EARACHE RECORDS LIMITED
Company number 02781569 · Monitor this company
This analysis was written by an AI from the company's public filings. It may contain errors or omissions and is not financial or professional advice.
Financial Health Assessment: Earache Records Limited
Company number: 02781569 | Registered office: 26 Handel Street, Nottingham | Status: Active
Basis: Filed annual accounts to 30 June 2025 and Companies House overview data. Figures are in GBP.
1. Financial Health Score: B
Grade: B — Satisfactory, with monitoring required
Explanation: The company is solvent and has rebuilt its balance sheet from very thin equity in recent years to £750,000 of net assets. It holds positive working capital, has no disclosed long-term debt, and is up to date with filings. However, liquidity is stretched: the quick ratio is below 1.0, cash reserves fell by almost 19% in the last year, and trade debtors more than doubled. The condition is improving but not yet robust, so active management of cash and receivables is needed.
2. Key Vital Signs
| Vital Sign | Latest (2025) | Previous (2024) | Interpretation |
|---|---|---|---|
| Net assets (equity) | £750,041 | £696,398 | Strong recovery from £16,405 in 2021. The business owns substantially more than it owes. |
| Cash at bank | £1,034,765 | £1,274,117 | A healthy absolute balance, but down 18.8% year-on-year; reserves are being consumed. |
| Current ratio | 1.26 | 1.24 | Current assets cover short-term debts, but the cushion is thin. |
| Quick ratio | 0.98 | 0.97 | Below 1.0 — the company could not settle all immediate creditors from cash and debtors alone without selling stock. |
| Cash ratio | 0.56 | 0.72 | Only 56p of cash for every £1 of short-term liabilities; reliance on debtor collection is increasing. |
| Working capital | £477,688 | £418,221 | Positive and growing, indicating short-term operational resilience. |
| Trade debtors | £371,200 | £150,373 | More than doubled; a significant amount of cash is tied up in customer receivables. |
| Trade creditors | £908,198 | £841,958 | Supplier obligations are stable but large relative to equity. |
| Long-term debt | None disclosed | None disclosed | No borrowings repayable beyond one year, which reduces fixed repayment risk. |
| Filing status | Up to date | Up to date | Accounts and confirmation statement are not overdue; regulatory health is good. |
Note: Total liabilities in the source data are presented as negative values because they represent amounts owed. The figures above use their absolute values.
3. Diagnosis and Prognosis
Diagnosis
The company is in convalescence. After years of minimal net assets — including £16,405 in 2021 and £10,100 in 2016 — equity has been rebuilt to £750,000. That is a significant improvement in solvency.
There is no disclosed long-term debt, so the business does not face a “chronic condition” of fixed loan repayments. Filings are current, and the company remains active.
However, liquidity is borderline. The quick ratio of 0.98 and cash ratio of 0.56 are symptoms that the company depends on collecting debtors and selling stock to pay its suppliers. Cash fell by £239,352 during the year, while total debtors rose by £320,377 and trade debtors alone more than doubled to £371,200. This pattern suggests growth is being funded by extending credit to customers rather than by accumulating cash.
Because the filed accounts are filleted (the profit and loss account is not delivered to the registrar), turnover and profitability cannot be verified from the public record. The £53,643 increase in shareholders’ funds implies a modest retained profit for the year, but this cannot be confirmed without internal management accounts.
Prognosis
- Short term: Stable, provided trade debtors are collected promptly and cash outflows are controlled. If debtor payment slows or sales decline, the company may need to negotiate extended creditor terms or arrange short-term funding.
- Medium term: Cautiously positive. The balance-sheet recovery is real, and continued profitability would further strengthen equity.
- Long term: Dependent on converting the improved net asset position into consistent, cash-generating trading.
4. Recommendations
- Introduce a rolling 13-week cash-flow forecast. Treat this as a regular “blood-pressure check” to spot liquidity shortfalls before they become critical.
- Tighten credit control. Prioritise collection of the £371,200 trade debtors. Review customer payment terms, issue invoices promptly, and consider early-payment incentives or invoice financing to convert receivables into cash faster.
- Set a minimum cash reserve. Aim to hold enough cash to cover at least one month of creditors (roughly £150,000–£200,000) and avoid letting the balance fall below that level.
- Review stock holdings. The £507,051 stock balance ties up cash. Identify obsolete or slow-moving items and liquidate them where possible.
- Negotiate creditor terms. With trade creditors of £908,198, seek longer payment periods from suppliers to better align with the debtor collection cycle.
- Produce monthly management accounts. Because the filed accounts are filleted and exclude the profit and loss account, internal monthly reports are essential to monitor turnover, margins, and net profit in real time.
- Exercise dividend caution. Given the recent recovery in equity, keep distributions modest until liquidity ratios improve sustainably.
- Maintain filing compliance. Continue submitting accounts and confirmation statements on time to avoid penalties and preserve good standing at Companies House.