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Question : Case Study: XYZ Ltd. - Raising Finance for Expansion

XYZ Ltd. is a growing company that manufactures electronic gadgets. The company has been successful in the market and is planning to expand its operations. To finance this expansion, XYZ Ltd. is considering various sources of business finance.

Questions : Debentures and Financial Instruments

How are GDRs and ADRs similar in function?

Option 1: Both are used to issue equity shares
    

Option 2: Both are issued only in the domestic market
 

Option 3: Both represent ownership rights in the issuing company

 

Option 4: Both enable companies to raise funds in international markets


Team Careers360 19th Jan, 2024
Answer (1)
Team Careers360 25th Jan, 2024

Correct Answer: Both enable companies to raise funds in international markets


Solution : The correct answer is (d) Both enable companies to raise funds in international markets

GDRs and ADRs are both financial instruments that enable companies to raise funds in international markets by issuing depositary receipts. GDRs are issued and traded outside the United States, while ADRs are specifically issued and traded in the United States. They allow companies to tap into a larger pool of investors and access capital from international markets without directly listing their shares on foreign stock exchanges. These instruments represent claims to shares in the issuing company and facilitate investment from investors in different regions around the world.

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