A cash-flow hedge attempts to limit a company's exposure to price changes in forecasted purchases.

Question

Quizplus · Accepted Answer

A cash-flow hedge is a type of hedge that is designed to limit a company's exposure to price changes in forecasted purchases. This is achieved by using financial instruments such as futures or forwards to lock in a future price. By doing so, the company can protect itself against potential losses due to unfavorable price movements in the future.

A Cash-Flow Hedge Attempts to Limit a Company's Exposure to Price