A legal summary of the term “Capital Employed” refers to the amount of capital invested in a business or enterprise, which includes both equity and debt. It is a measure of the total resources used by a company to generate profits and is often used to assess the efficiency and profitability of a business. The calculation of capital employed typically includes the value of fixed assets, working capital, and long-term debt. This term is commonly used in financial analysis and reporting to evaluate the financial health and performance of a company.
Capital employed refers to the total amount of capital invested in a business, including both equity and debt.
Capital employed is calculated by adding the total equity and long-term debt of a company.
Capital employed is important because it represents the total amount of funds that have been invested in a business, and it is used to assess the efficiency of a company’s use of its capital.
Capital employed includes both equity and debt, while capital invested typically refers to the amount of money that shareholders have invested in a company.
A company can increase its capital employed by raising additional equity or taking on more long-term debt.
A high capital employed ratio may indicate that a company is heavily reliant on debt financing, which can increase financial risk.
Companies can reduce capital employed by paying off debt, selling off assets, or improving operational efficiency to generate higher profits with the same amount of capital.
Capital employed is a key factor in determining a company’s valuation, as it represents the total amount of funds that have been invested in the business.
A low capital employed ratio may indicate that a company is not utilizing its assets and resources effectively, which can lead to lower profitability and financial instability.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 4th April 2024.
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