Polaroid Corporation, 1996 - Case Study Solution
Financial Flexibility
Introduction to the Polaroid Corporation, 1996 Case Study Solution
The year is 1996, and Polaroid has seen no real sales growth in over
10 years.  Nominal sales growth has been 3.6% from 1986 to 1995,
but when adjusted for inflation, the growth has been zero.   Polaroid is
seen to be going through a transition.  A new CEO has arrived in the
previous year, and he made major changes upon his arrival.  He
immediately announced restructuring to the firm which resulted in a
reduction in workforce, products and programs.  He put an emphasis
on projects that had the greatest potential for commercialization.  His
changes to the corporate structure resulted in a one-time charge for
the 1995 fiscal year of $247 million.  This resulted in a $140 million
loss in 1995, compared to a gain of $117 million the previous year.  

Ralph Norwood is the new Treasurer of Polaroid.  He is challenged
with competing goals for the financial future of Polaroid; value
creation, flexibility and bond rating.  Polaroid is in need of capital at a
low cost for many years.  Ralph will need to recommend a financial
policy that will balance the goals of Polaroid and provide the directors
with a target mix of capital and the maturity structure of Polaroid’s

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