...INTELLECTUAL CAPITAL OVERVIEW The purpose of the article is to examine the result of intellectual capital towards financial aspects of organizational performance and what it constitutes of its performance indicator. Influence of intellectual capital on Hong Kong stock exchange, Australian financial sector, hotel industry, India pharmaceutical industry and its general impact on firms are discussed in this essay. The most famous methodology used was the value added intellectual coefficient policy, where regression models were made to inspect the association between IC and the corporate financial performance indicator. The results were positive and suggested that IC, was positively connected with success of productions by VAIC methodology. To be precise, structural capital was found to be the main component of IC. INTRODUCTION It has been acknowledged by different scholars that universally the financial sector is converting into knowledge and fact based and the value of financial sector is acquired from intellectual capital than just from physical capital. Although the significance of intellectual capital is repeatedly expanding but companies are confronting measurement difficulties. The growing gap was noticed among market price and the book price of numerous organizations which attracted consideration towards examining the worth absent from records. Various definitions of IC are given by different economist, academics and practitioners. Still not even a single meaning...
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...firm-specific human capital which is likely to generate organizational rents, since those assets are more likely to be unique, sporadic, and thus a better basis for sustainable advantage. However psychological literature supports that generalized investments have value for the firm through it’s effects on worker’s commitment to the firm. This paper examines the impact of firm’s specificity in human capital versus generalization commitment of externalized workers. Externalized workers, face persistence pressure to maintain assets that are highly desirable in the market. Firms cannot offer lifetime contracts but nonetheless offer workers greater assurances of remaining competitive in the job market through more attention to general skills development and training. These skills increase the probabilities of the employees remaining employable, thus reducing their anxieties about the diminished job security (internal workers) or the stability of the employment relation (external workers), decreasing the likelihood of future or prolong unemployment. The study show more positive response in external workers when generalized investment by employers are made. Firms often fear to invest in externalized labor but the potential positive effects it has on employee’s commitment level are valuable outcomes of firm’s investments in general skills development and other transferable resources. The resource-based literature holds that the key strategic assets for a firm are its human capital. Loyalty...
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...Cost of Capital- Coffee Industry Group No. 4 Submitted to- Group Members- Prof. Sarath Babu Himakshi Mallik Vitash Sharma Rahul Rishav Avinash M Kopparapu Prudhvi Nadh Cost of Capital- Coffee Industry We have taken into consideration two firms- New World Coffee and New York Yankees. ESTIMATING COST OF EQUITY FOR A PRIVATE FIRM • Basic Problem: Most models of risk and return (including the CAPM) use past prices of an asset to estimate its risk parameters (beta(s)). Private firms and divisions of firms are not traded, and thus do not have past prices. • • Solution 1: Estimate the beta, based upon comparable firms, and after adjusting for risk. o Step 1: Collect a group of publicly traded comparable firms, preferably in the same line of business, but more generally, affected by the same economic forces that affect the firm being valued. A Simple Test: To see if the group of comparable firms is truly comparable, estimate a correlation between the revenues or operating income of the comparable...
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...Working Capital Management in a Post-Recession Environment: The View from Europe A report prepared by CFO Research Services in collaboration with The Royal Bank of Scotland TM Working Capital Management in a Post-Recession Environment: The View from Europe A report prepared by CFO Research Services in collaboration with The Royal Bank of Scotland TM Working Capital Management in a Post-Recession Environment: The View from Europe Contents Executive summary Cash, liquidity and credit during an uncertain recovery Pursuing improvements in working capital An opportunity to expand the toolkit Investing in working capital improvements Conclusion Sponsor’s perspective 2 3 5 7 11 12 13 © 2010 CFO PUBLISHING LLC SEPTEMBER 2010 1 Working Capital Management in a Post-Recession Environment: The View from Europe Executive summary In June and July of 2010, CFO Research Services (a unit of CFO Publishing LLC) conducted an electronic survey among senior finance executives representing mid-size to large companies in Europe. Our goal was to understand finance executives’ concerns with working capital management in the wake of global recession, as well as their plans for improving working capital performance. We asked finance executives a series of questions about the impact that the recession had on their working capital management, which areas of working capital their companies would focus on during the course of economic recovery and whom their companies worked...
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...MEANING OF INTELLECTUAL CAPITAL This is the intangible value of a company, and is measured as the difference between the enterprise value of a company and the market value of its tangible assets. Intellectual capital is knowledge that can be exploited for some money-making or other useful purpose. The term combines the idea of the intellect or brain-power with the economic concept of capital, the saving of entitled benefits so that they can be invested in producing more goods and services. Intellectual capital can include the skills and knowledge that a company has developed about how to make its goods or services; individual employees or groups of employees whose knowledge is deemed critical to a company's continued success; and its aggregation of documents about processes, customers, research results, and other information that might have value for a competitor that is not common knowledge. Classification of Intellectual capital • Human capital- The value that the employees of a business provide through the application of skills, know-how and expertise. It can be defined as all the unique ideas, skills, and knowledge that an individual owns and contributes to an organization. • Structural capital- Structural capital is the structures and mechanisms that help support employees and includes procedures, routines and everything that is left in the organization. It includes processes, intangible assets like patents, and trademarks, as well as the organization’s image, information...
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...Does high social capital lead to business growth Investments in human and social capital are widely believed to improve the performance of employees (Arthur, 1994; Bishop, 1994; Boselie, Paauwe and Jansen, 2001; Gelderblom and de Koning, 1996; Huselid, 1995; MacDuffie, 1995 human and social entrepreneurship-specific capital investments, such as earlier experience in starting up a business and the membership of an association for small business founders generate more promising start-ups. Our main finding is that the endowed level of talent of a small business founder is not the unique determinant of performance. Rather, investment in industry-specific and entrepreneurshipspecific human and social capital contributes significantly to the explanation of the cross-sectional variance of the performance of small firm founders Limited social capital translates into limited opportunities for black entrepreneurs to convert valuable social business relationships into financial support that will ultimately fuel successful market entry and growth. However, it is important to note here that familial relationships play a vital role in social network-building, which is inherent to the concept of social capital and the value it presents to an emerging or existing entrepreneur. Since social capital is an essential bridge used to support successful business emergence,35 the social networks and relationships to which an entrepreneur has effective access prior to and after...
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...WHY IS THE HUMAN CAPITAL SO IMPORTANT FOR THE ECONOMIC DEVELOPMENT OF MAURITIUS? Introduction This assignment aims to look at the special importance of human capital to the economy of Mauritius. First, we go about defining the concept of human capital. Afterwards, there will be a section which talks a bit about the history of the economy of Mauritius. Then we will move on to another section which tries to explore the different factors as to why and how human capital is important to Mauritius. We will then have a concluding remark. We will end by some possible recommendations. What is human capital? Adam Smith defined human capital as follows: “Fourthly, of Justin Slay’s types of capital which is of the acquired and useful abilities of all the inhabitants or members of the education, study, or apprenticeship, always costs a real expense, which is a capital fixed and realized, as it were, in his person. Those talents, as they make a part of his fortune, so do they likewise that of the society to which he belongs. The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labour, and which, though it costs a certain expense which certainly repays afterwards. The use of the term in the modern neoclassical economic literature dates back to Jacob Mincer's article "Investment in Human Capital and Personal Income Distribution" in the Journal of Political Economy in 1958. Theorists also...
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...interest in Intellectual Capital (IC) has been the core factor it is being developed rapidly (Juma and Paine, 2004; Bontis, 2001). IC was first being acknowledged in 1995 by Skandia when it published the world’s first IC yearly report (Edvinsson and Malone, 1997). Definition of Intellectual Capital (IC) There have been tremendously abundant definitions of IC (refer to Appendix 1). In general it may seen synonymous with knowledge capital and asset, intangible and visible assets (refer to Appendix 2). This also includes human capital, information assets as well as the enclose value of organisations (Bontis, 2001; Tseng and Goo, 2005). Itami (1987) refers IC as organisation’s intangible assets that consist of experience, customer relationship and information, organisation’s repute and culture and intellectual property. This consistent with what mentioned by Stewart (1997) where IC comprises intellectual material that is able to generate wealth. The closest definition of IC would be from Roos et al. (2005) where IC is said to be the non-physical besides non-monetary capitals controlled by organisations that leads to value formation. According to Stewart (1997), there are three components for IC, which are human capital, structural capital as well as relational capital (refer to Appendix 3). Components of IC Human capital happens to be the capital, embedded in a person’s mind and stays together in a person. When a worker quits, the human capital that includes skills, innovativeness...
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...Human Capital Human Capital is a set of skills which an employee acquires on the job, through training and experience, and which increase that employee's value in the marketplace. It is also the skills and knowledge acquired thru education. A computer training course, schooling and lectures on the virtues of punctuality and honesty are also capital because they raise earnings, improve health, or add to a person’s good habits over much of his lifetime. Therefore, economists regard expenditures on EDUCATION, training, medical care, and so on as investments in human capital. They are called human capital because people cannot be separated from their knowledge, skills, health, or values in the way they can be separated from their financial and physical assets. Human capital can be viewed in general terms, such as the ability to read and write, or in specific terms, such as the acquisition of a particular skill with a limited industrial application. Critics of the theory argue that it is difficult to separate human capital investment from personal consumption. I think in my opinion there is is no difference between human capital investment and personal consumption because both help in improving a person’s life. For example a skill in particular field could help a person get a job and that brings in money which could be used to feed the family. Adam Smith a Scottish moral philosopher and a pioneer of political economy defines four types of fixed capital (which is characterized...
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...Define ‘human capital’ and its impact on your organization There are various ways Human capital can be defined; I have chosen to define Human capital in simple terms: Human capital is the value that each employee brings to the organisation, in accordance to individual’s knowledge, skills and capability. Probably this is the only reason why the biggest companies in the world are recognised by their talent and attitude of their employees. Analyse what differentiates human from intellectual capital I work for a media organisation Engine Group. One of our division (JAM) is dominated by age 21-30.Creative industry has a very strong association with technological developments which is generally more rapidly adopted by young people. There is a brainstorming and idea sharing session conducted across all nine companies. With effective nurturing and regularly conducting training workshop we aim to add value to our capital and leap frog into new areas of wealth creation. We as creative industry are always at the crossroad between Technology, Business and Arts. Hence the marriage of technological application and intellectual capital provides the main source of wealth in this sector, continuous learning and high degree of experimentation are key to achieving sustained and cumulative growth Analyse relationship between human capital and other forms of Capital Different forms of Capital are: Human Capital, Social Capital, Economic Capital and infrastructure Capital Any effort to...
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...Cost of Capital Introduction This paper examines key elements of a cost of capital policy to facilitate objective management and allocation of corporate funds. In order for a company to make long-term investments to grow, whether that is new equipment, new products or other assets, managers must be aware of the cost of acquiring any of these assets. The obvious objective for these managers is to earn more than the cost of capital and in doing so will increase their company’s market value. If they fail to adequately estimate their cost of capital and their long-term investments fall beneath the cost of capital, their company’s market value will decline as a result. This ongoing battle of managing and calculating the cost of capital and how to budget them accordingly is extremely important in providing the necessary goals of increasing value to their company’s stockholders. The information that managers use will ultimately dictate the outcomes of their company’s cost of capital policy and how the allocate corporate funds. This paper will highlight several processes and elements managers use in determining capital cost. Functions for Decision Making When corporate managers think about the cost of capital and cost allocation, there are several factors that must be analyzed and weighed. First, managers need to look at the general economic condition for their industry as well as overall market. These would include the demand and supply of capital within the economy, and any...
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...they are required to maintain employees' record, in addition human resource personnel is required to think of strategy and ways to bridge between the employee and company management. Not only they are required to go through formal training, experience plays an important part as well. In modern days, human resource is known as a "people" profession. Their main asset are human and intellectual capital. As a human resource personnel, they are required to plan and execute plans to retain talent at the same time they have to ensure that human resource strategy is in line with their organization strategy. The foundation of an organisation is employee, in other words is intellectual capital in this main asset of an organisation. Even though in 21st century most company is moving towards machinery and technology but all these is build on intellectual capital. According to most researches, not only Human resource increase employees' capabilities in discovering business opportunities but also helps employees' to identify and find other useful resources such as physical and financial capital and it also assist in new employee getting new knowledge and skills. "Experience should not be equated with knowledge because experience may or may not lead to increased knowledge" (Unger, Rauch and Frese, 2011 cited, Sonnentag, 1998) According to this statement ,...
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...HUMAN CAPITAL DEVELOPMENT Human capital is the stock of competencies, knowledge, social and personality attributes, including creativity, cognitive abilities, embodied in the ability to perform labor so as to produce economic value. It is an aggregate economic view of the human being acting within economies, which is an attempt to capture the social, biological, cultural and psychological complexity as they interact in explicit and/or economic transactions. Many theories explicitly connect investment in human capital development to education, and the role of human capital in economic development, productivity growth, and innovation has frequently been cited as a justification for government subsidies for education and job skills training.[1] "Human capital" has been and is still being criticized in numerous ways. Michael Spence offers signaling theory as an alternative to human capital.[2][3] Pierre Bourdieu offers a nuanced conceptual alternative to human capital that includes cultural capital, social capital, economic capital, and symbolic capital.[4] These critiques, and other debates, suggest that "human capital" is a reified concept without sufficient explanatory power. It was assumed in early economic theories, reflecting the context, i.e., the secondary sector of the economy was producing much more than the tertiary sector was able to produce at the time in most countries – to be a fungible resource, homogeneous, and easily interchangeable, and it was referred to simply...
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...Chapter: Working Capital Management 1.Definition of Working Capital: 1.The capital which is required to finance current assets is called working capital. 2. That is in operating daily business of the firm effectively, some resources are needed and the capital which are needed to finance, these resources is called working capital 3. “Working capital may be defined as all the shot term assets used in daily operation”—John. J Harpton. 4. Short term assets of a firm means cash money, short-term securities, inventory, Bill receivable, note receivable, Debtors etc. 5.In operating daily business, fixed assets are also needed in addition to current assets. Though some fixed assets help on the daily operation of a firm, these can’t be told as working capital, because these can’t be converted into cash in this current accounting period. So, the assets which can be converted into Raw Material from cash---R/M—Finished Goods—B/R—Cash and helps in operating daily business of the firm, is called working Capital. Working capital is also called ‘Trading Capital”, Circulating capital/Short term capital /Short /Current Assets management. 2.Concepts of Working Capital: There are 2 concepts of working capital. 1. Gross working capital. 2. Net Working capital. 1. Gross Working Capital: In fact, working capital means Gross Working Capital. It means the firm’s investment in current assets. Current assets are the assets which be converted into cash within an accounting period or one year (normally)...
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...Venture Financing in India A. Sahay* Abstract Innovation is stated to be the initiating force for a new venture but venture finance is the life blood for entrepreneurship. Innovation is the fuel for igniting the Entrepreneurial engine, Venture capital revs up the engine fast till it attains sustainable speed to change the gears from idea to entity, eventually reaching IPO stage. The paper starts with Research and Development Cess Act, 1986 and covers the development in the field till 2003 and presents an analysis of venture investments as well as future prospects . The history of Venture capital (VC), its advent in India, Characteristics of VC, Government guidelines on VC, Classification of VC in India, Types of V and their analysis has been dealt in the C paper. . Introduction Since Independence till early1990s, the Government has been playing the role of an entrepreneur as well. This was on account of the policy direction which propounded socialistic society and mixed economy. There was dearth of capital, infrastructure facilities and entrepreneurship in the country. During this period, the Government developed infrastructural base such as roads, railways, electricity, ports, banks, financial institutions, insurance etc through the public sector enterprises which were supposed to attain commanding heights of the economy. The environment thus created resulted in the people of India becoming job seekers and the Government itself became a dominant entrepreneur and job provider...
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