Question

Where on the balance sheet can we find human capital?

Answer 1

When you buy a company for an amount in excess of its book value, you can book the excess amount as "goodwill," which is categorized as an intangible assets.. . Usually things like brand are categorized into this.. . However, it is unusual to put human capital (i.e, a trained staff) into a balance sheet because, unlike all other assets, human capital can leave at will.

Answer 2

Maybe think of it like a car. The purpose of a car is to get from point A to point B. Without a driver you can either say the car is worthless, or you can say it is only worth the amount you could see it for. To factor in human capital, the amount you could sell the car for would not change. But sending your driver to racing classes might allow him to get from point A to point B faster. This would be measurable (45 minutes instead of 60). Now the only challenge would be to put a dollar value to the saved 15 minutes.. . Maybe work backwards. Figure out profits before trainging and after. Then profits per person before and after. Then try to figure out the multiple of one day of training as a relationship of profits per person.. . Gary Becker said there is a point at which one more dollar invested in human capital will not yeild more value to the asset. For instance sending a garbage man to get a phd in waste water treatment would not make him a better garbage man. He also said there is an age in which investing in education is also not worth it. Sending a guy who is retiring in a month to a seminar on technologies of the future would again not be worth it.