The quality of the population does not depend on Physical capital.
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Human Capital vs. Physical Capital: What's the Difference?
Capital is the lifeblood of a corporation. It allows a business to maintain liquidity while growing operations. Generally, capital is used to refer to physical assets in business. It is also used to refer to how companies obtain physical assets. Both physical capital and human capital are important.
While human capital can be difficult to measure, the impact of investments in human capital can be measured and analyzed with the same ratios used to measure and analyze the investment performance of physical assets. Investments in physical and human capital both lead to fundamental improvements in the business model and better overall decision-making.BUSINESS BUSINESS ESSENTIALS
Human Capital vs. Physical Capital: What's the Difference?
By CHRISTINA MAJASKI
Updated Feb 9, 2020
Human Capital vs. Physical Capital: What's the Difference?
Capital is the lifeblood of a corporation. It allows a business to maintain liquidity while growing operations. Generally, capital is used to refer to physical assets in business. It is also used to refer to how companies obtain physical assets. Both physical capital and human capital are important.
While human capital can be difficult to measure, the impact of investments in human capital can be measured and analyzed with the same ratios used to measure and analyze the investment performance of physical assets. Investments in physical and human capital both lead to fundamental improvements in the business model and better overall decision-making.
Understanding Human Capital vs. Physical Capital
Physical Capital
Physical capital consists of man-made goods that assist in the production process. Cash, real estate, equipment, and inventory are examples of physical capital. Physical capital values are listed in order of solvency on the balance sheet.
The balance sheet provides an overview of the value of all physical and some non-physical assets. It also provides an overview of the capital raised to pay for those assets, which includes both physical and human capital.
Physical capital is recorded on the balance sheet as an asset at historical cost, not market value. As a result, the book value of assets is generally higher than market value. Accountants refer to physical capital as a tangible asset.
Human Capital
Intangible assets are non-physical capital. A balance sheet only lists intangible assets when they have identifiable values. Intangible assets can't be touched, but they are often represented by a legal document or paper.
Human capital is represented by more than the company brand. Harvard University is not Harvard University because of its crimson logo. The value of Harvard University is in its human capital. Human capital includes the knowledge base of the employees and is often measured by the quality of the product. It also refers to the network of the employee base and the general level of influence they have on the industry.
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