Explain the benefits and drawbacks of financial hedging, Financial Management

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What are the benefits and drawbacks of financial hedging of the firm’s operating exposure vis-a-vis operational hedges (like relocating manufacturing site)?

Answer: Financial hedging can be implemented rapidly along with comparatively low costs, but it is hard to hedge against long-term, real exposure along with financial contracts. Alternatively, operational hedges are costly, time-consuming, and not simply reversible.

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