Which concept represents the value of all long-term sources of finance used by the business?

Which concept represents the value of all long-term sources of finance used by the business?

• A. Balance Sheet
• B. Book Value
• C. Capital Employed
• D. Net Current Assets

Answer: (C)

Capital Employed captures the funds supplied for the long term to run the business. It includes owners’ equity and long-term debt, i.e., the sources financing non-current assets. You can think of it as total assets funded by long-term sources (often calculated as total assets minus current liabilities, or as equity plus non-current liabilities). This focus on long-term financing is what sets it apart from working capital or current liabilities. In contrast, Net Current Assets measures liquidity (working capital), while the Balance Sheet and Book Value are broader or accounting-position concepts. So the value of all long-term sources of finance used by the business is represented by Capital Employed.

Capital Employed captures the funds supplied for the long term to run the business. It includes owners’ equity and long-term debt, i.e., the sources financing non-current assets. You can think of it as total assets funded by long-term sources (often calculated as total assets minus current liabilities, or as equity plus non-current liabilities). This focus on long-term financing is what sets it apart from working capital or current liabilities. In contrast, Net Current Assets measures liquidity (working capital), while the Balance Sheet and Book Value are broader or accounting-position concepts. So the value of all long-term sources of finance used by the business is represented by Capital Employed.