Donka Co. does a lot of business in Australia. It has numerous trade accounts receivables and accounts payables that are to be settled in Australian dollars. What type of hedge does Donka have?
A)Natural hedge.
B)Fair-value hedge.
C)Cash-flow hedge.
D)Hedge instrument.

Question

Quizplus · Accepted Answer

Donka has a natural hedge because its trade accounts receivables and accounts payables are in Australian dollars, so any fluctuations in the AUD exchange rate will have a direct impact on its cash flows.

Donka Co Does a Lot of Business in Australia