can anyone explain the following relationship: Invested capital = Net working capital - net fixed assets = book value of long term debt + book value of equity
Net Working Capital is Current Assets - Current Liabilities. If you take out Fixed Asstes from Net Working Capital you are left with the long term liabilities and the shareholder equity as balance. However the equation is assuming that all Long Term Liabilities are interest bearing long term debt which may not be the case…so I am not sure if the equation is 100% correct.
gazhoo Wrote: ------------------------------------------------------- > Invested capital = Net working capital - net fixed assets This does not make sense to me. Can you refer to which page in the text it states this.
rus1bus Wrote: ------------------------------------------------------- > gazhoo Wrote: > -------------------------------------------------- > ----- > > Invested capital = Net working capital - net > fixed assets > > This does not make sense to me. Can you refer to > which page in the text it states this. http://www.answers.com/topic/invested-capital
Thanks idreesz. It helps to confirm what gazhoo has posted is incorrect. Invested Capital = Net Working Capital + Net Fixed Assets and NOT what gazhoo posted as: Invested Capital = Net working capital MINUS Net Fixed Assets.