Question

Which of the following is not correct?

Options

• Equity = Capital Employed + Debt.

• Equity = Share Capital + Reserves and Surplus.

• Debt = Long-term Borrowing + Long-term Provisions.

• Working Capital = Current Assets − Current Liabilities.

Answer 1

Equity = Capital Employed + Debt.

Explanation:

This equation is incorrect because Capital Employed is actually the aggregate of both Equity (Shareholders' Funds) and Long-term Debt. Therefore, the correct relationship is Capital Employed = Equity + Debt. Expressing it in terms of Equity, the mathematically accurate formula should be Equity = Capital Employed - Debt.