ZAI AUTOS LTD

Executive Summary

ZAI AUTOS LTD is a small but growing vehicle maintenance business showing improved liquidity and recovery in net assets. However, rising administrative costs and reduced profitability are warning signs that require attention. With focused cost control and balanced reinvestment, the company can strengthen its financial health for sustainable growth.

ZAI AUTOS LTD - Analysis Report

Company Number: 14155814

Analysis Date: 2025-07-29 21:00 UTC

Financial Health Assessment of ZAI AUTOS LTD
Company Number: 14155814
Assessment Date: June 2024 Financial Year End

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1. Financial Health Score: C+

Explanation:
ZAI AUTOS LTD shows signs of stable but modest financial health typical for a young micro-business in the vehicle maintenance sector. The company is generating consistent profits and improving working capital. However, the scale of operations is very small, cash reserves are limited, and margins have narrowed compared to the prior year. There is also a modest tax liability and dividends paid out that reduce retained earnings. These factors place the company in a cautious "fair" health category, with scope to strengthen liquidity and profitability.

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2. Key Vital Signs: Critical Metrics & Interpretation

Metric	Value (2024)	Value (2023)	Interpretation
Turnover (Revenue)	£16,708	£13,927	Small but growing revenue indicates some market traction.
Gross Profit	£15,298	£13,427	High gross margin (~91.5%) reflects low cost of sales relative to revenue, healthy operational control.
Operating Profit	£2,551	£4,244	Profit fell by 40%; administrative expenses rose, squeezing operating margin.
Profit after Tax	£2,066	£3,438	Profitable, but net profit reduced significantly year on year.
Cash at Bank	£1,655	£864	Cash balance almost doubled, showing improved liquidity "pulse".
Current Liabilities	£485	£806	Current liabilities decreased, easing short-term debt pressure.
Net Current Assets	£1,170	£58	Working capital improved dramatically; healthier cash flow position.
Net Assets (Equity)	£620	-£492	Positive net assets after prior negative balance, indicating a "recovery" in financial health.
Dividends Paid	£1,546	£4,030	Dividends reduce retained earnings; need to balance distributions with reinvestment.
Number of Employees	1	1	Very small operation; limited human resource capacity.

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3. Diagnosis: What the Financial Data Reveals

• Healthy Cash Flow Signs: Cash reserves have almost doubled, and net current assets have improved from a near break-even to a positive buffer of £1,170. This suggests better management of receivables/payables and cash inflows, which is a reassuring "heartbeat" for liquidity.

• Symptoms of Expense Pressure: Despite increased turnover, operating profit and net profit have declined due to rising administrative expenses. This indicates possible inefficiencies or increased overhead that may be constraining the company's "vital functions."

• Balance Sheet Recovery: The company moved from negative net assets in 2023 (-£492) to positive equity of £620 in 2024, signalling recovery from prior losses and strengthening of the capital base. However, the absolute net asset value remains modest.

• Profitability Under Stress: The reduction in profit margins and the payment of dividends, which exceed profits in the previous year, indicate stress on retained earnings and potential cash flow strain if not carefully managed.

• Micro Business Scale: With only one employee and low turnover, the company is in the early stages of development. The narrow operational scale limits economies of scale and makes financial health sensitive to any external shocks or unexpected expenses.

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4. Recommendations: Specific Actions to Improve Financial Wellness

• Control Administrative Costs: Investigate the rising administrative expenses and identify cost-saving opportunities. Tightening expense management will help restore operating profit margins.

• Balance Dividends with Retained Earnings: Review dividend policy to ensure that distributions do not undermine the company’s working capital and reinvestment capacity. Retaining more profits could strengthen the equity base.

• Enhance Revenue Growth: Explore strategies to increase turnover such as targeted marketing, service diversification, or partnerships. Growth in sales volume will support fixed cost absorption and profit improvement.

• Build Cash Reserves Further: Maintain the positive cash flow trend and build a stronger cash buffer to safeguard against seasonal fluctuations or unexpected costs.

• Monitor Tax Liabilities: Ensure that corporation tax payments are planned and budgeted to avoid surprises that could disrupt cash flow.

• Plan for Scaling: As a micro business, consider operational scalability and workforce planning to support growth without disproportionately increasing overheads.

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Summary Using Medical Analogy

ZAI AUTOS LTD is showing signs of a recovering patient: the "pulse" of liquidity is strengthening, and the "vital signs" of net assets have improved. However, the "symptoms" of rising expenses and reduced profitability indicate that the company’s financial "immune system" needs attention to prevent relapse. With careful management of costs and reinvestment of profits, the company can expect a healthier financial prognosis.

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