Question : Assertion-Reason Questions: Chapter - Sources of Business Finance
Questions : Different Sources of Finance
Assertion: American Depository Receipts (ADRs) allow foreign companies to raise funds in their home country.
Reason: ADRs are issued by American companies in international 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: Assertion is true, but the reason is false.
Solution : The correct answer is (c) Assertion is true, but the reason is false.
American Depository Receipts (ADRs) are negotiable certificates issued by a U.S. depositary bank that represent shares of a foreign company's stock. ADRs trade on U.S. stock exchanges, which allows U.S. investors to buy and sell shares of foreign companies without having to buy the foreign shares directly.
ADRs allow foreign companies to raise funds in their home country by selling shares to foreign investors. The foreign company deposits its shares with a U.S. depositary bank, which then issues ADRs to the foreign investors. The foreign company receives the proceeds from the sale of the ADRs, which it can then use to fund its operations or growth plans.
Assertion: American Depository Receipts (ADRs) allow foreign companies to raise funds in international markets.
Reason: ADRs are only issued by American companies in the United States.
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