Consider the investments in the following assets. How many of the above are considered intangible investments?

UPSC Prelims 2023 Question:

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: Option c) Only three

Explanation:

• Intangible investments are assets that are not physical in nature, such as patents, trademarks, copyrights, and human capital. They are often associated with higher productivity and growth in companies, sectors, and economies. Intangible investments can be created or acquired by businesses, but they do not appear on the balance sheet unless they have been purchased.
• Among the four assets listed above, three are considered intangible investments: brand recognition, intellectual property, and mailing list of clients. These assets have no physical form, but they can generate value for the business by enhancing its reputation, innovation, and customer loyalty. Inventory, on the other hand, is a tangible asset that consists of physical goods that are ready to be sold or used in production. So, points 1, 3 and 4 are correct.

Tangible Investments vs Intangible Investments

• Tangible investments are physical assets that can be seen, touched, and felt. Examples of tangible investments include real estate, machinery, and inventory. Tangible investments are often easier to value than intangible investments, and they can be used as collateral for loans.
• Intangible investments are non-physical assets that have value because of their intellectual property or potential to generate future revenue. Examples of intangible investments include patents, trademarks, copyrights, and brand recognition. Intangible investments can be more difficult to value than tangible investments, and they cannot be used as collateral for loans.
• Intangible assets exist in opposition to tangible assets, which include land, vehicles, equipment, and inventory. So, point 2 is not correct.

Therefore, option (c) is the correct answer.

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