What is the ratio of capital intensity?

The ratio of the intensity of the capital intensity is a financial calculation that measures how much the company is invested in total assets compared to how much it earns in income. It is calculated by dividing the value of its total assets in a certain period of time for the amount of income acquired in the same period. The capital intensity ratio shows how much capital it requires a company to generate a single dollar of income. Like all financial conditions, this is best used to compare companies in one industry together. It looks like an apparent truth, but when it comes to companies that deal with a huge amount of money, it may be difficult to monitor the relationship between assets and income. This is important not only for the companies themselves, but also for investors who control the value of these companies. One way to measure the relationship between assets and IS income ratio ratio of capital intensity intensity. In the same period of time, the value of the total assets that the company has is equal to $ 500,000. In this case, the ratio of intensity iscapital intensity of $ 500,000 divided by $ 200,000, leaving a ratio of 2.5.

In this example, the ratio of capital intensity intensity is that the company in question has to spend approximately $ 2.50 for each dollar of income it earns. Ideally, the company could reduce the ratio as much as possible. A company that continues to invest considerable investments in its assets without eventually returning the income in the neighborhood spent amounts, to keep it over the water. Such companies that have high conditions are highly capital demanding and must find a way to achieve better balance over time.

There are several objections that should be considered in solving the ratio of capital intensity. The circumstances of societies often dictate their circumstances. For example, a company that is just starting will probably be highly capital demanding because their business had no time togathering of large income. In addition, companies in various industries should not be compared to each other because their industries are likely to dictate how capital ones must be demanding.