Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Which of the following is NOT a source of finance?

1. Retained earnings

2. Intellectual property

3. Bank borrowings

4. Venture capital

The correct answer is: Intellectual property

Intellectual property, while valuable to a business, is not considered a direct source of finance. It comprises intangible assets like patents, trademarks, and copyrights, which can enhance a company's value and possibly be leveraged for funding through licensing or selling. However, it does not provide funds in itself; instead, it represents potential future financial benefit. In contrast, retained earnings, bank borrowings, and venture capital are all established sources of finance. Retained earnings refer to the portion of net income that a company retains for reinvestment in the business rather than distributing as dividends. Bank borrowings involve loans taken from financial institutions that provide immediate capital, while venture capital refers to funds provided by investors to startup firms and small businesses with perceived long-term growth potential.