What is capital employed?

Understanding capital employed and how it works.

Capital employed, also known as funds employed, is a figure commonly used to measure a company’s profitability and efficient use of capital.

Capital employed is typically the total amount of capital that is used for the acquisition of profits by a firm or particular project. It can also be used to refer to the value of all of the assets that are used by a company in order to generate earnings.

Capital employed is helpful in the sense that it can be used alongside other financial metrics in order to properly determine aspects such as the return on a company’s assets or to see how effective management is at utilising capital.

Key takeaways from this section:

  • Capital employed is a way to tell how much money has been put to use in an investment.
  • Simply put, capital employed is the total amount of funds that are deployed to run the business in order to generate profit.
  • The figure commonly used to calculate capital employed is: Total assets – current liabilities = Equity + Noncurrent liabilities.

Understanding capital employed

Capital employed is a way to estimate how well a company is using its capital to enhance its profitability. It refers to the value of all the assets that are employed in a business.

The formula to calculate capital employed is as follows:

Total assets – current liabilities = Equity + noncurrent liabilities

Essentially, capital employed is calculated by taking total assets from your balance sheet and then subtracting any and all current liabilities as these are considered to be short-term financial obligations. Instead, you work out capital employed by adding equity to noncurrent liabilities, which are considered to be the long-term liabilities.


Capital Employed FAQs

How do you calculate capital employed?

Capital employed is calculated by subtracting current liabilities from total assets, or by adding noncurrent liabilities to owners’ equity. Capital employed is also better interpreted by combining it with other information in order to form an analysis metric, such as return on capital employed (ROCE).

What is capital employed used for?

Capital employed is used mainly by analysts to help determine return on capital employed, but is also used in many other contexts. It indicates the investment in the business and helps companies to see how well they are using their capital to improve profitability.

What is return on capital employed (ROCE)?

Return on capital employed (ROCE) is a financial ratio that is used to assess a company’s profitability and capital efficiency. It can help to understand how well a company is generating profits from it’s capital. The return on capital employed ratio is one of many profitability ratios that is used by analysts, financial managers, stakeholders and potential investors when analysing a company for efficiency and investment.


Have you thought about Invoice Finance as a cash flow solution for your business?

Invoice finance allows you to release cash quickly from your unpaid invoices.

As your lender, we can release up to 90% of your invoices within 24 hours. On payment of the invoice from your customers, we will then release the final amount minus any fees and charges. There are different types of invoice financing options available to businesses depending on the situation and the level of control they require in collecting unpaid invoices.

We are an invoice financing company who offer a solution whereby payments are collected on your behalf managed by our team of expert credit controllers so you can focus on running your business. Our Confidential Invoice Discounting solution is offered to businesses who want to maintain their own credit control processes, therefore this remains strictly confidential so your customers are unaware of our involvement.


Get in touch

Contact our friendly UK advisors on our freephone

0808 250 0859

8:45 - 17:15 - Monday to Thursday &
8:45 - 16:45 - Friday


The benefits of invoice finance companies such as Novuna Business cash flow

  • Boost your cash flow without having to wait up to 120 days for your customers to pay you

  • Release up to 90% of the invoice straight away, and the final 10% when the invoice is settled

  • Access funds within 24 hours from initial appointment with our revolutionary digital onboarding process

  • Benefit from our in-house credit control processes, allowing you to focus on running your business, instead of chasing clients for payment

  • 6 month trial period followed by a rolling contract


Want to understand more Cash Flow Finance terms?

Our Cash Flow Resource Hub has been set up to help SME's with cash flow finance advice, tips and resources to help with their cash flow position.

We explore ways you can begin improving your cash flow situation and start getting your business on track to positive cash flow.



Let's talk

Please complete this form and one of our friendly advisors will call you back.

If your customers are consumers, please contact our consumer finance division.

Back to top