Types of risk-reducing financial transactions

(Question 1) Why might a firm undertake risk-reducing financial transactions, for example, a hedge against fluctuations in raw materials prices? Give at least one good reason. What types of risk-reducing financial transactions does your organization use?

(Question 2) Which of the following companies would be more likely to hedge its raw materials prices? Explain your answer.

- A mature firm with no debt outstanding.

- A growth firm that will rely on debt to finance future capital investments.

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Finance Basics: Types of risk-reducing financial transactions
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