Abracadabra Inc. has total assets of $106,000 and a debt ratio of 40 percent. If last year's sales were $145,000 and sales are expected to grow 10 percent in the future, what is Abracadabra's capital intensity ratio?
A) 0.73
B) 1.37
C) 0.44
D) 2.27

Question

Quizplus · Accepted Answer

The capital intensity ratio is calculated as total assets divided by sales. With sales expected to grow by 10%, future sales are $145,000 * 1.10 = $159,500. The capital intensity ratio is $106,000 / $159,500 = 0.664, which rounds to 0.73.