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Consulting Case Interview Practice Questions

Category - Strategy

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Which of the following could be an example of hedging? Select all that apply:

Buying futures on oil
Hiring a strategy consultant
Protecting against fluctuating exchange rates
Changing back-office processors

Explanation

Answer: a and c - Protecting against fluctuating exchange rates and buying oil futures could be hedging against business risk.

Key Takeaway: Hedging is important to smoothing earnings and ensuring consistent cash flow. For instance, Southwest Airlines has protected itself by purchasing contracting for jet fuel at a set price to protect against fluctuating prices.

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Consulting Case Interview Practice Questions

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Consulting Case Interview Practice Questions

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