Accountancy Part BAccounting Ratios

The components of capital employed areA. Share holders fundB. Net fix…

The components of capital employed are

A. Share holders fund
B. Net fixed Assets
C. Non-current liablities
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 and C only

Capital employed is the long-term funds in the business, seen from the liabilities side: shareholders’ funds plus long-term debt (non-current liabilities).

A. Share holders fund — Correct. The owners’ long-term funds.

B. Net fixed Assets — Incorrect. Fixed assets are what the capital is invested in; taken alone they leave out working capital.

C. Non-current liablities — Correct. Long-term borrowings are the other part of the long-term funds.

D. Current Assets — Incorrect. Only working capital (current assets less current liabilities) enters capital employed, and then on the assets side.

E. Fictitious Assets — Incorrect. They are losses not yet written off and are not funds 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.”