The fact that GP for the company is increasing annually, while the Net Profit figure is decreasing indicates that operational costs have been increased by year 1965 – 1971.
Current ratio is less than 1 constantly indicating that their current assets are not enough to pay off their liabilities.
Total D/E ratio shows an alarming condition of large number of debt figures compared to that of equity. In 1971 D/E ratio has risen up to 4.6. It has been consistently increasing since 1965.
A negative net working capital ratio effects the liquidity of the company adversely that has also been consistently going towards unfavorable position.
Joint Venture OR Franchise for Expansion:
As per their financial conditions they cannot acquire organic growth nor does franchising seem suitable as it needs capital investment which is not available. They are already in more debt comparatively to the industry average. Their debt to equity ratio indicates that they are largely dependent on their debt as a capital investment. As we can see that businessman in other Europe where they want to invest already has more finance so it would be more convenient for them to start joint ventures with them.
They have provided everything under one roof before that essentially visits to four separate shops were required. So this is our strength.
They are trying to acquire inexpensive construction in combination with low cost land. Which will cut off their total investment per meter square by 2/3. This is an opportunity we should acquire.
They follow decentralized management style which seems to be highly motivated for the employees by their consents. This is a strength as more ambitious employees are more aligned they are with the company’s objective.
Their main strengths are convenience for the customers and lowest prices in the industry.
Economy had lagged behind in adopting modern techniques. It is a weakness.