Question

What is the primary purpose of using derivatives in financial risk management?

a.

To increase exposure to financial risks

b.

To stabilize the balance sheet position

c.

To speculate on future financial risks

d.

To diversify investment portfolios

Posted under IC 89 Management Accounting

Answer: (b).To stabilize the balance sheet position Explanation:Derivatives are used as hybrid financial instruments to treat and manage financial risks, aiming to stabilize a firm's balance sheet position.

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