Meaning & use
capital employed
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Meaning
noununcountablebusinessfinance
The total money invested in a business, usually measured as its assets minus its short-term debts.
Grammar: Not used with an or an: capital employed was higher.
Patterns
- return on capital employed
- capital employed in something
The firm's capital employed rose by ten percent last year.
Analysts compared profit with capital employed to judge efficiency.
Most of the capital employed was tied up in factories.
Common combinations
- return on capital employed
- Return on capital employed was 15 percent.
- total capital employed
- Total capital employed fell after the sale.
- calculate capital employed
- First calculate capital employed from the balance sheet.
- capital employed in the business
- The capital employed in the business increased.
Synonyms and how they differ
- invested capital
- Invested capital is nearly the same but focuses on money put in by owners and lenders.
- net assets
- Net assets are assets minus all debts, while capital employed uses only short-term debts.
- total funds
- Total funds is a vague everyday phrase and not a precise accounting measure.
Word family
Commonly confused: capital employed or working capital?
capital employed vs working capital
Working capital is current assets minus current liabilities and measures short-term health, while capital employed measures long-term funds.
Practice
An investor wants to see how much profit a company makes from the funds put into it. Which measure is she using?
Choose one answer.
Return on capital employed compares profit with the funds invested. Turnover measures sales and share price measures market value, so they do not do this.
Make it your own
Write a sentence using “capital employed”, then check it and compare it with the examples above.