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8/14/2019 Intellectual Capital Final1
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INT ELLECTUALCAPIT AL
Purvi Agarwal 02
Vivek M. Desai 13
Vikas Lalwani 44
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FUNDAMENTAL FORMS OF
CAPITAL
FINANCIAL CAPITAL
Funds which are required to buy what isneeded to make products or provide
services.
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INTELLECTUAL CAPITAL
Intellectual capital is knowledge
That can be exploitedFor some money-making orother useful purposeIt combines the idea of the intellect or brain-power with the economic concept of capital.
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INTELLECTUAL CAPITAL ..
Intellectual Capital is one way of defininga companys intangible assets and
resources.
Knowledge-based, intangible assets are
sometimes referred to as intellectualcapital.
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INTANGIBLE ASSETS
Defined as
Identifiable non-monetaryassets that cannot be seen,
touched or physically measured,
which are created through time and/oreffort and that are identifiable as aseparate asset.
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ELEMENTS OF
INTELLECTUAL CAPITALCustomer capital: Enhances the fitness of the
organization for succeeding in the market place
like customer loyalty.Human capital: Knowledge and competences
residing with the company's employees.
Structural capital: Collective know-how,beyond the capabilities of individual employees.E.g. information systems; policies; intellectualproperty.
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INTELLECTUAL CAPITAL CAN
INCLUDE THESE INTANGIBLEASSETS
The skills and knowledge that a company has
developed over a period of Time. Knowledge of Individual Employees or groups
critical to Companys success.
Aggregation of Documents aboutprocesses,customers,research,results
Other information of value to the competitorwhich is not common knowledge.
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MET HOD S FOR MEASURINGINT ELLECTUAL CAP ITAL
Return on Assets ( ROA ) : It uses average pretax earnings of the company for three to five years. These average earnings are then divided by average tangible assets of the company over a period of
time. The resulting ROA is compared with the Companys industry average to calculate the difference
DIFFERENCE
+ ve 0 or - ve
Excess of intellectual capital Company intellectual capital is
over industry assumed to be Zero
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Formula :
Value of intellectual of a company
AEBTt5 IEBTt5
ATAt5 IATAt5
Where , AEBT = Average earnings of the company before tax for five years.
ATA = Average Tangible Assets of the company for five years.
IEBT = Industrys earnings before tax for five years.
IATA = Industrys Average Tangible Assets for five years
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IllustrationOn the basis of the statistical data of Asian Paints Ltd , we have tried to calculate intellectual capital.
Year 1995-96 1996-97 1997-98 1998-99 1999-00
Earning before tax 8035 8538 10050 10088 14309
Tangible Assets 11979 17017 23146 30111 32934
Average earnings before tax :- 23037
Average Tangible assets :- 10204
Therefore, AEBTt5 10204 .44ATAt5 23037
Industry Average:- .21
Valueof intellectual is .44 - .21 = .23
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MARKETCAPITALIZATION
METHOD The excess of companys market capitalization over its
stockholders equity is its intellectual capital. It is given bythe formula :
Market Capitalization =
Average market value of shares x no. of shares subscribed - Paid up capital
Letus measure it with an example,Average market value of shares of ABC Ltd Rs. 100
No. of shares subscribed 1000
Paid up capital Rs.50,000
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Therefore Value of intellectual capital
= Rs.100 x 10000 50,000
= Rs.50,000
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TOBINS Q The ratio was developed by James Tobin (Tobin 1969). It
is calculated by dividing the market value of a company byits book value.
Market Value of companyTobins q = ________________________
Book Value of a company
Suppose;Market value per share of company XYZ Ltd. is 200
Book Value per share of company XYZ Ltd is 75
No. of shares are 10 lakh
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Tobins q = 200 x 10 lakh = 2.67 lakh
75 x 10 lakh
Hence, XYZ has excess intellectualcapital of Rs. 2.67 lakh
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SKANDIA NAVIGATOR
HISTORY Skandia is an international insurance
financial services company based inSweden in the 1990s
Realized the importance of intangible assetsand intellectual capital
Skandia wanted a way to measure itsintellectual capital
Skandia developed the Intellectual Capital
Navigatormanagement model
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SKANDIA NAVIGATOR
(Intangibles Valuation) A collection of
critical
measurements.
Comprises of aHolistic view of
performance & goalachievement.
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Financial focus :
-Captures the financial outcome of our activities.Customer focus :
-Gives an indication on how well the organization fills the needs of its
customers via services and products.Process focus:
-Captures the actual processes of creating services and products ourcustomers desire.
Renewal and development Focus:-Aims at reassuring the organizations long-term renewal and in part its
sustainability.Human focus: (Heart of the Organization)
-Process of Knowledge creation is visualized in this area.
FOCUS AREAS
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THE STORY
OFMAHABHARATA
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LOOK AT INFOSYS.....
Our core corporate assets walk out every
evening. It is our duty to make sure that theseassets return the next morning, mentally andphysically enthusiastic and energetic.
-Narayana Murthy
`Value of human resources' was Rupees 1,04,850crores for its employees
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LETS THINK, SHALL WE.
What is more Important for an Organization?
FINANCIAL CAPITAL
ORINTELLECTUAL CAPITAL
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THINK AGAIN...
Now then, if I put $40,000.00 of Financial Capital in aroom and left it there for a year when I came back Iwould still have $40,000.00; no more, no less. Except it
would have less value due to inflation. However, if I gave someone the same $40,000.00 who
had an idea and the proper Intellectual Capital to makesomething of it when I came back in a year that money
could easily double or triple or more. The point? Money doesnt make more money by itself. It
requires human intervention.
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TAKE AN EXAMPLE...
If you have a dollar and I have a dollar and we each giveone another our dollar what will each of us have? Weeach still have 1 dollar.
But, if you have an idea and I have an idea and we eachgive one another our idea what will each of us have? Weeach will have two ideas!
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CONCLUSIONWe just have to remember that in todaysworld it is Mind over Money that will rule
the day.
The point? Money doesnt make more
money by itself. It requires humanintervention.
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