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Examinatoion of the capital employed ratio formula

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The capital employed ratio formula is used to determine how efficiently capital is being used to generate sales. It subtracts all assets not directly associated with operations, such as investments, and divides the remainder into annual sales.

The variables are as follows:

AR(Annualized revenue) / [ C(Capital) â?" A(assets not directly related to operations)] = CER(Capital Employed Ratio)

Using the formula, what is the order in which you need to do the calculation?

Why does it matter?

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CER = AR(Annualized revenue) / [ Capital - Assets not directly related to operations)]

Order of the calculation:

Step 1: Simplify the denominator by
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Solution Summary

The capital employed ratio formula is used to determine how efficiently capital is being used to generate sales. It subtracts all assets not directly associated with operations, such as investments, and divides the remainder into annual sales.

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