What is the difference between human capital and physical capital?

Human capital encompasses the knowledge, skills, and abilities of an individual or workforce. Physical capital refers to tangible assets like machinery, buildings, and technology. Investments in human capital can increase productivity and innovation, while investments in physical capital can expand production capabilities. What is Human Capital?

What is 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.

Why do companies invest in physical and human capital?

Investments in physical and human capital both lead to fundamental improvements in the business model and better overall decision-making. Physical capital consists of man-made goods that assist in the production process. Cash, real estate, equipment, and inventory are examples of physical capital.