Which source of finance uses money saved by the business owner from personal funds?

• A. Retained profits
• B. Personal savings
• C. Sale of fixed assets
• D. Sale and leaseback

Answer: (B)

The idea being tested is funding from the owner’s own money, which is a form of internal finance. When a business owner uses personal savings to fund the business, they are putting in their own funds to help it grow or cover costs. This avoids external borrowing and uses money the owner already has.

This is the best answer because it directly describes money saved from personal funds flowing into the business as finance. Retained profits come from profits the business has earned and kept for reinvestment, not from the owner’s personal savings. Selling fixed assets raises cash by converting assets the business owns into money, while sale and leaseback involves selling an asset and then leasing it back, which is a cash-raising tactic rather than funds from the owner’s personal savings.