Capital employed = long-term debt + shareholders’ funds or = net assets which are equal to the total assets– current liabilities
Capital Employed: Capital Employed is the total amount of capital invested in a company to generate revenue. It represents the long-term funds used by the company to finance its assets and operations. Capital Employed is calculated as the sum of Equity and Debt because it includes both the funds provided by shareholders (Equity) and the funds borrowed from external sources (Debt).
The formula for calculating Capital Employed is: Capital Employed = Equity + Debt
Capital Employed is an important financial metric used to assess the efficiency of capital utilization in a company. It reflects the total resources (equity and debt) that the company employs in its operations to generate profits and achieve its objectives. By comparing Capital Employed with the company's earnings or profits, investors and analysts can evaluate the company's return on capital and its overall financial performance. |
