What is Invested Capital ?

Invested Capital ( used in return on assets or return on invested capital ) can be defined as all assets, modified investment basis, or shareholder's equity only.

The following elements of financial statements may be modified or not included in the investment base, depending on the analyst's preference :

• Unproductive Assets- It include such items as an idle plant, surplus inventories, and intangible assets.
• Depreciable Assets- Assets that can be depreciated, such as buildings and equipment, will carry lower values on the books as they are depreciated, resulting in higher ROI against the same earning.
• Preferred shareholder's book value- Some analysts exclude preferred shareholder's book value because during liquidation preferred shareholders are entitled to only the book value of the preferred shares, not to the total returns of the business.