What is capex intensity?

Asked By: Rongguang Chuecos | Last Updated: 16th April, 2020
Category: business and finance debt factoring and invoice discounting
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capital intensity. Measure of a firm's efficiency in deployment of its assets, computed as a ratio of the total value of assets to sales revenue generated over a given period. Indicates how successful a firm is in utilizing its assets in generation of sales revenue.

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Accordingly, what does capital intensity mean?

Capital intensity is the amount of fixed or real capital present in relation to other factors of production, especially labor. At the level of either a production process or the aggregate economy, it may be estimated by the capital to labor ratio, such as from the points along a capital/labor isoquant.

Subsequently, question is, what is considered high capex? Five companies with high capital expenditures (CAPEX) include Tesla Motors, General Motors, Apple Computer, Nike and Facebook. The capital expenditures of these five companies from different industries are compared using the CAPEX to sales ratio and free cash flow to CAPEX ratio.

Then, how do you calculate capital intensity?

Capital intensity ratio of a company is a measure of the amount of capital needed per dollar of revenue. It is calculated by dividing total assets of a company by its sales. It is reciprocal of total asset turnover ratio.

What is the capital intensity ratio at full capacity?

Capital Intensity Ratio. The capital intensity ratio reveals the amount of assets your business requires to generate $1 in sales. It equals total assets divided by annual sales. For this ratio, a smaller figure is better.

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How is labor intensity measured?

Labor intensity may be quantified by taking a ratio of the cost of labor (i.e. wages and salaries) as a proportion of the total capital cost of producing the good or service. The higher the ratio, the higher the labor intensity. Labor intensive industries may control costs in bad economies by laying off workers.

What is a capital intensive good?

The term "capital intensive" refers to business processes or industries that require large amounts of investment to produce a good or service and thus have a high percentage of fixed assets, such as property, plant, and equipment (PP&E).

How is a debt ratio of 0.45 interpreted?

How is a debt ratio 0.45 interpreted? A debt ratio of . 45 means that for every dollar of assets, a firm has $. Dee's earned more income for its common shareholders per dollar of assets than it did last year.

Are banks capital intensive?

Definition: Capital Intensive
There are a number of examples of capital intensive industries like steel, cement, automotive, petroleum. These industries require large sum of money and capital to support their operations. Some businesses like IT, software design, banking, consulting etc.

What is the labor intensive good?

Labor-intensive goods are those in which require a significant amount of labor to produce in labor intensive industries. A labor-intensive industry is determined by the amount of capital needed to produce these goods and normally refer to industries like food service, mining, and agriculture.

How do you know if a company is capital intensive?

Although there is no mathematical threshold that definitively determines whether an industry is capital intensive, most analysts look to a company's capital expenses in relation to its labor expense. The higher the ratio between capital and labor expenses, the more capital intensive a business is.

What does debt to equity ratio mean?

The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. Closely related to leveraging, the ratio is also known as risk, gearing or leverage.

Is Apple capital intensive?

Apple's Technology Is Capital Intensive, And Its Production Function Is Given By F (K,L) =K3/4L1/2 The Value Of Apple's Physical Capital (machines, Real Estate, Ect ) Is Equal To K = 16 Billion (ignore Billions In Your Calculation).

What does debt ratio mean?

The debt ratio is defined as the ratio of total debt to total assets, expressed as a decimal or percentage. In other words, the company has more liabilities than assets. A high ratio also indicates that a company may be putting itself at a risk of default on its loans if interest rates were to rise suddenly.

What is a good asset turnover ratio?

An asset turnover ratio of 4.76 means that every $1 worth of assets generated $4.76 worth of revenue. In general, the higher the ratio – the more "turns" – the better. But whether a particular ratio is good or bad depends on the industry in which your company operates.

What does a high current ratio mean?

The current ratio is an indication of a firm's liquidity. If the company's current ratio is too high it may indicate that the company is not efficiently using its current assets or its short-term financing facilities. If current liabilities exceed current assets the current ratio will be less than 1.

What is capital intensive method of production?

Capital intensive technique refers to that technique in which larger amount of capital is comparatively used. In such a technique the amount of capital used per unit of output is larger than what it is in case of labour intensive technique.

What is labor intensive production?

Labour-intensive production means that the way that a good or service is produced depends more heavily on labour than the other factors of production, such as capital. Labour intensive method of production is usually used for individual or personalised products, or to produce on a small scale.

What does asset intensive mean?

"asset-intensive" means that it takes a lot of assets, whether money or materials or land or something else to start / run /operate the business. In your case, for wine production, you need to have land (the vineyard), some money and some equipment before you can even start to produce the wine. HTH.

What is mean capital?

Capital includes all goods that are made or created by humans and used for producing goods or services. Capital can include physical assets, such as a production plant, or financial assets, such as an investment portfolio. Capital can also refer to money invested in a business to purchase assets.

What is the difference between Labour and capital intensive?

Capital intensive production requires more equipment and machinery to produce goods; therefore, require a larger financial investment. Labor intensive refers to production that requires a higher labor input to carry out production activities in comparison to the amount of capital required.

Is retail capital intensive?

The retail business has reasonably well defined segments with food and grocery accounting for the largest share. Retail is a capital intensive business — large investments are required in real estate, leasehold improvements and working capital. Foreign investment in retail is necessary for the growth of the industry.