Question : Assertion-Reason Questions: Chapter - Sources of Business Finance
Questions : Different Sources of Finance
Assertion: Global Depository Receipts (GDRs) enable foreign companies to raise funds in any country.
Reason: GDRs are issued by foreign companies in their own country's markets.
Option 1: Both assertion and reason are true, and the reason is the correct explanation of the assertion.
Option 2: Both assertion and reason are true, but the reason is not the correct explanation of the assertion.
Option 3: Assertion is true, but the reason is false.
Option 4: Both assertion and reason are false.
Correct Answer:
Both assertion and reason are true, but the reason is not the correct explanation of the assertion.
Solution : The correct answer is (b) Both assertion and reason are true, but the reason is not the correct explanation of the assertion.
The assertion is true. GDRs are financial instruments that allow foreign companies to raise funds from investors in different countries by listing and trading these instruments on international stock exchanges.
The reason is true, but it does not directly explain why GDRs enable fundraising in any country. GDRs are indeed typically issued in the foreign company's home country but are designed to be traded and available for investment in multiple countries, allowing the foreign company to access a broader and more diverse investor base worldwide.
