Capital Employed Ratio (Formula, Examples) | Calculation
In this video on Capital Employed Ratio, we are going to discuss this topic in detail. Including its formula and examples.
𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐄𝐦𝐩𝐥𝐨𝐲𝐞𝐝 𝐅𝐨𝐫𝐦𝐮𝐥𝐚
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Capital Employed = Total Assets - Current Liabilities
𝐀𝐥𝐭𝐞𝐫𝐧𝐚𝐭𝐞 𝐟𝐨𝐫𝐦𝐮𝐥𝐚 𝐨𝐟 𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐄𝐦𝐩𝐥𝐨𝐲𝐞𝐝
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Capital Employed = Non Current Assets + Working Capital
𝐄𝐱𝐚𝐦𝐩𝐥𝐞 𝐨𝐟 𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐄𝐦𝐩𝐥𝐨𝐲𝐞𝐝
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𝘾𝙖𝙥𝙞𝙩𝙖𝙡 𝙀𝙢𝙥𝙡𝙤𝙮𝙚𝙙 𝘾𝙖𝙡𝙘𝙪𝙡𝙖𝙩𝙞𝙤𝙣 𝙪𝙨𝙞𝙣𝙜 1𝙨𝙩 𝙁𝙤𝙧𝙢𝙪𝙡𝙖
To calculate this for Company XYZ based on first formula, we look for the figure against “Total assets.” Let us suppose it is $62000000.
Next, we look for the figure against “Total Current Liabilities” as listed in the balance sheet. Let us suppose this figure is $35000000.
Now, we calculate like this
Capital Employed = Total Assets (62000000) - Current Liabilities (35000000)
𝗖𝗮𝗽𝗶𝘁𝗮𝗹 𝗘𝗺𝗽𝗹𝗼𝘆𝗲𝗱 = 𝟮𝟳𝟬𝟬𝟬𝟬𝟬𝟬
𝘾𝙖𝙥𝙞𝙩𝙖𝙡 𝙀𝙢𝙥𝙡𝙤𝙮𝙚𝙙 𝘾𝙖𝙡𝙘𝙪𝙡𝙖𝙩𝙞𝙤𝙣 𝙪𝙨𝙞𝙣𝙜 2𝙣𝙙 𝙁𝙤𝙧𝙢𝙪𝙡𝙖
Here we will look at the following measures on the balance sheet of Company XYZ, non-current assets, current liabilities and current assets.
Here, we can find both current and non-current assets listed in the Assets section of the balance sheet and current liabilities on the Liabilities section.
Non-Current Assets = $205000000
Current Liabilities = $74000000
Current Assets = $85000000
Capital Employed = Non-Current Assets ($205000000 + Working Capital (Current Assets ($85000000) – Current Liabilities($74000000))
=$20500000+$11000000
𝗖𝗮𝗽𝗶𝘁𝗮𝗹 𝗘𝗺𝗽𝗹𝗼𝘆𝗲𝗱 = $𝟮𝟭𝟲𝟬𝟬𝟬𝟬𝟬𝟬
To know more about Capital Employed, you can go to this 𝐥𝐢𝐧𝐤 𝐡𝐞𝐫𝐞: https://www.wallstreetmojo.com/capita...
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