Enter the total debt & leases, total equity & equity equivalents, and non-operating cash and investments to determine the total invested capital.
Table of Contents
Invested Capital Formula
The following formula can be used to calculate the total invested capital.
IC = D&L + E + C&I
- Where IC is the invested capital
- D&L is the debt and leases ($)
- E is the total equity and equity equivalents ($)
- C&I is the non-operating cash & investments ($)
Invested Capital Definition
Invested capital is defined as the sum of the debt, equity, and non-operating cash of an investment portfolio.
What is included in invested capital?
The following factors are included in invested capital:
- Debt and Leases. This is any long or short term debt owned by an individual.
- Equity. This includes all equity and equity equivalents.
- Non-operating cash. This is any cash that is readily liquid and available to use.
- Investments. This includes any investment, even those done through margin.
Can an invested capital be negative?
An invested capital should not be negative if calculated correctly, however, the return on an invested capital can most certainly be negative if the invested capital decrease over time.
Invested Capital Example
How to calculate invested capital?
- First, determine the total debt and leases.
This will be the total debt and leases used on equipment and services directly used for the business.
- Next, determine the total equity.
Evaluate the total value of the equity and equity equivalents.
- Next, determine the non-operating cash and investments.
Evaluate the total amount of non-operating cash and investments.
- Finally, calculate the invested capital.
Using the formula, calculate the total amount of invested capital.
Invested capital is a financial term used to describe the total amount of monetary capital invested in any given business or business segment.
These are included in invested capital because while they are liabilities, they are part of the total investment in the project.