Polaroid faces several business risks in March of 1996 that go away affect its financing policy. Traditionally a one-product-line company, Polaroid still derives 90% of its revenues from photographic products.
Although the company enjoys a de facto monopoly on instant chemic photography, digital imaging technologies pose a substantial threat. It is non clear how fast these technologies will develop or give the sack conventional photography, but it is clear that Polaroid will not progress to a monopoly in these markets. And the crop of quick one-hour photo exploitation processing could make instant photography less good-hearted to consumers.
Further, an increasing portion of Polaroids revenues come from outside the United States. umteen of the sales are in developing countries: Russia alone accounted for nearly 9% of 1995 sales. Polaroid does not have a large installed rear in these countries, and the Polaroid brand name may not be as strong as in the United States. Although Polaroid uses world(prenominal) lines of credit and possibly other hedging techniques to reduce cash risk, doing business in developing nations poses an increased market risk.
The growth in international business is a logical fly the coop for Polaroid given that U.S.
sales are flat and net margins of unconnected sales have been higher than domestic margins for the past terzetto years.
The increased risk and the possibility that the company will compulsion additional funds to develop or acquire bleak technologies in the near future mean that Polaroid must entertain a strong enough balance sheet to abide a cushion for future financing needs.
Capital be
To assess Polaroids options, it is useful to know the firms salute of capital. The companys bonds have a BBB rating, and Hudson Guaranty estimates the fair(a) BBB-rated issuer has a cost of debt of 7.40% and a cost of equity of 10.5%.
Polaroids outstanding notes and debentures have a weighted average yield of 7.95%. Using the...If you want to get a generous essay, order it on our website: Ordercustompaper.com
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