Interpretation of Accounts Using Simple Accounting Ratios Equity: Capital Employed - SS2 Accounting Past Questions and Answers - page 1
What is capital employed?
The amount of money invested in a business by its owners and/or lenders.
The amount of money a business has in its bank account.
The amount of revenue a business generates in a year.
The amount of money a business owes to its suppliers.
What is the formula for calculating capital employed?
Assets + liabilities
Revenue - expenses
Equity + loans
Net income + dividends
Why is capital employed important for businesses?
It measures the efficiency and profitability of a business.
It helps businesses avoid paying taxes.
It determines the size of a business's workforce.
It determines the price of a business's products.
What is the goal of any business with regard to capital employed?
To minimize its capital employed
To maximize its capital employed
To keep its capital employed constant
To ignore the capital employed
How is capital employed calculated?
Capital employed is calculated by adding up all the assets that the business owns and subtracting all the liabilities, such as loans and accounts payable.
What is the significance of maximizing the return on capital employed for a business?
Maximizing the return on capital employed is important for a business because it means generating as much profit as possible from the amount of capital invested in the business. This can lead to higher profits and returns for its owners and investors, as well as increased competitiveness and growth opportunities.