12 Analyse the reasons, why capital employed can’t be a good approach to measure business size. [6]

[Abbas17]

(KN) Different Capital Structures
(AN) Businesses may have different capital structures based on their industry, growth stage, and financing strategy.
(AN+) a capital-intensive manufacturing business may have a high capital employed, while a service-oriented business may require less capital.

(KN) Asset Intensity
(AN) Some businesses, such as those in the information technology or software development sector, may have low capital employed despite generating substantial revenue. This is because they may not require significant physical assets to operate.
(AN+) A business with a high return on capital employed may generate substantial profits relative to the capital invested, even if the capital employed figure is relatively low. This indicates a high level of efficiency in utilizing resources.

[Areena]

[Kn] it depends what method business use
[An] if the business uses labour intensive method than measurment from capital employed would be incorrect
[An+]leading towards underestimation of business size

[Kn]unused capital available
[An] business might have extra capital which is not is used
[An+] thus measuring through capital employed would be ineffective as most of the capital is abondoned

[Syed Mustafa Ali]

[KN] Intangible Assets
[AN] Many businesses calculate their value from intangible assets such as property, brands, and customer relationships
[AN+] these assets can tell the size of the business but it isn't a reliable source

[KN] Working Capital
[AN] capital employed focuses on assets and investments.
[AN+] A business with a large amount of working capital might have more immediate financial strength.

The second point is COPIED from RAZA

[Syed Mustafa Ali]

[KN]Different Capital Structures
[AN]Businesses may have different capital structures based on their industry, growth stage, and financing strategy.
[AN+]a capital-intensive manufacturing business may have a high capital employed, while a service-oriented business may require less capital.

[KN]Asset Intensity
[AN]Some businesses, such as those in the information technology or software development sector, may have low capital employed despite generating substantial revenue. This is because they may not require significant physical assets to operate.
[AN+]A business with a high return on capital employed may generate substantial profits relative to the capital invested, even if the capital employed figure is relatively low. This indicates a high level of efficiency in utilizing resources.

The answer is COPIED from SALMAN

[Syed Mustafa Ali]

[KN]capital productivity[AN]different capital employed have different prodictive capacity which can be worn out by the amount it has been used[AN+]a business with more productive capital will have more goods than those with worn out capital

[KN]idol capital [AN]some capital may not be used by the business and would be left for back up[AN+]in such cases the firms may not be successful in measuring it

Second point is mostly COPIED from Ibrahim...

[Syed Mustafa Ali]

(KN) Different Capital Structures
(AN) Businesses may have different capital structures based on their industry, growth stage, and financing strategy.
(AN+) a capital-intensive manufacturing business may have a high capital employed, while a service-oriented business may require less capital.

(KN) Asset Intensity
(AN) Some businesses, such as those in the information technology or software development sector, may have low capital employed despite generating substantial revenue. This is because they may not require significant physical assets to operate.
(AN+) A business with a high return on capital employed may generate substantial profits relative to the capital invested, even if the capital employed figure is relatively low. This indicates a high level of efficiency in utilizing resources.

COPIED from KHURRAM who COPIED it from SALMAN

[Mahnoor Ali]

[KN] labor intensive buisnesses
[AN] Thus capital may not be required in such great quantities and hence the size of the business can't be measured as a business with fewer machines might be larger than those businesses that are capital-intensive
[AN+] Thus it may underestimate the business size
[KN] capital that isn't being used
[AN] A business may have capital in large quantities but it may not be using all of it
[AN+] this it may overestimate the size a buisness

[Huma Junaid]

[KN]Growth Stage
[AN]Startups and fast-growing companies might not have a substantial amount of capital employed which may be highly influential
[AN+] Moreover established companies with a high capital base may be in a mature or declining stage.

[KN]Operational Efficiency
[AN]Businesses that operate efficiently and generate high revenue with less capital employed may be considered successful but on the other hand capital employed alone doesn't account for operational efficiency and effectiveness.
[AN+]It allows organizations to do more with less, enhance customer satisfaction