Knowledge Capital - BULLTEK LTD

Knowledge Capital

Valuation of knowledge-capital is the assessment and worth of the intellect residing within and organization, otherwise, the accumulated knowledge within a given organization. This intellect comprises of the sum of individuals within the realm of a workplace (or further, its supply chain); the stored intellect in their heads that includes the know-how acquired within the organization itself.

Intellectual bubbles, individuals, carry and share an organization's knowledge capital. In such way that makes each custodian of the most important assets that we own, knowledge, even when it is not reported within the realm of financial assets.

Finance professionals, retainers of financial assets control are disciplined on procedures and regulations on accounting for and report tangible resources. Yet there is action for assessing and measuring intellect / knowledge involving finance professionals, economist, accountants, auditors, and applying reporting standards and government oversight. Further, there are some functional schemes in use, whilst there is no standardization protocol.

Placing Knowledge on the agenda

Whist the needs to account for knowledge as an asset, financial professionals have shown to rather deal within the classical and shown reluctance to quantify "intangibles". Times are changing and the rise of knowledge as an asset bring the need to be managed and to manage measurements is beneficial to an organization. Indeed, one must start by developing a measurable and convertible to currency the worth of knowledge assets, namely knowledge capital.

We can measure and analyze knowledge and its relating capital, once done it will reveal itself as a significant component for management for decision making relevant to earnings. Prosperity is not uniquely and exclusively financial capital (which can be obtained for a price) but how effective is the organization flowing from information into knowledge, when knowledge is used for decisions.

Then is it reasonable to begin with the neo classical financial capital and then subtracting that amount from profits. Afterward knowledge capital may rise. Economist call this difference "economic profit" and what others may call the "economic value-added"… or others "knowledge value-added" or "knowledge capital". Whichever name is given it accounts for the missing elements not shown on a classical balance statement.

By segregating contributions of financial capital from reporting profits, we can attribute the differential 100% to knowledge, thus namely knowledge capital. This (knowledge capital) is the annual yielding an organization receives from its knowledge capital assets.

Once known the yield from a capital asset, calculating its value of its principal can be straightforward - divide the value of knowledge capital by the costs of that capital resulting in a verifiable and independently reproducible worth of knowledge capital itself.

The challenge lays in determining the appropriate cost factor of capital usage for estimating knowledge worth (knowledge capital). Some models have risen including best valuations of the cost of capital related to those offered by the marketplace. It is reflected in the cost of interest a firm actually pays for its long-term debt.

In an attempt to promote a mean to initiate the calculation of knowledge capital as a capital asset we can begin with net income (A, through out a period of years) minus total liabilities (B), realizing that interest rate (I) is not constant. In result, we can notice that knowledge capital can grow at a faster rate than net income (A - B, considering I). Ratio analysis and studies with bottom line profit can lead to calculate some defective dollarization ("Atypical" 1986) , and may be unique to each organization.