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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Integrated Reporting Framework, Global Reporting Initiative Framework and Business Responsibility and Sustainability Reporting

Kaveri Power Ltd builds a solar plant, financed by retained profits and a bank loan, and sells electricity under a long-term contract. In the value creation model of the IR Framework, the retained profits and loan funds used to build the plant are best classified as which input?

They are financial capital. The IR Framework defines financial capital as the pool of funds available to an organisation, obtained through debt, equity, grants or generated by operations. The solar plant built with those funds is manufactured capital, but the funds themselves remain financial capital.

  1. AFinancial capitalCorrect
  2. BManufactured capital
  3. CNatural capital
  4. DSocial and relationship capital

Explanation

Financial capital is the pool of funds available to the organisation, obtained through financing such as debt, equity or grants, or generated through operations. The plant itself is manufactured capital, but the question asks about the funds used to build it, so the key distractor manufactured capital is wrong.

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