In order to avoid exchange rate risks, the company will make all transactions in one standard currency that is U.S. dollars. Moreover, in order to avoid exchange rate risks AKJRT Inc. will use hedging approach, while netting approach will also be used where necessary. Hedging approach will be more pragmatic for the company as the company will be taking financial loans from international financial institutions (IXGW, 2011).
Generation of Financial Resources
Given the highly capital intensive nature of the business, generation of financial resources remains a major concern for AJKRT Inc. Since the retained profits of the company are expected to remain relatively lower in the initial years, the company's retained profit cannot be considered dependable enough to finance the entire business all by itself. In order to finance its capital intensive structure, the business will have to depend on diverse sources of finance. The three main sources of finances are as follows:
Finance generated through share capital
Loan Capital which primarily includes bank loans
Government Assistance
As stated earlier, AKJRT Inc. is a highly capital intensive venture. While retained profit alone cannot be depended upon, depending too much on the loan capital can be negative for the company as well due to the increase interest expenditure. Therefore the most viable option is the generation of finance through issue of shares. The company can sell its stocks in the...
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