The primary method by which a firm may protect itself against operating exposure impacts is
A) money market hedges.
B) diversification.
C) forward contract hedges.
D) balance sheet hedging.

Question

Quizplus · Accepted Answer

Diversification is the primary method by which a firm may protect itself against operating exposure impacts. By diversifying its operations, a firm can reduce its reliance on a single market or currency, thereby reducing its exposure to potential losses due to currency fluctuations or changes in market conditions. Money market hedges, forward contract hedges, and balance sheet hedging are useful tools for managing operating exposure, but they are not as effective as diversification in reducing the overall risk of a firm.

The Primary Method by Which a Firm May Protect Itself