Coastal Freight Pty Ltd is a fictitious Australian transport and logistics company: a large, growing operator with a real fleet, real fuel exposure and real commercial contracts. It is much bigger than Ridgeline (a sole trader, Chapter 8) or Noosa Care (a partnership, Chapter 8C), and it is included to show that the same solvency risk exists at any size. At Coastal's scale, a margin problem measured in single percentage points is a multi-million-dollar problem, not a rounding error.
Because Coastal is a company, the people responsible are its directors. They pay company tax at 25% every year, and the reports speak to them in company terms: the duty not to trade while insolvent (section 588G of the Corporations Act), Director Penalty Notices for unpaid tax, and the record a director needs to rely on safe harbour. Shareholders, not owners, put money in (equity) and take it out (dividends).
Coastal is not a startup. By FY2025, the first year shown, it is an established operator: a $15.6 million fleet (at cost), funded mostly by equipment finance secured against the trucks themselves, and $4.8 million of Total Equity built up from years of retained profit on just $500,000 of Share Capital. A bank lending against real trucks and trailers doesn't need a large capital injection to feel secure, and a mature freight company's balance sheet reflects a decade of trading, not day one.
Coastal never looks obviously troubled. Revenue grows in every one of the six years, from $34.1 million to $52.6 million, and only one year (FY2028) shows a loss. That is deliberate. Coastal's lesson is not about a business that is visibly failing. It is about how the familiar measures can all look reasonable while a real trading problem builds underneath, how new borrowing and shareholder money can cover the gap for a while, and what it takes to climb back out.
What the analysis shows
Coastal opens the story looking exactly like the mature, well-financed freight company it is. Revenue of $34.1 million, Net Income of $887,250, and trading cash that covers loan repayments 1.58 times. Revenue was $1,551,105 above the $32,548,895 needed for all cash in to equal all cash out, so the year passes the Sustainable Cashflow test with room to spare. Cash closes at $775,975. The Year by Year section of the Annual Solvency Report says simply: No action needed this year.
What the analysis shows
Margin firms to 41.6%, Net Income nearly doubles to $1,683,375, DSCR climbs to 1.85x, and cash more than doubles to $2,062,000. Breakeven is met by $3,126,179. A director reviewing FY2026 on its own would have every reason to feel reassured, and would not be wrong to. The reversal that follows isn't visible anywhere in this year's figures.
One thing is quietly set up here, though. A strong profit year means a large tax bill, paid partly in the following year, and the PAYG instalments for the next year are set on this year's profit. If profit then falls, the company pays for two good years in one bad one. That is exactly what happens in FY2027.
What the analysis shows
Revenue grows again, to $42,000,000, and Net Income is still a positive $502,537. A director glancing at either figure would see a growing, profitable company. Underneath, Gross Margin has dropped from 41.6% to 35.6% as fuel costs and competitive freight rates bite. That six-point fall is worth about $2.5 million of gross profit at this revenue.
The Sustainable Cashflow test catches it straight away. Revenue was $1,171,817 short of the $43,171,817 needed for all cash in to equal all cash out. Cash falls by $1,080,423 in the year, from $2,062,000 to $981,577. Trading cash no longer covers loan repayments and interest: DSCR is 0.87x.
Part of the cash fall is the PAYG double hit set up in FY2026. Tax paid in the year was $826,500, against this year's own tax of just $167,513: last year's balance plus instalments set on last year's much higher profit. The overpayment comes back as a refund later (it shows as $393,612 “Income tax refund due” on the Balance Sheet), but the cash has left now. A tax refund or a big instalment from another year never changes the Breakeven verdict, because each year is tested on its own tax.
Actions needed now — from the Annual Solvency Report's Year by Year section
Revenue $1,171,817 below the Sustainable Cashflow target. Close the gap of about $97,651 a month, by raising revenue or prices or by a smaller saving in costs or dividends.
Trading cash did not cover loan repayments (DSCR 0.87x). Talk to the lender before a repayment is missed.
Tax paid well above this year's own tax. Ask the accountant to vary the PAYG instalments as soon as profit is known to be falling.
Safe Harbour depends on the record, not on being right. A director who raises this position is protected only by a documented, active step: raised in writing, minuted, and backed by independent advice.
This is the top of Coastal's Annual Solvency Report for FY2025 to FY2027, as the platform produces it today, with FY2027 as the present year.
Annual Solvency Report — Coastal Freight Pty Ltd · FY2025 to FY2027 · Score 58/100, Caution — Monitor Closely
The Story So Far
Two indicators read red and two read green, and the green ones are worth a careful look. Cash Trend reads “Improving” because it compares the first and last years shown: cash closed FY2025 at $775,975 and FY2027 at $981,577, up $205,602. But cash fell by $1,080,423 in the present year itself. A director who reads only the trend card misses the year that matters most. Current Ratio reads a healthy 2.36x, helped by debtors, the tax refund due and lower creditors. It says the company can pay its short-term bills today, not that this year's trading paid its way.
That is why the report doesn't stop at the cards. The Year by Year section (Section 10.5 above) lists the actions each year called for, and the Breakeven Report for the actual years shows the present-year verdict on its own page: Breakeven not met, shortfall $1,171,817. To close the gap: about $97,651 a month more revenue, or a smaller saving in costs or dividends. The score of 58 sits in the amber band, Caution, so the Safe Harbour card is included for the directors.
What the analysis shows
The forecast's first year shows the margin compression arriving in full. Revenue grows to $46,998,000, but Gross Margin falls to 30.2% and the company makes a loss of −$492,500, the only loss year in the story.
Yet DSCR reads 1.03x: the loan repayments are covered, but only just. That is below the 1.25x working threshold, so the platform calls it thin (Chapter 3, Section 3.9): a small fall in revenue would leave the repayments uncovered. That is not a mistake. DSCR compares trading cash with loan repayments and interest, and trading cash is still positive: $2,270,000 of depreciation is added back (it is a cost, but not a cash payment), and a $226,099 tax refund for FY2027 comes in. What DSCR does not look at is the $2,600,000 of new trucks and trailers bought this year, or the Contingency Reserve that needs funding.
The Sustainable Cashflow test does look at them. Even counting $1,000,000 of new borrowing and $778,843 of fresh shareholder equity as cash in, revenue is still $1,781,646 short of the $48,779,646 needed for all cash in to equal all cash out. Cash ends the year at $603,324, down $378,253: the bank balance is still positive, but that relies on the borrowing, the new equity and the $226,099 tax refund for FY2027, which the Breakeven test rightly leaves out because each year is tested on its own tax.
Planning the days the responsible way
How fast customers pay and how long suppliers wait move a great deal of cash for a company this size. The forecast follows our rule for planning the days: start from what your business actually achieved last year, never plan worse, improve by no more than 5 days a year towards your terms, and pay suppliers sooner only in a year that meets Breakeven and is not overdrawn.
In FY2027 Coastal’s customers paid in 45 days and its suppliers were paid in 28, against terms of 15 days both ways. So customers are planned to pay in 40, 35 and then 30 days. Suppliers stay at 28 days in FY2028 and FY2029, because a year that misses Breakeven cannot afford to pay them sooner, and step to 23 days in FY2030, the year the plan pays its way.
An earlier version of this forecast had suppliers waiting 34 and then 39 days, longer than Coastal has ever made them wait. That flattered the bank. Planned the responsible way, FY2028 is $1,781,646 short, more than twice the $751,154 the hopeful plan showed, and DSCR falls from 1.27x to 1.03x. On the Forecast page, the Step towards our terms button fills these days in for you (Section 3.10, Chapter 11).
Why $1.77 million was obtainable this quickly
The capital raise makes commercial sense because of what is on Coastal's Balance Sheet. At the end of FY2027, Total Equity is $6,954,162: almost fourteen times the $500,000 Share Capital line a director might glance at and mistake for the whole picture. The difference is years of retained profit. The fleet stands at $7.7 million after depreciation, plus $1.68 million of leased (right-of-use) assets, against $6.73 million of loans. A lender extending new debt, and shareholders putting in fresh equity, are both looking at that real security.
That is also why raising the money doesn't fix anything. Strong asset backing buys a struggling company time to keep trading through a bad year. It is not a substitute for fixing the margin. A healthy closing cash balance paid for by new debt and new equity means “we could still borrow and raise capital”, not “we are trading our way out”.
What the Solvency Forecast shows the directors
The FY2028 panel opens with four act-now actions: suppliers kept waiting (paid in 28 days against the 15 agreed), customers paying late (40 days against 15), gross margin falling while the bills are not all covered, and Revenue $1,781,646 below the Sustainable Cashflow target: close the gap of about $148,471 a month. Two keep-watch items follow: little buffer on the loan repayments (DSCR 1.03x), and a plan that relies on the shareholders putting in $778,843. The 3-Year Sustainable Cashflow badge reads NOT YET SUSTAINABLE, naming FY2028 as the year that fails. Because the forecast is only as sound as its weakest year, the forecast's Solvency Score is held at Caution (67/100), even though FY2030 on its own looks strong.
What the analysis shows
Pricing and cost discipline lift Gross Margin back to 35.5%, close to FY2027's 35.6%, while revenue grows 6.0% (1.9% after 4% inflation) and every cost rises at least with inflation. Net Income returns to $1,865,842 and DSCR strengthens to 1.96x with no new borrowing. Cash grows to $948,534. Yet Breakeven is missed by $1,399,365 on $49.8 million, about $116,614 a month. Two things flatter the bank: this year's company tax of $621,948 is still owing at year end, and a $167,513 refund for FY2028 comes in. The reserve top-up of $1,309,625 comes entirely from the company's own cash, because the bank holds enough that the shareholders are not asked for reserve money. Count this year's own tax and the reserve, and the year's trading does not yet pay its way: there is no cost headroom, and costs would need to fall 3.2% for the year to break even. The crisis looks behind the company; it is not yet.
With profit back, the shareholders would like a $500,000 dividend, the first in the story. The year has not yet paid its way, so they are advised to wait, and no dividend is paid.
A dividend one year after a loss — the shareholders ask, the accountant says not yet
On FY2029's figures alone a dividend can look affordable: DSCR is covered, profit is back and cash is growing. But the Sustainable Cashflow test fails by $1,399,365, because part of the cash in the bank is this year's tax, still to be paid. FY2028 needed $1,778,843 of new borrowing and equity just twelve months earlier, and the Contingency Reserve is still being built ($2,422,258 this year, reaching its full $3,709,138 only in FY2030). Paying $500,000 out would widen the shortfall to about $2,428,092, and costs would then need to fall 5.5% for the year to break even. A lender or new investor would push back hard on money going out to shareholders while the company is not yet covering its own obligations, and the next request for funds could fail.
So the forecast pays no dividend in FY2029 or FY2030. Dividends become a question for the board once the reserve is fully funded and no further shareholder money is needed — and then only after the board has minuted it and the accountant has confirmed the Corporations Act test that a dividend does not materially prejudice the company's ability to pay its creditors.
What the analysis shows
Revenue reaches $52,557,863, Gross Margin 35.7%, and Net Income $2,299,073. Breakeven is met by $2,730,287, DSCR is 1.99x, Current Ratio 2.55x, and cash closes at $1,356,468. The year's reserve top-up comes entirely from the company's own trading, so the shareholders are not asked for reserve money. Cost headroom is 6.0%, about a year and a half of 4% inflation, so the plan still depends on prices keeping pace with costs. Behind it sits a fully funded Contingency Reserve of $3,709,138 (Section 10.10). Long-term debt has fallen from $6.41 million in FY2028 to $3.41 million.
Nothing about this recovery required shrinking the company. Coastal in FY2030 is bigger and more profitable than at any point in the story. It simply prices its freight properly, manages its fuel exposure, and carries a funded reserve, as the Sustainable Cashflow Formula requires.
Why the forecast still scores 67, not 90
Judged on FY2030 alone, Coastal looks financially sound: Breakeven met by $2,730,287, DSCR 1.99x and Current Ratio 2.55x. Earlier versions of the platform showed the four cards at the top of the Solvency Forecast for FY2030 alone, all green, and scored it 90/100. Now the DSCR and Breakeven Gap cards name the weakest year, with each year listed underneath: DSCR 1.03x, thin, in FY2028 and Breakeven Gap −$1,781,646 in FY2028. Cash Trend reads +$753,144 and Current Ratio 2.55x. The story under the cards opens on the weakest year too (Chapter 9). But the score looks at every forecast year, and FY2028 and FY2029 miss Breakeven, so it is held at Caution, 67/100, and the score band says why. A forecast that relies on a year of new borrowing and new equity, and then on tax not yet paid, has not yet shown it can stand on its own trading. Once FY2028 and FY2029 are replaced by a plan that meets Breakeven, the score is free to rise.
Coastal's FY2028 to FY2030 recovery is backed by a real, growing Contingency Reserve: about 1 month of cost cover in FY2028, rising to 2 and then 3 months by FY2030. It is funded first from the company's own spare cash. Shareholders are asked only for the part that cash cannot cover, and never for more than the tapering 70% / 50% / 30% share covered in Chapter 3, Section 3.9. Money borrowed during the year never counts as spare cash:
| Year | Reserve at year end | Shareholder equity put in | Dividend |
|---|---|---|---|
| FY2028 | $1,112,633 | $778,843 (70%: the year’s cash came from new borrowing) | — |
| FY2029 | $2,422,258 | Nil (the company’s own cash covers it) | Nil — advised to wait |
| FY2030 | $3,709,138 | Nil (the company’s own cash covers it) | Nil — advised to wait |
Why this matters at Coastal's scale
A reserve of several million dollars is not a rounding adjustment for a company Coastal's size. It competes directly with fleet spending, debt repayment and dividends for the same cash. The levers used to fund it here, Capital Expenditure timing and Debt Repayment scheduling alongside the shareholder contributions, never touched Revenue, Cost of Goods Sold, Wages or Overheads, so the underlying margin story stays exactly what it was. The reserve means the next fuel-price shock or lost contract doesn't have to be absorbed entirely out of one year's trading. Notice too that the shareholders are asked for reserve money only in FY2028, when the year's cash came from $1,000,000 of new borrowing: a reserve is never funded from a new loan. From FY2029 the company's own cash carries the whole reserve build, which is how it should end. FY2029 also shows why the bank balance alone is not the test: some of that cash is tax still owing. Only once that build is complete does a dividend become a fair question for the board.
Why reserves matter
Coastal’s recovery holds because its reserve is built from the company’s own spare cash and the shareholders’ money, never from a new loan. A reserve keeps your business solvent, keeps the tax paid when it is due, and keeps your business trading.
Coastal's story contains the same lesson three times. In FY2027, the present year, DSCR does its job and falls to 0.87x, but the Cash Trend card still reads “Improving” and the Current Ratio reads 2.36x. In FY2028, DSCR still reads 1.03x, covered but thin, while the company makes a loss and needs $1,778,843 of new borrowing and equity. In FY2029 the bank balance itself grows by $345,210 while the year misses Breakeven by $1,399,365, because part of that cash is tax still owing. Every one of these figures is correctly calculated. They disagree because each measures something narrower than solvency:
- DSCR compares trading cash with loan repayments and interest. It ignores fleet replacement, reserves and dividends.
- Cash Trend compares the first and last years shown. It can hide a large fall in the latest year.
- Current Ratio compares short-term assets with short-term debts at one date. It says nothing about whether the year paid its way.
- The bank balance includes money that is not the company's to keep, such as tax still owing. It can grow in a year that does not pay its way.
The Sustainable Cashflow Formula asks the one question that covers all of them: did the year's revenue bring in enough cash to pay every cash obligation, including equipment, loan repayments, reserves and dividends? Coastal's FY2028 fails that test even after $1,778,843 of new borrowing and equity is counted as cash in. When new borrowing or new equity is doing the work that trading should do, a covered ratio is measuring lenders' and shareholders' willingness to keep funding the company, not the company's own ability to fund itself. Treat the Breakeven Gap as the real signal for the year, and record what the board decided to do about it.
Coastal Freight Pty Ltd shows something no ratio-only dashboard reliably catches: a company can grow its revenue every year, show a profit in the present year and read comfortably on Current Ratio and Cash Trend, while a real margin problem builds underneath, visible only once each year is tested against the Sustainable Cashflow Formula. It also shows that recovery is possible, and what it looks like when it is earned: better pricing, cost discipline, careful timing of fleet spending, and a funded reserve. For directors, the reports turn that into a written record, year by year, of what the position was and what was done about it.
The key figures for all six years, straight from the BusinessSolvency calculation engine. Directors can stop here, or read on.
In short: every key figure for FY2025–FY2030 in one table, with the cash movements and the solvency ratios year by year.
| Figure | FY2025 | FY2026 | FY2027 | FY2028 (F) | FY2029 (F) | FY2030 (F) |
|---|---|---|---|---|---|---|
| Revenue | $34,100,000 | $38,400,000 | $42,000,000 | $46,998,000 | $49,817,880 | $52,557,863 |
| Net profit (Net Income) | $887,250 | $1,683,375 | $502,537 | −$492,500 | $1,865,842 | $2,299,073 |
| Company income tax | $295,750 | $561,125 | $167,513 | $0 | $621,948 | $766,358 |
| Trading cash (operating cash flow) | $2,954,975 | $3,486,025 | $1,239,577 | $1,362,904 | $3,945,210 | $3,607,934 |
| of which set aside into the cash reserve | $0 | $0 | $0 | −$1,112,633 | −$1,309,625 | −$1,286,880 |
| Spent on equipment and buildings | −$1,900,000 | −$1,400,000 | −$1,400,000 | −$2,600,000 | −$2,000,000 | −$1,800,000 |
| New borrowing | $850,000 | $400,000 | $0 | $1,000,000 | $0 | $0 |
| Loan repayments | −$1,050,000 | −$1,200,000 | −$920,000 | −$920,000 | −$1,600,000 | −$1,400,000 |
| Sustainability equity injection | $0 | $0 | $0 | $778,843 | $0 | $0 |
| Cash at start of year | −$79,000 | $775,975 | $2,062,000 | $981,577 | $603,324 | $948,534 |
| Cash at year end | $775,975 | $2,062,000 | $981,577 | $603,324 | $948,534 | $1,356,468 |
| Cash reserve held (a separate asset) | $0 | $0 | $0 | $1,112,633 | $2,422,258 | $3,709,138 |
| ATO amounts owing | $237,725 | $265,375 | $0 | $0 | $621,948 | $144,410 |
| Short-term loans | $1,050,000 | $400,000 | $400,000 | $400,000 | $400,000 | $400,000 |
| Long-term debt | $7,400,000 | $7,250,000 | $6,330,000 | $6,410,000 | $4,810,000 | $3,410,000 |
| Suppliers owed (trade creditors) | $3,100,000 | $3,400,000 | $2,224,109 | $2,668,431 | $2,624,554 | $2,265,779 |
| Sustainable Cashflow target: revenue above (+) or below (−) it | +$1,551,105 | +$3,126,179 | −$1,171,817 | −$1,781,646 | −$1,399,365 | +$2,730,287 |
| Loan cover (DSCR): trading cash ÷ loan repayments | 1.58 | 1.85 | 0.87 | 1.03 | 1.96 | 1.99 |
| Current Ratio: short-term assets ÷ short-term debts | 1.34 | 1.85 | 2.36 | 2.20 | 2.16 | 2.55 |
- Cash check: each year’s cash at year end equals cash at the start of the year, plus trading cash, less equipment and buildings, plus or minus the financing lines above; and each year starts with the previous year’s closing cash. It agrees to the dollar in all six years.
- Tax: company income tax at 25%.
- The cash reserve: money set aside into the reserve is taken out of trading cash and held as a separate asset, so “cash at year end” is the cash left free after the reserve. Both are shown.
- The Sustainable Cashflow target counts every cash payment, including equipment, loan repayments and dividends, and counts new borrowing and money put in by the shareholders as cash in (Chapter 3).
- Scores: the BusinessSolvency score is 58 out of 100 for the actual years and 67 for the forecast.
- See it live: during alpha testing, request access to open this business’s forecast in the BusinessSolvency app.