Valuation in Context

Human Capital

Human capital refers to the ability of a firm to effectively hire and retain individuals or collective employees, that add significant value to the firm. The most profitable companies are the best at this process. 

More specifically, human capital includes the educational background, intelligence, skills, and health of the employee, as well as their training, loyalty, and punctuality. All of which increase productivity. 

With increased productivity, a company can expect to make higher profits. Therefore, companies that invest a lot into human capital, tend to be more successful and more profitable. 

A key way to measure how well a company deals with human capital is staff turnover. If staff turnover is high, it suggests that staff are not satisfied, leading to higher costs for a business and lower productivity. 

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