(a) Distinguish between GDR and ADR.

OR

(b) Distinguish between internal and international trade.

Question

(a) Distinguish between GDR and ADR.

OR

(b) Distinguish between internal and international trade.

Accepted Answer

>

> [!TLDR]
> (a) GDR and ADR are both depository receipts a company uses to raise money abroad, but a GDR is issued in multiple foreign markets while an ADR is confined to the US market and US dollars. (b) Internal trade is within one country; international trade is between countries and involves foreign currency, customs and documentation.
>
> **(a) Distinction between GDR and ADR**
>
> | Basis | GDR (Global Depository Receipt) | ADR (American Depository Receipt) |
> |---|---|---|
> | **Meaning** | A negotiable instrument issued by a depository bank representing a company's shares, traded in **many countries** | A negotiable instrument issued by a US depository bank representing a company's shares, traded **only in the USA** |
> | **Market** | Listed and traded in **international markets** (usually European, e.g., London, Luxembourg) | Listed and traded in **American stock exchanges** (e.g., NYSE, NASDAQ) |
> | **Investors** | Investors from **several countries** | Only **American investors** |
> | **Currency** | Usually in **US dollars or euros** | Only in **US dollars** |
> | **Regulation** | Governed by norms of the markets where issued | Governed by the strict rules of the **US SEC** |
>
> Both allow an Indian company to raise foreign capital without directly listing its shares abroad.
>
> **(b) Distinction between Internal Trade and International Trade**
>
> | Basis | Internal (Home) Trade | International Trade |
> |---|---|---|
> | **Meaning** | Buying and selling of goods **within one country** | Buying and selling of goods **between different countries** |
> | **Boundaries** | Confined to national boundaries | Crosses national boundaries |
> | **Currency** | Carried on in the **home currency** | Involves **foreign currency and exchange rates** |
> | **Customs/Restrictions** | **No customs duty** or import-export licence needed | Requires **customs duty, licences and government regulations** | …

Basis	GDR (Global Depository Receipt)	ADR (American Depository Receipt)
Meaning	A negotiable instrument issued by a depository bank representing a company's shares, traded in many countries	A negotiable instrument issued by a US depository bank representing a company's shares, traded only in the USA
Market	Listed and traded in international markets (usually European, e.g., London, Luxembourg)	Listed and traded in American stock exchanges (e.g., NYSE, NASDAQ)
Investors	Investors from several countries	Only American investors
Currency	Usually in US dollars or euros	Only in US dollars
Regulation	Governed by norms of the markets where issued	Governed by the strict rules of the US SEC

Basis	Internal (Home) Trade	International Trade
Meaning	Buying and selling of goods within one country	Buying and selling of goods between different countries
Boundaries	Confined to national boundaries	Crosses national boundaries
Currency	Carried on in the home currency	Involves foreign currency and exchange rates
Customs/Restrictions	No customs duty or import-export licence needed	Requires customs duty, licences and government regulations

Q.(a) Distinguish between GDR and ADR.

Concept understanding — Depository Receipts and External Commercial Borrowings

Q.(a) Distinguish between GDR and ADR.

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