Capital Employed

Capital employed represents the total long-term funding invested in a business — equity plus long-term debt — used to generate operating profit. It's calculated as total assets minus current liabilities, which strips out short-term obligations to isolate the capital genuinely tied up in running the business over the long term.

It's mainly used as the denominator in return on capital employed (ROCE): operating profit (EBIT) divided by capital employed, a measure of how efficiently a business turns its long-term capital into profit. ROCE is most useful for comparing capital-intensive businesses against each other, where simple profit margin alone doesn't reflect how much capital was required to generate it.