Asked by Maritza Cabrera on Jul 17, 2024
Verified
Which of the following best defines the term "capital intensity ratio"?
A) sales divided by total assets, i.e., the total assets turnover ratio
B) the percentage of liabilities that increase spontaneously as a percentage of sales
C) the ratio of current assets to sales
D) the amount of assets required per dollar of sales, or A*/S0
Capital Intensity Ratio
A measure of a company's investment in physical assets relative to its labor force, indicating the extent to which a firm's operations are automated or labor-intensive.
- Evaluate how capital intensity and operational potential affect financial necessities.
Verified Answer
XC
xavier camelJul 22, 2024
Final Answer :
D
Explanation :
Capital intensity ratio is the amount of assets required per dollar of sales, or A*/S0. It measures the level of capital investment required to generate a certain level of sales revenue. Therefore, among the given options, option D is the best definition of the capital intensity ratio.
Learning Objectives
- Evaluate how capital intensity and operational potential affect financial necessities.