To protect against loss as a result of adverse currency fluctuations,an export firm may:

Question

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Purchasing a futures contract as a hedge allows the exporter to lock in a future exchange rate, reducing the risk of adverse currency fluctuations. This is a commonly used strategy for managing currency risk in international trade. Option A is not feasible in many cases, as customers may not be willing to pay upfront and in cash. Option C can limit market access and competitiveness, as customers may prefer to pay in their own currency. Option D is not a practical solution, as it may not be available or may come with complex requirements.

To Protect Against Loss as a Result of Adverse Currency