operations. This is a "double-edged sword": while it may provide flexibility, it also introduces risk if the directors withdraw funding or if the company cannot repay these loans in a timely manner.

• Operational Efficiency:
  Stock levels have decreased, which could indicate better inventory management or stronger sales, potentially improving cash flow. Debtors remain low, reducing risk of bad debts.

• Growth and Employee Base:
  The company experienced growth in staff numbers (18 average employees in 2024 vs 14 in 2023), suggesting expansion or increased operations, which may stress cash flow further if not matched by revenue growth.

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4. Recommendations: Specific Actions to Improve Financial Wellness

1. Improve Working Capital Management:

   • Aim to reduce current liabilities by negotiating longer payment terms or converting part of directors’ loans into equity to ease short-term pressure.
   • Accelerate debtor collections and optimize inventory turnover to free up cash.

2. Strengthen Cash Flow Forecasting and Controls:

   • Develop detailed cash flow forecasts to anticipate liquidity gaps and manage expenditures proactively.
   • Consider setting a minimum cash reserve target to maintain a "healthy cash flow" buffer.

3. Explore Additional Financing Options:

   • Seek external financing such as a bank overdraft or invoice financing to reduce dependency on directors’ loans and spread financial risk.
   • Evaluate possibility of equity injection to strengthen shareholder funds.

4. Cost Control and Efficiency:

   • Review operational costs and staffing levels in line with revenue growth to ensure sustainable profitability.
   • Monitor stock levels closely to avoid overstocking or stock obsolescence.

5. Regular Financial Health Monitoring:

   • Implement monthly financial reviews focusing on liquidity ratios and cash flow to detect early symptoms of distress.
   • Engage professional financial advice for strategic planning and risk mitigation.

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Medical Analogy Summary:

YU & HE LIMITED exhibits symptoms of liquidity stress akin to a patient with borderline blood pressure—stable but at risk. The company’s cash flow shows some vitality, but the negative working capital is a warning sign that immediate liquidity "vital signs" need strengthening. Without intervention, the risk of financial "illness" worsening could increase, but with recommended "treatment" steps, the company can move towards a healthier financial state.

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