Definition for : Negative capital employed

Companies with negative Capital employed usually have a highly Negative working capital exceeding the size of their Net fixed assets. This type of company typically posts a very high Return on Equity. Return on Capital employed of these companies should take into account Income from short-term financial investments (included in Earnings) and the size of these investments (included in Capital employed): ROCE = (EBIT + Financial income) ? (1 – corporate Income tax) / (Capital employed + Short-term financial investments). Such companies Factor their Financial income into the selling price of their products and services.

(See Chapter 13 Return on capital employed and return on equity of the Vernimmen)

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