Capital is needed by every business not only for the survival of the business but also for the expansion of the business and company basically have to work with two types of capital one is physical capital and other is human capital and if both the capital complement each other than the success of the company is assured. In order to have a better understanding of both terms, one should look at the difference between physical capital and human capital –
Physical Capital and Human Capital Difference
Meaning
Physical capital refers to that capital which is tangible in nature and can be seen or felt by us, hence things like plant, machinery, building are some of the examples of physical capital while human capital as the name suggests refers to workforce working in the company and therefore they come under intangible group of assets which is shown nowhere in the balance sheet of the company but is important for the company.
Training
In case of physical capital, there is no need for any training because assets once purchased are ready for use immediately but as far as human capital is concerned they need to be trained so that they can do the job correctly. Hence if the company employs people than the company expect them to work straightaway rather the company will have to give proper training if it wants to see the desired results from the employees of the company
Emotions
Physical capital does not have any emotions and that makes the task of the company easy as compared to human capital which has emotions. Hence, for example, suppose company does not keep the machines properly than the machine will not go anywhere due to lack of emotions but if the company does not take care of its employees than employees will leave the company at first opportunity as emotions play a big role as far as human capital is concerned.
Flexibility
Physical capital is rigid in the sense that they can be used for completion of particular task only so for example furniture cannot do the task of machine or machine cannot do the task of furniture but as far as human capital is concerned they are more flexible and can do multiple tasks, hence for example worker working in the production department can also do the task of dispatch department or administration debarment.
Cost Factor
The initial outlay for purchasing physical capital is huge but recurring expenses for maintenance of physical assets are less and when it comes to human capita initially company does not have to incur any expense for recruiting employees but employees have to be paid monthly salaries and incentives. In simple words, physical capital can be compared to purchasing equity shares at one shot because the company pays all cost upfront while human capital can be compared to buying equity shares through systematic investment plan as the company pays monthly salaries to the employees of the company.
As one can see from the above that there are many differences between the two but one thing is clear that company needs both physical as well as human capital for the smooth running of the business of the company.