Assertion (A): Capital Employed = Non Current Assets + Current Assets − Current Liabilities. Reason (R): Capital Employed = Shareholder’s Funds + Non Current Liabilities. In the context of the above two statements, which of the following is correct?

Question

KollegeApply · Accepted Answer

Both (A) and (R) are true and (R) is the correct explanation of (A). Explanation: Capital Employed is computed as Non-Current Assets + Working Capital (Current Assets − Current Liabilities). It can also be calculated as Shareholders’ Funds plus Non-Current Liabilities. Both formulas provide the same result, indicating that both Assertion and Reason are true, and Reason correctly explains Assertion.

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