What is capital employed?
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.
The benefits of invoice finance companies such as Novuna Business cash flow
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.
Competent staff, slick technology. Would recommend
Halo is one of the smartest bits of tech I have seen & every team is only as good a it's people and I would like to take this time to actually specifically point out Alex Hall & Claire Davies. Alex is an account manager that has continually improved during our time working together and is a real credit to Novuna. Claire has been exceptional from start to finish; meticulous in her work and very patient with us at every temp - an absolute star. It is a shame that the email address went to a generic platform and not each individual. I totally understand why this works better for companies but it did mean that the personal element was lost meaning that starts like Claire will be harder to identify from a customer point of view.
High recommedation for Novuna Business Cashflow.
My company was in need of invoice factoring to assist with the cashflow due to the nature of debtor days with our clients. After looking at a number of options, the right decision was made to work in partnership with Novuna Business Cashflow. Right from setup through sales to customer service, the communication and support has been outstanding. Providing me with all the information I needed regarding new clients coming onto our books. The system they use is so user friendly and the drawdown payments are very efficient in the fast moving world of temporary payroll. This has allowed my company to look at positive growth knowing we are safe financial hands. I would highly recommend Novuna Business Cashflow 10/10.
Set up went well and communication was good.
Syed and Vipul were extremely helpful top class service
Very helpful from the start
Great people made this process very straightforward.
Jemma from Novuna (formally Hitachi) was brilliant. Worked with us throughout the process and succeeded when some others had failed. Carried out the necessary checks with a smile and cheery demeanour, making what would have been a laborious process quite manageable.
Teething problems -Maybe ?
It's still early days so I may alter this review at a later date. However with retentions and concentration limits and other items, were finding were not getting 85% up front, were probably getting nearer 70% Also when a customer pays the remaining allegedly 15% due to us seems not to be credited to become available. For instance a customer paid Â£6918 and a customer paid Â£1300 hence we should see an extra Â£1330 available (15% of both these payments). However availability seemed to go down and not up by Â£1330 !!! Hard to work out where this 15% has actually gone ? I'll re-submit this review when things become clearer.
I found Hitachi true to their world in every aspect of the service they promised. I can't recommend enough.
Excellent Customer care and service.
Excellent customer service from start of initial conversations, right through to finally becoming a customer. The whole team involved are a credit to Hitachi, they were accommodating and informative the whole way along the process. I would highly recommend Hitachi to future clients and business associates. Thanks Alan.
I really enjoyed working with the Hitachi team, professional, helpful and really good people to deal with. They have made what could have been a very difficult experience a pleasure. Very happy to recommend them.
Hitachi made the process of moving factoring facilities painless, bearing in mind we previously had our facility with the same provider since 1997. I cant fault Hitachi's staff and processes and we are delighted with the move.
Staff excellent all together professional
Great service so far
From start to finish the process for transferring our invoice finance to Hitachi has been been brilliant, a smooth transition, great communication our link Person Jonathan Oakes has helped the process go through seamlessly, A great experience so far and a brilliant start to what we hope will be a long term partnership.