Capital Employed is an important financial metric often used when calculated and analyzing ratios. Capital employed can be seen as the value of the assets that add to a company's ability to generate revenues, or, equivalently, its liquidity. That is, capital employed represents the necessary amount of capital that a company invests in its business to continue its operations. Capital employed is commonly used to calculate a company's return on capital employed. GAAP does not require companies to report capital employed on their balance sheet.
Capital Employed = Total Assets - Current Liabilities
- Or -
Capital Employed = Fixed Assets + Working Capital