For most firms the principle reason for hedging is

Question

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The primary reason for most firms to hedge is to reduce the likelihood of financial distress. This is because hedging helps firms to manage their exposure to risks such as commodity price fluctuations or exchange rate fluctuations, which can have a significant impact on their financial performance. By hedging, firms can mitigate the potential losses associated with these risks, thereby reducing the likelihood of financial distress. Complying with SEC regulations, satisfying shareholders or debt owners may be other motives for firms to hedge, but they are not the primary reasons.

For Most Firms the Principle Reason for Hedging Is