A theoretical approach to cost of capital evaluation from a knowledge management perspective

Capital-based economies and firms define their entrepreneurial purposes fundamentally considering debt and equity costs at the basis of the decision-making about business investments. Although basically divided into risk-free compensation and risk premium, the cost of capital calculation has attracted the interest of much research, essentially attributable to a business economics approach and a financial economics approach, but many profiles concerning this concept and its related calculation methods remain still unexplored. This theoretical paper examines how the cost of capital can be analyzed from a knowledge management perspective, and in this respect a conceptual comparison method has been adopted. Through speculative reasoning, the economic profit ratio, using as denominator the total assets and not the turnover, has been detected as potential measure of the differential knowledge management, with consequent scientific and managerial implications.