Question : Questions: Different Sources of Finance
Statement 1: Global Depository Receipts (GDRs) enable foreign companies to raise funds in international markets.
Statement 2: GDRs are issued by foreign companies in their home country's markets.
Option 1: Statement 1 is true, and statement 2 is false.
Option 2: Statement 1 is false, and statement 2 is true.
Option 3: Both statements 1 and 2 are true.
Option 4: Both statements 1 and 2 are false.
Correct Answer:
Statement 1 is true, and statement 2 is false.
Solution : The correct answer is (a) Statement 1 is true, and statement 2 is false.
Statement 1 is true. Global Depository Receipts (GDRs) indeed enable foreign companies to raise funds in international markets. GDRs are financial instruments issued by foreign companies to raise capital by listing their shares on foreign stock exchanges.
Statement 2 is false. GDRs are not issued by foreign companies in their home country's markets. Instead, GDRs are issued by depository banks in international markets, representing the shares of the foreign company. These depository banks hold the actual shares and issue GDRs against those shares, making them available for trading on international exchanges.
