Pimo Benzina AG is a retail chain of high quality petrol in central Europe offering snacks, restaurant meals and grocery items. The business was established with a mission “to be the best petrol convenience, and fresh food retailer in the eyes of our customers, our competitors, and our employees” The company grew rapidly from four outlets and sales of 2.4 million euros in 2006 to 24 outlets and sale of 38.1 million euros in 2009. The corporation’s rapid growth in revenues was accompanied by declining profitability and a substantial increase in receivables, inventories and capital investment in new retail outlets. The primary focus was on fast efficient and safe stores. The company relied heavily on short term loans and the rate of…show more content… They provided a loyalty program to which customers earned miles and offered credit to customers who chose to use its Primo Benzina Visa credit card. The financial implications of this strategy was that it increased costs, elevated price premiums on petrol and other products, and created higher operating margins but less sales volume as compared to competitors.
In review of the financial statements they disclosed that share of refreshments, food and drinks in total sales has decreased from 40% in 2006 to 26% in 2009. However the sales of refreshments, food and drinks is rising at a high percentage of 176% indicating the accomplishment of Primo Benzina’s full service stations. The financial analysis of the balance sheet shows that the percentage of equity in the sources of funds is decreasing while the debt is escalating. Short term liability has compounded from 14% to 39% while long term liability had increased from 16% to 24%. The Debit/equity ratio shows an almost double increase in dependence on borrowed funds between 2007-2008, leading to a greater obligation of fixed interest payment, and a lessor safety margin for long term creditors. An increasing Debit-equity ratio can also create difficulties in raising additional loans. This triggered a potential lack of future financing, considering that Gerhard Schroder property developer had indicated that he was unwilling to continue to provide financial support to the organization. Additionally, they