![]() There is no set rule on whether a high or lower capital intensity ratio is better, as the answer depends on the circumstantial details.įor example, a company with a high capital intensity ratio could be suffering from low-profit margins, which are the byproduct of inefficient utilization of its asset base - or the general line of business and industry could just be more capital intensive. sum of the beginning of period and end of period balance, divided by two). The formula for calculating the total asset turnover is the annual revenue divided by the average total assets (i.e. The total asset turnover measures the amount of revenue generated per dollar of assets owned. The capital intensity ratio and total asset turnover can be calculated using only two variables: The capital intensity ratio and asset turnover are closely related tools for gauging how efficiently a company can utilize its asset base. ![]() The 0.5x capital intensity ratio implies that the company spent $0.50 to generate $1.00 of revenue.Ĭapital Intensity Ratio vs.
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