Invested Capital

AAA

DEFINITION of 'Invested Capital'

The total amount of money that was endowed into a company by the shareholders, bondholders and all other interested parties. Invested capital is often determined by adding the total debt and lease obligations to the amount of equity in the firm and then subtracting the non-operating cash and investments. Invested capital must be calculated, and there are multiple ways to calculate this figure. It will not be listed on the company's financial statement.

INVESTOPEDIA EXPLAINS 'Invested Capital'

Companies must earn more than it costs them to use the invested capital provided by bondholders, shareholders and other financing sources, in order to earn an economic profit. Knowing a company's invested capital allows investors to use this metric to calculate measures of performance such as return on invested capital, economic value added and return on capital employed.

RELATED TERMS
  1. Return On Equity - ROE

    The amount of net income returned as a percentage of shareholders ...
  2. Collateralized Loan Obligation ...

    A security backed by a pool of debt, often low-rated corporate ...
  3. Return On Capital Employed (ROCE)

    A financial ratio that measures a company's profitability and ...
  4. Capital

    1) Financial assets or the financial value of assets, such as ...
  5. Economic Value Added - EVA

    A measure of a company's financial performance based on the residual ...
  6. Asset

    1. A resource with economic value that an individual, corporation ...
Related Articles
  1. Options & Futures

    Find Quality Investments With ROIC

    Return on invested capital is a great way to measure the true value produced by a company. Learn to use the ROIC metric and increase your chances of finding successful investments.
  2. Markets

    Understanding Economic Value Added

    Discover the simplicity of this important valuation metric. We reveal its underlying ideas and examine each of its components.
  3. Fundamental Analysis

    What is the difference between a capital gearing ratio and a net gearing ratio?

    Understand the definition of gearing in the finance industry, the difference between net gearing and capital gearing ratios and how they are interpreted.
  4. Investing Basics

    What is the difference between the gearing ratio and the debt-to-equity ratio?

    Dive deeper into gearing ratios: what are they, how are they used and why the debt to equity ratio is one of the most popular analytical gearing tools.
  5. Fundamental Analysis

    What is the difference between interest coverage ratio and DSCR?

    Understand the basics of the interest coverage ratio and the debt-service coverage ratio, including calculations and how each type reflects financial stability.
  6. Investing Basics

    What is the difference between interest coverage ratio and TIE?

    Read about the times interest earned, also known as the interest coverage ratio. Find out why this is an important ratio for investors and creditors.
  7. Investing Basics

    What is accrual accounting used for in finance?

    Read about the accrual method of accounting, its uses and rules, and why it is considered so important for investors, lenders and managers.
  8. Investing Basics

    What is the difference between accrual accounting and cash accounting?

    Understand the differences between the two basic methods of accounting commonly used by businesses: cash accounting and accrual accounting.
  9. Investing Basics

    When are expenses and revenues counted in accrual accounting?

    Take an in-depth look at the treatment of revenues and expenses within the accrual method of accounting and learn why many consider it superior to cash accounting.
  10. Investing Basics

    What is the difference between accrual accounting and accounts payable?

    Understand the difference between accrual accounting, an accounting method, and accounts payable, which is a ledger entry within the accounting system.

You May Also Like

Hot Definitions
  1. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  2. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  3. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  4. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  5. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
  6. Law Of Supply And Demand

    A theory explaining the interaction between the supply of a resource and the demand for that resource. The law of supply ...
Trading Center