The Theory Of Human Capital Value Measurement Options - Total Revenue Model

Human capital is the highest quality human resources and effective weapons in getting the best of the fierce and competitive market. Firstly, in the paper the definition of the evaluation of human capital was made and the typical models on the domestic and foreign human capital evaluation are thoroughly analyzed. Then it points out that they have the following defects such as cutting apart the measurement process integrity of human capital valuation, separating the relevance between the costs and gains, ignoring American option of human capital, blindly assessing the expected return, and so on. Secondly, in order to overcome the limitations mentioned above, the theories of options were applied to the human capital evaluation, and endogenous value and option value of human capital have been analyzed in detail. Then it points out that human capital value consists of the endogenous value and the value which is determined by zero and the endogenous value and the exercise price locked in the contract between the owner and the employer.In addition, the former equals to the sum of the intrinsic value and option value. Then from the standpoint of accounting, it expounds the whole process of human capital measurement and the composition of EBITC. And then the model of EBITC is put forward. Provided the option, giving the holder the right of termination of the labor contract signed before, will not be exercised by the employer actively or passively, finally, the comprehensive evaluation model on human capital which is the core in the paper is concluded based on the hypothesis of the expected return equal to the risk-free rate.