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Capital employed definition

Description

Capital employed is a measure which shows the value of the capital used in business. This measure can be explained using different accounting categories (fixed assets plus working capital or total assets minus current liabilities). Data to calculate this ratio is collected from balance sheet.

This measure is commonly used while discussing a need for capital for the investments. Capital employed also known as funds employed or capital invested.

Norms and limitations

There are no norms and limitations for this measure.

Formula

Assets (Total assets) – mean every asset that the company owns and that is shown on the balance sheet. Total assets equals total liabilities + owner’s equity.

Current liabilities, also known as short-term debts, indicate debts that must be covered in a period of 12 months.