Examinatoion of the capital employed ratio formula
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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