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Capital employed

Capital employed is the long-term funds financing a business: total equity plus non-current liabilities, equivalently total assets minus current liabilities. It is the denominator of return on capital employed (ROCE).

ByHoang TruongUpdated

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A balance sheet shows total equity of €180,000, non-current liabilities of €70,000, current liabilities of €50,000 and total assets of €300,000. Capital employed is equity plus non-current liabilities: €180,000 + €70,000 = €250,000, the same figure reached from total assets minus current liabilities, €300,000 − €50,000.

Where it fits
SubjectFinancial AccountingCoreTopicFinancial Statement Analysis & RatiosCore

The formula

LaTeX
CE=E+LNC=A−LCCE = E + L_{NC} = A - L_{C}

Variables

Capital employed (€)
Total equity (€)
Non-current liabilities (€)
Total assets (€)
Current liabilities (€)

The long-term funding base of the business, used as the denominator of ROCE; both routes give the same answer.

Check yourself

PracticeCORE

A company reports total assets of €420,000, current liabilities of €90,000, non-current liabilities of €110,000 and total equity of €220,000. What is its capital employed?

Select an answer to check your understanding.