Physical Capital vs Human Capital

What is Physical Capital?

Physical capital is referred to as being one of the three main factors in the production process. Physical capital consists of items like machinery, buildings, equipment.

Physical capital includes man made goods that are used in the process of production for converting raw material to finished goods. Any new project requires a significant amount of investment in physical capital.

What is Human Capital?

Human Capital implies the knowledge which a worker brings to the company in the manner of education, talents, abilities, talents, knowledge, preferences etc., which he or she has gathered over time. As a consequence, the employees are regarded as an asset, whose value can be enhanced, by spending in their coaching and improvement, like any other asset of the firm.

The notion makes it obvious that all the workers at the job, are unequal, and they contrast in their skill fulness.

This article is a ready reckoner for all the students to learn the difference between Physical Capital and Human Capital.

Physical Capital

Human Capital

                                                                Definition
The term ‘physical capital’ is used to indicate the data (factor of product) or man-made commodities, which are maintained by the firm such as machinery, computers, tools, equipment and many more. It is used in the manufacturing procedure to allow the change of raw material into finished goods Human Capital implies the knowledge which a worker brings to the company in the manner of education, talents, abilities, talents, knowledge, preferences etc., which he or she has gathered over time. As a consequence, the employees are regarded as an asset, whose value can be enhanced, by spending in their coaching and improvement, like any other asset of the firm
                                                            The process of formation
Technical and economic  Conscious and social process
                                                              Is it tradable?
There is a possibility of trading physical capital in market Only the services that are rendered by the human capital can be sold
                                                            Is it separable?
Separable from owner Not separable
                                                          How does it depreciate?
Depreciation occurs due to continuous use Depreciation occurs due to ageing and can be minimised to certain extent
                                                      Present in financial statement
Yes No
                                                              Mobility Restriction
Due to presence of trade barriers Due to culture and nationality

The above mentioned is the concept, that is elucidated in detail about ‘Difference between Physical Capital and Human Capital’ for the Commerce students. To know more, stay tuned to BYJU’S.

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