Question : Case Study 4:
LMN Ltd. is a manufacturing company that relies heavily on imported raw materials. Due to changes in currency exchange rates, the cost of raw materials has increased significantly, affecting the company's profitability.
Q:- How can LMN Ltd. mitigate the impact of currency exchange rate fluctuations?
Option 1: Seek government subsidies
Option 2: Find alternative suppliers
Option 3: Reduce production volume
Option 4: Increase product prices
Correct Answer: Find alternative suppliers
Solution : The correct answer is (B) Find alternative suppliers
To mitigate the impact of currency exchange rate fluctuations, LMN Ltd. can consider finding alternative suppliers. This approach involves diversifying its supplier base to include those who operate in regions with more favorable currency exchange rates, or it might negotiate contracts in which suppliers bear a portion of the exchange rate risk. Seek government subsidies might be considered in specific circumstances, but it is not a direct response to exchange rate fluctuations. Reducing production volume and increasing product prices might be strategies to manage costs and revenue but may have other consequences and should be considered carefully.
