Tuesday 28 October 2008

Not just a simple subtraction

Via Duncan Bucknell comes a link to Pat Sullivan's Blog, which summarises Pat's post as follows:
"... Pat Sullivan posted a great comment on the (ongoing) myth clung to by many in the Intellectual Asset and Intellectual Property fields - that you can calculate the value of a publicly traded firm's intangible assets by simply subtracting the value of the tangible assets from the current market capitalisation.

This is the line of thinking that generated the often quoted figure that 70% or more of a companies assets are intangibles".
Comments Duncan:
"I've always qualified that by saying here 'intangibles' must include a fudge factor for market perception - which overules everything in the publicly traded stocks. As Pat points out, the current economic crisis and the large market cap losses on stock markets underscore the proposition that the difference in value is not simply attributable to intangible assets".
The truth is that myth is so widely held that it will take generations to eradicate. Like all enduring myths, it is simple to understand, has a superficially comprehensible logic and provides a basis for decision-making without the need to engage in clear-headed thinking.

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