Which equation accurately defines capital employed?

Capital employed is a measure that reflects the total amount of capital that is used for the acquisition of profits. It essentially represents the resources that a company has at its disposal for generating income.

The correct definition of capital employed is derived from the understanding of how it relates to the financial structure of a company. It can be calculated as the sum of total equity and non-current liabilities. This captures both the funds that shareholders have invested in the business and the long-term debt obligations that the company has taken on, thus providing a comprehensive picture of the financial resources available for operations and investments.

Total equity contributes to the capital employed by representing the ownership value that shareholders have in the company's assets, while non-current liabilities (or long-term debt) indicate the obligations that the company is responsible for in the longer term. Both components together facilitate the financing of assets and operations, and thus the generation of future revenues and profits.

Understanding capital employed in the context of total assets and liabilities can be crucial for financial analysis, as it informs both the leveraged position of a company and its overall solvency and ability to generate returns on investments. The other definitions do not appropriately encapsulate both the equity and non-current liabilities which are fundamental to calculating capital employed accurately.