Capital Employed Formula

Steps:

• Recall capital employed measures long-term funds financing the business.
• Identify owner's capital as equity (shareholders' funds).
• Add non-current liabilities (long-term debt) to equity for total capital employed.
• Exclude short-term items like current assets/liabilities, as they represent working capital.

Why the correct option is correct:

• Capital employed = Owner's equity + Non-current liabilities, per standard accounting formula, capturing permanent financing sources.

Why the others are wrong:

• A: Current assets fund operations but are not added to capital; they form working capital.
• B: Current liabilities are short-term obligations, subtracted from assets to find net working capital.
• C: Non-current assets are resources owned, financed by capital employed, not an addition to it.

Final answer: D