Consider the investments in the following assets : 1. Brand recognition 2. Inventory 3. Intellectual property 4. Mailing list of clients How many of the above are considered intangible investments?
- A.Only one
- B.Only two
- C.Only three
- D.All four
Correct answer
Explanation
The correct answer is C, Only three. Brand recognition, intellectual property and a client mailing list have no physical form, while inventory is a stock of physical goods.
An intangible asset is a non-physical resource that a firm owns and that earns it money over time. Spending on brands and advertising, on patents, copyrights, trademarks and software, and on building customer databases and relationships is therefore counted as intangible investment. Inventory means raw materials, work-in-progress and finished goods held in stock; it is a tangible, current asset that can be counted and stored.
A is wrong because three of the four items are intangible, not one.
B is wrong because it misses one of the three intangible items.
D is wrong because inventory is a physical asset and so is not an intangible investment.
Economists note that firms in rich economies now invest more in intangibles than in machines and buildings.
Exam tip: intangible = brand, patent, copyright, software, data, customer list; tangible = land, plant, machinery, inventory.
Practice Questions
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- D.The Ministry of Labour and Employment
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