Which scenario depicts the use of Forex by a multinational corporation?

The scenario that illustrates the use of Forex by a multinational corporation is when it hedges against currency risk from international operations. Multinational corporations often engage in business activities across different countries, which exposes them to fluctuations in foreign exchange rates. These fluctuations can significantly impact their profits and revenue when converting currencies back to their home currency.

Hedging is a risk management strategy employed by these corporations to protect themselves against unfavorable movements in exchange rates. By using various financial instruments, such as forward contracts or options, a company can lock in exchange rates, thereby mitigating the risk associated with currency fluctuations. This strategic use of Forex enables the corporation to stabilize cash flows, enhance predictability in financial planning, and ultimately maintain competitiveness in the global market.

In contrast, the other scenarios depicted do not involve the use of Forex. Investing exclusively in domestic markets restricts a corporation's exposure to international currencies. Issuing stocks pertains to raising capital rather than managing currency risks. Reducing costs through local procurement focuses on operational efficiency and does not necessarily involve foreign exchange transactions.