Methods to measure IC.... Define IC and its origin....

Intellectual Capital (IC) refers to the intangible value of a business, which includes its people, the value relating to its relationships, and everything that is left when the employees go home, namely the systems, procedures, patents and proprietary technologies. The concept of IC has its origins in the knowledge-based theory of the firm that suggests that the primary source of a firm's competitive advantage lies in its knowledge and learning capabilities.

There are several methods to measure IC:

1. Direct Intellectual Capital methods (DIC): These methods identify the various components of IC, measure them directly, and add them up to get the total IC.

2. Market Capitalization Methods (MCM): These methods calculate IC by finding the difference between a company's market capitalization and its book value.

3. Return on Assets method (ROA): This method calculates IC by comparing a company's average pre-tax earnings to its average tangible assets.

4. Scorecard Methods (SC): These methods, like the Balanced Scorecard, track the performance of a company's IC through key performance indicators (KPIs).

5. Economic Value Added (EVA): This method calculates IC by subtracting a company's net operating profit after taxes from its total cost of capital.

6. Tobin’s Q: This method calculates IC by finding the ratio of a company's market value to the replacement value of its tangible assets.

Each of these methods has its own strengths and weaknesses, and the choice of method depends on the specific circumstances of the company.