Capital employed
Encyclopedia
Capital employed has many definitions. In general, it represents the capital investment necessary for a business
to function. Consequently, it is not a measure of asset
s, but of capital investment: stock
or shares and long-term liabilities.
:
Capital Employed is equal to Non-Current Debt and Equity provide obvious sources of long-term funding, but a further source is provided by the short-term debt
that remains on the balance sheet at the year end. The sum of these sources of long-term funds is termed capital employed.
Capital employed can be defined as equity plus loans which are subject to interest or one can say that it is total assets less non bearing interest liabilities.
Capital employed can be defined as shareholders funds (ie. Share capital and reserves) plus creditors > 1 year (long-term liabilities) plus provisions for liabilities and charges.
NB. This MUST equal Total assets less current liabilities.
More clearly capital employed means total of long term liabilities, ie equity share capital+ pre share capita+ debenture capital+ long term loan from financial institutions.
Capital employed is the value of the assets that contribute to a company's ability to generate revenues, ie. their liquidity.
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
to function. Consequently, it is not a measure of asset
Asset
In financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset...
s, but of capital investment: stock
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...
or shares and long-term liabilities.
Definitions
Capital employed is usually presented as total assets less current liabilities, or non-current assets plus working capitalWorking capital
Working capital is a financial metric which represents operating liquidity available to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Net working capital is...
:
Capital Employed is equal to Non-Current Debt and Equity provide obvious sources of long-term funding, but a further source is provided by the short-term debt
Money market
The money market is a component of the financial markets for assets involved in short-term borrowing and lending with original maturities of one year or shorter time frames. Trading in the money markets involves Treasury bills, commercial paper, bankers' acceptances, certificates of deposit,...
that remains on the balance sheet at the year end. The sum of these sources of long-term funds is termed capital employed.
Capital employed can be defined as equity plus loans which are subject to interest or one can say that it is total assets less non bearing interest liabilities.
Capital employed can be defined as shareholders funds (ie. Share capital and reserves) plus creditors > 1 year (long-term liabilities) plus provisions for liabilities and charges.
NB. This MUST equal Total assets less current liabilities.
More clearly capital employed means total of long term liabilities, ie equity share capital+ pre share capita+ debenture capital+ long term loan from financial institutions.
Capital employed is the value of the assets that contribute to a company's ability to generate revenues, ie. their liquidity.