Accountancy Part BAccounting Ratios

The components of capital employed are: A) Shareholders fundB) Net fi…

The components of capital employed are:

A) Shareholders fund
B) Net fixed assets
C) Non current liabilities
D) Current assets
E) Fictitious assets

Choose the correct answer from the options given below-

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → A & C only

Capital employed is the long-term fund in the business: shareholders’ funds plus non-current liabilities (debentures, long-term loans). Seen from the assets side it is non-current assets plus working capital.

(A) Shareholders fund — True. The owners’ long-term funds are part of capital employed.

(B) Net fixed assets — False. Fixed assets give capital employed only together with working capital, not on their own.

(C) Non current liabilities — True. Debentures and long-term loans are borrowed long-term funds.

(D) Current assets — False. Only working capital (current assets less current liabilities) enters capital employed.

(E) Fictitious assets — False. Fictitious assets are written off and never form part of capital employed.

NCERT (2026-27 edition):
Return on Capital Employed or Investment – “… Capital employed means the long-term funds employed in the business and includes shareholders’ funds, debentures and long-term loans. Alternatively, capital employed may be taken as the total of non-current assets and working capital.”