Invested Capital, Capital Employed and Total Capital.

CFA Level II
#1

Hi, I have been reading through old forum discussions and tried to find final answers elsewhere as well, but I seam to find conflicting answers. We come across these definitions in various formulas, ROIC, ROCE, EVA and I wondered if anyone has clear definitions of them. And how we can find the required information, also if there are multiple ways to find the information that I should be aware of. My understanding is in the () below.

  1. Invested Capital (Same as NOA. NOA = (Tot A - Cash) - (Tot L - Debt)
  • Is this correct? If it is, do we include all Debt?
  • Are there any other ways to define this?
  1. Capital Employed (MvEquity + MvDebt)
  • Is this correct? If it is does it include preferred equity and is there any part of Debt I should not include?
  • Are there any other ways to define this?
  1. Total Capital
  • I am not sure about the definition here. Any differences from Capital Employed?

Thank you for your help.

#2

Sorry it’s an old topic but I am really interested to hear answers as well as I’m having a hard time understanding those 3 terms.

Maybe @Thammer you know the answers now ?

Thanks !

#3

My view:

  1. Invested Capital (_Same as NOA. NOA = (Tot A - Cash) - (Tot L - Debt) –> Covers only the operating assets/liabilities _
  • _Is this correct? If it is, do we include all Debt? Only long-term interest bearing debt _
  • Are there any other ways to define this? Yes, IC = operating long-term Assets (e.g. PPE) + NWC
  1. Capital Employed (_MvEquity + MvDebt) –> Covers only the long-term employed asset base _
  • _Is this correct? If it is does it include preferred equity and is there any part of Debt I should not include? No, this should be defined as total assets minus current liabilities _
  • Are there any other ways to define this?
  1. Total Capital _ –> Covers all the companies assets or equal total equity plus debt plus current liabilities and can be measured in market or book values _
  • I am not sure about the definition here. Any differences from Capital Employed? _ Definition is just the total asset number in the BS or if measured in market values the current market cap plus the current market value of debt. _