Consistent negative net worth
Discussion
Below are the key financials for a supposedly reputable limited (company 30+ years old with outstanding reviews).
As the graph suggests the company's had a consistent negative NW for the duration of time shown.
Can someone explain this?
Not sure, firstly, if this is suspicious or a cleaver accounting strategy to avoid tax?
As the graph suggests the company's had a consistent negative NW for the duration of time shown.
Can someone explain this?
Not sure, firstly, if this is suspicious or a cleaver accounting strategy to avoid tax?
Standalone, or part of a group? Intragroup charges/strategies can do things like this.
Also, how are they defining "net worth"? Retained profit, or net assets? If it's retained profit, then it's easier to understand.
Share capital 10,000
Share premium 10,000
Retained losses (20,000)
Management take a bonus each year that takes retained profit movement to zero. Fairly common in family owned companies, although they prefer to get rid of retained losses so they can take dividends instead as it's more tax efficient...
Also, how are they defining "net worth"? Retained profit, or net assets? If it's retained profit, then it's easier to understand.
Share capital 10,000
Share premium 10,000
Retained losses (20,000)
Management take a bonus each year that takes retained profit movement to zero. Fairly common in family owned companies, although they prefer to get rid of retained losses so they can take dividends instead as it's more tax efficient...
Your missing some pretty vital info to make an assessment with that info. Simply subtracting liabilities from Assets is a very random way of assessing a company.
The fact they actually have some cash would be a positive....
You need to look at the full P&L account for last year, which should be available on companies house.
Then you need to also take into account,
Profit,
Cost of sales
Debtors
director pay
etc...
The fact they actually have some cash would be a positive....
You need to look at the full P&L account for last year, which should be available on companies house.
Then you need to also take into account,
Profit,
Cost of sales
Debtors
director pay
etc...
PoleDriver said:
Wow! If I was an individual with assets of £24K and liabilities of almost double that I'd be trying to take myself off the radar! 
Most important tip for staying under the radar. Never, ever, ever sign up for a parking permit. If you sign up for a parking permit, that's you f
king fked.
Generally speaking a profitable company can operate like this where you are taking payment up from for a service. Happens a lot where you have internet services where you pay up front for a month or year (web hosting is one example but could just as easily apply to Spotify or to Sky). Whilst the company might receive your £10 for the month now, it also has a liability equal to the value of the time left on the service contract. So at the beginning of the month they'd have a liability of £10, half way through the month it would recognise a liability of £5. Even though the money is already in the bank, and the actual marginal cost to provide the service is in most cases nowhere near what the liability shows.
TooLateForAName said:
Need to know more about it.
Have they bought something that gets written down quickly but the debt to pay for it is long term?
eg set up as mot place and bought all testing equipment on 10 year debt but written off over 3 years?
This sounds most likely - accounting asset value or 'book value' is not always (/ usually?) equal to fair market value of assetsHave they bought something that gets written down quickly but the debt to pay for it is long term?
eg set up as mot place and bought all testing equipment on 10 year debt but written off over 3 years?
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