YZC LTD

Executive Summary

YZC LTD is experiencing liquidity challenges and erosion of equity, reflected in negative working capital and declining shareholders’ funds. While still operational and solvent, the company’s financial health is fragile, requiring urgent focus on improving cash flow and managing liabilities. Proactive measures in cost control, debtor management, and director loan arrangements are essential to restore financial wellness and secure future stability.

YZC LTD - Analysis Report

Company Number: 13554420

Analysis Date: 2025-07-20 18:25 UTC

Financial Health Assessment for YZC LTD as at 31 August 2024

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1. Financial Health Score: D

Explanation:
The company shows signs of financial distress primarily due to persistent negative net current assets (working capital deficit) and a sharp decline in shareholders’ funds. These indicators suggest liquidity challenges and weakening equity base. While the company remains operational, its financial "vital signs" warrant close monitoring and remedial action.

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2. Key Vital Signs

Metric	2024 (£)	2023 (£)	Interpretation
Current Assets	53,800	59,749	Slight decrease; cash is the largest component, which is positive, but overall assets dropped.
Cash at Bank	41,447	47,910	Cash has decreased, indicating possible cash burn; still significant but declining.
Debtors	9,853	9,339	Reasonable collection of receivables, stable.
Current Liabilities	66,583	62,916	Increased liabilities, including a large director’s current account balance (£52,084).
Net Current Assets	(12,783)	(3,167)	Negative working capital increased, a symptom of liquidity strain — short-term obligations exceed short-term assets.
Fixed Assets (Net Book Value)	17,910	22,289	Decrease in fixed assets, possibly due to depreciation or disposals.
Total Assets Less Current Liabilities	5,127	19,122	Sharp decline, indicating worsening net asset position.
Shareholders’ Funds (Equity)	5,127	19,122	Equity has significantly eroded but remains positive; a sign of weakening financial "immune system".

Additional Observations:

• The company operates in the licensed restaurant industry (SIC 56101), which can be capital-intensive with fluctuating cash flows.
• The director’s current account liability is notably high (£52,084), suggesting the directors have funded the company but are owed significant sums.
• The company has not undergone audit but filed unaudited accounts under small company exemptions.
• Employee count increased from 3 to 5, which may increase operational costs.

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3. Diagnosis: What the Financial Data Reveals

YZC LTD’s financial health exhibits symptoms akin to a patient with compromised liquidity and weakening equity reserves. The persistent negative net current assets indicate that the company’s short-term debts exceed its liquid assets, signaling potential cash flow difficulties. The decline in shareholders’ funds from £19,122 to £5,127 evidences erosion of capital, reducing the business’s financial resilience to absorb shocks.

The high director’s current account balance may represent short-term financing from directors rather than external creditors, which may provide some flexibility but is not a sustainable long-term funding solution. The reduction in fixed assets net book value reflects depreciation, which is normal but also reduces collateral value.

Overall, YZC LTD's financial "pulse" is weak, with liquidity constraints being the most urgent issue. While it remains solvent, the company is at risk of distress if cash flow problems intensify, especially given the challenging nature of the licensed restaurant sector.

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4. Recommendations: Steps to Improve Financial Wellness

1. Improve Liquidity:

   • Accelerate debtor collections and tighten credit terms to boost cash inflow.
   • Review and negotiate payment terms with creditors to ease short-term liabilities.
   • Consider short-term financing options if necessary to bridge liquidity gaps.

2. Manage Director’s Current Account:

   • Formalise arrangements regarding amounts owed to directors to avoid disputes.
   • Explore options for converting director loans into equity or repayment plans to improve balance sheet strength.

3. Cost Control:

   • Review operational expenses and employee costs to ensure alignment with revenue.
   • Implement cash flow forecasting to anticipate and mitigate liquidity shortfalls.

4. Asset Management:

   • Evaluate fixed assets for potential sale or better utilisation to generate cash.
   • Invest prudently in assets that directly contribute to revenue growth.

5. Strategic Planning:

   • Develop a business plan focusing on improving profitability and strengthening equity.
   • Seek professional advice on restructuring if financial strain worsens.

6. Maintain Compliance:

   • Keep up to date with filing deadlines to avoid penalties and maintain good standing.

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