HOMEPAGE

Capital Intensity Ratio

Definition

The Capital Intensity Ratio measures how much capital a company needs to generate one dollar of revenue.

$$\text{Capital Intensity}=\frac{\text{Total Assets}}{\text{Revenue}}$$

Why It Matters

• Indicates whether a business is asset‑heavy or asset‑light.
• High capital intensity = large investments required (utilities, telecom, manufacturing).
• Low capital intensity = scalable, asset‑light models (software, consulting).

How to Interpret It

• Higher ratio: More assets required to produce revenue.
• Lower ratio: More efficient, scalable operations.

Example

Assets = $2B Revenue = $1B

$$\text{Capital Intensity}=\frac{2}{1}=2$$

The company needs $2 of assets to generate $1 of revenue.