Tag: gdrs, adrs and idrs

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Multiple choice commerce sources of business finance - 2 gdrs, adrs and idrs depository receipts international sources

The regulatory body ________ introduced the concept of ADR.

  1. Securities Exchange Commission (SEC)

  2. SEBI

  3. RBI

  4. Imperial Bank
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The regulatory body Securities Exchange Commission introduced the concept of ADR.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.

Multiple choice commercial studies sources of business finance - 2 gdrs, adrs and idrs depository receipts international sources

_____ is/are the disadvantage(s) of Global Depository Receipts.

  1. Dividends are paid in domestic countrys currency which is subject to volatility in the forex market.

  2. It is mostly beneficial to High Net-Worth Individual (HNI) investors.

  3. GDR is one of the expensive sources of finance.

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
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. Disadvantages of GDR are:
a) Dividends are paid in domestic countrys currency which is subject to volatility in the forex market.
b) It is mostly beneficial to High Net-Worth Individual (HNI) investors.
c) GDR is one of the expensive sources of finance.
Multiple choice commercial studies sources of business finance - 2 gdrs, adrs and idrs depository receipts international sources

Which is the next step of GDR mechanism, after the overseas depository bank enter into a custodian agreement with the domestic custodian of such company?

  1. On the instruction of domestic custodian, the overseas depository bank issues shares to foreign investors.

  2. The domestic custodian holds the equity shares of the company.

  3. The domestic company enters into an agreement with the overseas depository bank for the purpose of issue of GDR.

  4. The whole process is carried out under strict guidelines.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

After the overseas depository bank enter into a custodian agreement with the domestic custodian of such company, the next step of GDR mechanism is: the domestic custodian holds the equity shares of the company.  Hence the equity shares is held by the domestic custodian when the overseas depository bank signs the agreement.

Multiple choice commercial studies sources of business finance - 2 gdrs, adrs and idrs depository receipts international sources

Depository bank has right to issue one GDR certificate for _______ shares.

  1. 2 to 10

  2. 3 to 5

  3. 4 to 8

  4. 5 to 10
Reveal answer Fill a bubble to check yourself
A Correct answer
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.Depository bank has right to issue one GDR certificate for 2 to 10 shares.

Multiple choice commercial studies sources of business finance - 2 gdrs, adrs and idrs depository receipts international sources

GDRs can not be directly issued to foreign investors.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

GDRs can not be directly issued to foreign investors- 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.