It can be argued that, while financial hedging can be used to stabilize a firm's cash flows,

Question

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Financial hedging, such as using derivatives to reduce financial risks, can help stabilize a firm's cash flows in the short-term. However, it does not address the underlying operational risks that a firm may face in the long-term. Operational hedging, such as diversifying supply chains or developing new products, is necessary to manage and mitigate these long-term risks. Therefore, financial hedging is not a substitute for long-term operational hedging.

It Can Be Argued That, While Financial Hedging Can Be