While not always true for small firms, large multinationals can deal with currency fluctuations by
A) using forward contracts and foreign-currency options.
B) locating all their plants in the country that offers the most advantageous exchange position.
C) limiting sales in each country market to reduce exposure to any one currency.
D) following the advice of the international sales manager.

Question

Quizplus · Accepted Answer

Large multinationals can use forward contracts and foreign-currency options to hedge against currency fluctuations. These financial instruments enable the company to lock in exchange rates for future transactions, thereby reducing the risk of fluctuating rates. This is a common practice among multinational corporations to manage currency risk. Locating all plants in the country with the most advantageous exchange position may not be feasible or strategic, and limiting sales in each country market may not be desirable from a growth perspective. Following the advice of the international sales manager may not necessarily address the currency risk management issue.

While Not Always True for Small Firms, Large Multinationals Can