Knowledge Capital Assessment Knowledge vs. Financial Capital Comparing the value of Knowledge Capital with the "book value" of Financial Capital defines the relative importance of a firm's information assets. The ratio of Knowledge Capital to Financial Capital for a group of look-alike firms is a telling indicator of the potential future gains in the market valuation of the firm. A high Knowledge Capital / Financial Capital ratio qualifies a firm as a knowledge-intensive enterprise. Financial Capital Knowledge Capital Company A $566,237 $4,857,802 Company B $364,230 $1,845,434 American Industrial Corp. $1,345,217 $1,534,844 Company C $493,188 $889,159 Comprehensive Value "Comprehensive Value" of a firm is the sum of its Financial Capital plus Knowledge Capital. It offers a benchmark comparison against market valuations. Comparisons provide an indication of fair market value and the premium shareholders are ready to pay for information productivity. Comprehensive Value Market Valuation Market Valuation / Comprehensive Value Company A $177,019 $355,000 201% Company B $1,382,347 $1,672,000 121% American Industrial Corp. $2,880,061 $3,000,000 104% Company C $1,068,594 $988,000 92% Company D $2,209,664 $1,825,000 83% [Values in $000s] Knowledge Assets Yield Financial Leverage The financial leverage a firm obtains from its assets is a critical key indicator of performance and the basis for making investment decisions. 1993 1994 1995 1996 1997 1993-1997 Increase % Gain Financial Capital $1,053,442 $1,159,541 $1,235,022 $1,361,655 $1,345,217 $291,775 28% Knowledge Capital $200,163 $584,797 $423,984 $554,572 $1,534,844 $1,334,680 667% Market Valuation $2,001,000 $2,053,000 $2,120,000 $3,000,000 $3,000,000 $999,000 50% Comprehensive Value $1,253,605 $1,744,338 $1,659,006 $1,916,227 $2,880,061 $1,626,455 130% [Values in $000s] Creation of Knowledge Capital Knowledge Capital is created when information management costs generate effects that are longer-lasting than an annual operating expenses. A comparison of cumulative Sales, General and Administrative Costs, plus R&D expense with gains in Knowledge Capital provide an index of Knowledge Capital Accumulating efficiency. 1993 1994 1995 1996 1997 Cumulative SG&A $882,484 $1,840,805 $2,839,393 $3,921,488 $5,049,610 Knowledge Capital $200,163 $584,797 $423,984 $554,572 $1,534,844 [Values in $000s] Knowledge Capital Accumulation Efficiency 30.4% Employee Value The value of Knowledge Capital per Employee may give support to the frequent assertion that "employees are our most important asset." It is desirable that the Knowledge Capital per Employee is a large multiple of average employee salaries and wages. 1993 1994 1995 1996 1997 Knowledge Capital ($000s) $200,163 $584,797 $423,984 $554,572 $1,534,844 Employment 33,022 30,933 32,941 34,681 34,471 Knowledge Capital / Employee $6,062 $18,905 $12,871 $15,991 $44,526 Download KC data input form to complete assessment. [ Back to Top | Info Productivity Assessment | IT Assessment | Knowledge Capital Assessment ] Security of corporate data protected for privacy and confidentiality. Contact info@strassmann.com for details. Copyright © 1999, Strassmann, Inc. All Rights Reserved. Information Productivity® and Knowledge Capital® are U.S. Registered Trademarks of Strassmann, Inc.