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Capital Employed

Capital Employed:

Capital Employed is a term which refers to company’s assets side of the balance sheet which includes Fixed Assets + Inventories + Current Assets as major components and Current Liabilities on the other side of the Balance sheet.

 

This is often referred to as total money investment in business to generate revenues, more precise analysis of this can be done by way of Return on Capital Employed or ROCE.

 

There is no standard formula to determine Capital Employed, still in general practice is the sum of Fixed Assets + Current Assets – Current Liabilities.

 

Capital Employed Formula: Fixed Assets + Current Assets – Current Liabilities.

To do this simply add all capital heads under balance sheet including Fixed Assets, Inventories, Receivables Cash and cash equivalent etc... and deduct the total amount by the total of current liabilities which shall include Account Payables, Debt Payables, Tax and other business current liabilities for the year.

 

You may also like to read more on ROCE analysis with Formula and Example.

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