Invisible Balance Sheet - Sveiby Knowledge Management

or insignificant, loans. Therefore, traditional financial yardsticks of solidity are
not so relevant in assessing risk.
Differences between them normally do not mean much in comparing knowhow
companies, except in capital-intensive ones, where indicators have the
same significance as for other capital-intensive enterprises.
But other things being equal, a know-how company with high solidity/large
equity should naturally have greater chances of surviving disturbances in the
long run than a company with low solidity/little equity because of its extra
buffer and presumably better credit potential.
Also, though it is not necessarily so, good solidity can lead to the company’s
net financial items making a positive contribution to the aggregate return. In that
case, it is often evidence of the fact that the company has a large amount of
structural capital.
Interest cover
Interest cover tells you how many times the company’s cash flow will cover
actual interest costs.
As external loans are often of no importance in the typical know- how
company, this yardstick is of the same limited significance as other measures of
solidity.
Liquidity
The know-how company’s solvency in the relatively short term, can determine
its chances of surviving changes of personnel and in the employment situation,
and also in retaining its image. This too, is what the various liquidity yardsticks
try to express.
Usually, they compare current assets, i.e. assets which it is considered can be
realised quickly, and short-tern liabilities.
Comparisons within the sector
How do you know if the liquidity yardstick for a particular company is good,
bad, or indifferent? Is it of real importance in assessing the risk if the company’s
liquidity is acceptable, or extremely good? To answer the question it is necessary
to make a comparison and the comparison closest to hand is with other
companies working under similar conditions, i.e. primarily companies in the
same line of business.
In addition to assessing the personnel risk, it should then be possible on the
basis of comparisons over time, mainly between liquidity measures for know-
KAPITEL VII
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