Which of the following is a form of external capital?

The correct answer is bank debt, as it represents a form of external capital. External capital refers to the financing that a company obtains from outside sources, which is crucial for funding growth, acquisitions, or operational needs. Bank debt typically involves loans that must be repaid over time, usually with interest, which creates a liability on the company’s balance sheet. It is a way for companies to leverage their operations by borrowing funds to invest in various projects or pay for expenses without diluting ownership through equity issuance.

Other forms mentioned, such as asset sales and internally generated funds, do not qualify as external capital. Asset sales involve liquidating existing assets to generate cash, which does not bring in new external funds but rather recycles the company's existing resources. Internally generated funds come from the company's operations and profits; this is internal financing. Retained earnings, similar to internally generated funds, represent accumulated profits that are reinvested into the business rather than being distributed to shareholders. Both of these options signify self-financing strategies rather than external capital brought in from third parties.