Why would the management of a multinational corporation incur real costs to hedge accounting exposure,which is only on paper?
A)Fluctuations in reported income may affect stock price.
B)Management compensation may be tied to accounting income.
C)Hedging can smooth income.
D)all of the above

Question

Quizplus · Accepted Answer

The management of a multinational corporation may incur real costs to hedge accounting exposure, which is only on paper, for various reasons. Fluctuations in reported income may affect stock price, and management compensation may be tied to accounting income. Hedging can also smooth income, reducing the impact of exchange rate fluctuations and providing a more accurate reflection of underlying business performance. Therefore, all of the given reasons are valid for why management may choose to incur real costs to hedge accounting exposure.

Why Would the Management of a Multinational Corporation Incur Real