Why Look at Company Accounts?
Every UK limited company must file annual accounts with Companies House. These accounts are public documents that anyone can access for free. They're useful for:
- Due diligence — checking whether a company you're about to do business with is financially healthy
- Job research — understanding a potential employer's financial position
- Competitor analysis — comparing your business against others in your industry
- Investment research — assessing whether a company is growing or declining
Types of Accounts
The level of detail in company accounts depends on the company's size:
| Company Size | What They File | Detail Level |
|---|---|---|
| Micro | Balance sheet only | Minimal |
| Small | Balance sheet + notes | Limited |
| Medium | Full accounts (may omit P&L) | Moderate |
| Large / PLC | Full audited accounts | Comprehensive |
Small and micro companies make up the vast majority of UK businesses, so you'll often see very basic filings with limited financial detail.
The Balance Sheet
The balance sheet is a snapshot of the company's financial position on a specific date. It has three main sections:
Fixed Assets
Long-term assets the company owns — property, equipment, vehicles, and intangible assets like goodwill or intellectual property. These are things the company uses to generate revenue rather than items for sale.
Current Assets
Short-term assets that can be converted to cash within a year:
- Cash at bank — money readily available
- Debtors — money owed to the company by customers
- Stock — inventory held for sale
Liabilities
What the company owes:
- Creditors due within one year — bills, taxes, and short-term loans
- Creditors due after one year — long-term loans, mortgages
Net Assets
The bottom line: total assets minus total liabilities. A positive number means the company has more assets than debts. A negative number (net liabilities) is a warning sign — the company owes more than it owns.
Profit and Loss Statement (P&L)
The P&L shows the company's income and expenses over the financial year. Not all companies are required to file this, but when available it tells you:
- Turnover (Revenue) — total sales income
- Cost of sales — direct costs of producing goods or services
- Gross profit — turnover minus cost of sales
- Administrative expenses — overheads like rent, salaries, office costs
- Operating profit — gross profit minus admin expenses
- Profit before tax — operating profit plus/minus interest and one-off items
- Tax — corporation tax due
- Profit after tax — the final bottom line
Key Numbers to Look At
When reviewing company accounts, focus on these figures:
Net Assets / Net Liabilities
Is the company solvent? Positive net assets means it can theoretically pay all its debts. Negative net assets is a serious warning sign, though some companies (especially startups) operate with negative net assets temporarily.
Cash at Bank
A company can be profitable on paper but still run out of cash. Check whether the cash balance is increasing or decreasing year over year.
Creditors vs Debtors
If creditors (what the company owes) significantly exceed debtors (what's owed to it), the company may face cash flow problems.
Year-on-Year Trends
One year's accounts is a snapshot. Compare with previous years to see trends. Is turnover growing? Are debts increasing? Is the company becoming more or less profitable?
Red Flags in Company Accounts
- Net liabilities — the company owes more than it owns
- Declining cash — cash reserves shrinking year over year
- Overdue accounts — late filing suggests disorganisation or financial trouble
- Qualified audit opinion — the auditor has flagged concerns
- Director loans increasing — directors lending money to the company can signal cash problems
- Going concern note — the auditor doubts the company can continue operating for the next 12 months
Where to Find Company Accounts
You can view a company's filed accounts through their filing history on UK Company Hub. Search for the company name or number, then look for "Annual Accounts" or "Total Exemption Small Company" in the filing history section.
Accounts are typically filed as PDF documents. The most recent filing gives the current financial position, but comparing multiple years provides much more insight.