Tag: sources of business finance - 2

Questions Related to sources of business finance - 2

What is/are the eligibility criteria of foreign issuing company to issue Indian Depository Receipts (IDRs)?

  1. Preissue paidup capital and free reserves of at least US$ 50 million

  2. A continuous trading record or history on a stock exchange

  3. Listed in home country and not been prohibited to issue securities

  4. All of the above


Correct Option: D
Explanation:
IDR is a form of Depository receipt. It is created by a domestic depository. It is an instrument denominated in Indian Rupees. The eligibility criteria of foreign issuing company to issue Indian Depository Receipts are:
a) Pre issue paid up capital and free reserves of at least US$ 50 million b) A continuous trading record or history on a stock exchange
c) Listed in home country and not been prohibited to issue securities.

American depository receipt fee varies from one cent to ___ cents per share depending upon the ADR amount and its timing.

  1. Four

  2. Three

  3. Five

  4. Ten


Correct Option: B
Explanation:

American depository receipt fee varies from one cent to 3 cents per share depending upon the ADR amount and its timing.American Depository Receipt (ADR) is a certified negotiable instrument issued by an American bank suggesting the number of shares of a foreign company that can be traded in U.S. financial markets. Common types of ADR are: mediation, concilation, arbitration.

GDRs are usually denominated in U.S. dollars.

  1. True

  2. False


Correct Option: A
Explanation:

GDRs are usually denominated in U.S. dollars- this is a true statement.GDR is a foreign currency denominated derivative instrument in the form of depository receipt created outside India and issued to non-resident investors. GDR stands for Global Depository Receipt. It is a bank certificate issued in more than one country for shares in a foreign company.

What are the requirements for investing in IDRs?

  1. IDRs can be purchased by any person who is resident in India as defined under FEMA.

  2. Minimum application amount in an IDR issue shall be Rs. 20,000.

  3. Investments by Indian companies in IDRs shall not exceed the investment limits.

  4. All of the above


Correct Option: D
Explanation:

IDR is a form of Depository receipt. It is created by a domestic depository. It is an instrument denominated in Indian Rupees.Requirements for investing in IDRs are:a) IDRs can be purchased by any person who is resident in India as defined b) Minimum application amount in an IDR issue shall be Rs. 20,000.under FEMAc) Investments by Indian companies in IDRs shall not exceed the investment limits.

Issue of Global Depository Receipt is one of the most popular ways to tap the global equity markets.

  1. True

  2. False


Correct Option: A
Explanation:

Issue of Global Depository Receipt is one of the most popular ways to tap the global equity markets- this is a true statement.GDR is a foreign currency denominated derivative instrument in the form of depository receipt created outside India and issued to non-resident investors. GDR stands for Global Depository Receipt. It is a bank certificate issued in more than one country for shares in a foreign company.

Feature(s) of Global Depository Receipts is/are _______.

  1. GDRs are issued to investors in more than one country.

  2. GDRs are issued to investors by the depository bank.

  3. GDR holders are entitled to all corporate benefits available to equity holders.

  4. All of the above


Correct Option: D
Explanation:
GDR is a foreign currency denominated derivative instrument in the form of depository receipt created outside India and issued to non-resident investors. GDR stands for Global Depository Receipt. It is a bank certificate issued in more than one country for shares in a foreign company.Features of Global Depository Receipts are:
a) GDRs are issued to investors in more than one country.
b) GDRs are issued to investors by the depository bank.
c) GDR holders are entitled to all corporate benefits available to equity holders.

Identify the advantage(s) of GDRs.

  1. GDR provides access to foreign capital markets.

  2. GDR can be freely transferred.

  3. GDR saves the taxes of an investor.

  4. All of the above


Correct Option: D
Explanation:
GDR is a foreign currency denominated derivative instrument in the form of depository receipt created outside India and issued to non-resident investors. GDR stands for Global Depository Receipt. It is a bank certificate issued in more than one country for shares in a foreign company. Advantages of GDR are:a) GDR provides access to foreign capital markets.
b) GDR can be freely transferred.
c) GDR saves the taxes of an investor.

____ is a foreign currency denominated derivative instrument in the form of depository receipt created outside India and issued to non-resident investors.

  1. IDR

  2. SDR

  3. GDR

  4. ADR


Correct Option: C
Explanation:

GDR is a foreign currency denominated derivative instrument in the form of depository receipt created outside India and issued to non-resident investors. GDR stands for Global Depository Receipt. It is a bank certificate issued in more than one country for shares in a foreign company.

Which are the intermediaries involved in issuance of IDRs?

  1. Overseas Custodian Bank

  2. Domestic Depository

  3. Merchant Banker registered with SEBI

  4. All of the above


Correct Option: D
Explanation:
IDR is a form of Depository receipt. It is created by a domestic depository. It is an instrument denominated in Indian Rupees. The intermediaries involved in issuance of IDRs are:
a) Overseas Custodian Bankb) Domestic Depository
c) Merchant Banker registered with SEB.

American Depository Receipt (ADR) is a certified negotiable instrument issued by an American bank suggesting the number of shares of a foreign company that can be traded in U.S. financial markets.

  1. True

  2. False


Correct Option: A
Explanation:

American Depository Receipt (ADR) is a certified negotiable instrument issued by an American bank suggesting the number of shares of a foreign company that can be traded in U.S. financial markets- this is a true statement. Common types of ADR are: mediation, concilation, arbitration.