Invested Capital Calculator

Frequently Asked Questions

• Which balance sheet items should I include in short-term and long-term debt in this calculator? +

  Include only interest-bearing borrowing such as bank loans, bonds, notes payable, overdrafts, and finance leases. Exclude operating payables like trade payables, accrued expenses, and tax payables, because they are treated as operating liabilities, not financing capital.

• Why does the calculator subtract cash, cash equivalents, and non-operating assets from invested capital? +

  Invested capital is meant to capture only the capital tied up in core operations. Cash & equivalents, marketable securities, and non-operating assets (like idle real estate or equity stakes in other companies) are stripped out because they don’t need to be there to generate operating profit.

• When should I use the “Debt + Equity − Cash” method versus the “Operating Assets − Non-interest Liabilities” method? +

  Use “Debt + Equity − Cash” if you have clean totals for interest-bearing debt and equity from the financing side of the balance sheet. Use “Operating Assets − Non-interest Liabilities” if you build the analysis from the operating side (total assets minus cash, non-operating assets, and non-interest-bearing current liabilities). In a well-prepared set of accounts both methods should give a very similar invested capital number.

• What revenue and period should I use for Invested Capital Turnover in this tool? +

  Use net revenue (net sales) for the same period as your balance sheet data, ideally trailing twelve months. If you toggle on “Use beginning and ending average,” the calculator will use average invested capital instead of a single point, which is the correct approach when you later combine this with NOPAT to compute ROIC.