Distinguish between Fixed, Working and Human Capital.
Answers
Answer:
Explanation:
What is Fixed Capital?
FC implies the fund investment created in the long term belongings (assets) of the firm. It is a mandatory necessity of an enterprise during its primary stage, i.e. to begin the business concern or to administer the existing trade. It is that portion of the entire fund, which isn’t utilised for manufacturing but they are kept in trade for more than 1 accounting cycle. Its character is perpetual which subsist in the framework of intangible and tangible assets of the firm.
What is Working Capital?
WC is the gauge that measures the economic soundness and functional effectiveness of the firm. However, it is the result of current assets minus current liabilities, whereas current assets are the assets which can be transformed into cash within 1 year, namely cash, debtors, inventories, etc., whilst current liabilities are those liabilities that decrease outstanding for pay in 1 year, namely, bank overdraft, short term loans, tax provision, creditors, etc.,
Fixed Capital Working Capital
Definition
Investing capital in the long term assets of an enterprise. Working capital is the capital invested in the current assets of an enterprise.
Types of assets acquired
Used to acquire non-current assets for the company Used to acquire current assets for the company
Liquidity
Fixed capital is not at all liquid Working capital is highly liquid
Conversion to cash
Not possible to convert into cash Can be converted into cash
Objective served
Serves strategy oriented objectives Serves operational objectivesHuman Capital connotes the experience which an employee takes to the organization in the form of knowledge, skills, abilities, talents, intelligence, values etc. which he/she has accrued over time. As a result, the employees are perceived as an asset, whose value can be increased, by investing in their training and development, like any other asset of the company.
The concept makes it clear that all the employees at work, are not equal and they differ in their proficiencies.
Simply put, it portrays the aggregate value of the firm’s intellectual capital, which is a sustained source of creativity and innovation. It is a standard used to ascertain the economic value of an employee’s skill set.
Human capital is not owned by the company rather rented from employees, and so there remains an uncertainty of being lost, when the employee leaves the organization.
Key Differences Between Physical Capital and Human Capital
The substantial differences between physical capital and human capital are outlined below:
Physical Capital, is used to mean, the company’s non-human assets like plant and machinery, building, computers, office supplies etc. that assist in the production of goods and services. On the contrary, human capital is defined by collection of knowledge, talent, skills and abilities possessed by an employee or a group of employees working in an organization.
Physical capital is tangible in nature, i.e. it can be seen and touched. Unlike human capital is intangible, that can only be experienced.
The creation of physical capital is an economic and technical process. Conversely, the formation of human capital is a social process, but it is also a result of conscious decisions taken by the entrepreneur in this regard.
Physical capital can be sold in the market directly, whereas human capital cannot be traded in the market, rather the services are sold.
Physical capital can be separated from its owner easily. On the other extreme, human capital is inseparable from its possessor.
Physical capital is usually mobile, but some restrictions occurs out of trade barriers imposed by different countries. However, when it comes to the mobility of human capital, it is not fully mobile between countries, as the mobility is restricted by nationality and culture.
While physical capital appears in the financial statement of the company, human capital is not shown in the financial statement.
Both physical and human capital undergo depreciation, but the reason is different, in the sense that physical capital is depreciated because of costant use.
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I DONT KANOW PROPERLY ABOUT HUMAN CAPITAL..