Tasty Ice Cream has a capital intensity ratio of 1.25 at full capacity. Currently, total assets are $1,900 and current sales are $1,400. At what level of capacity is the firm currently operating?

Question

Quizplus · Accepted Answer

The capital intensity ratio is calculated as Total Assets / Full Capacity Sales. Given the ratio is 1.25, Full Capacity Sales = Total Assets / 1.25 = $1,900 / 1.25 = $1,520. The current level of capacity is Current Sales / Full Capacity Sales = $1,400 / $1,520 = 92%.

Tasty Ice Cream Has a Capital Intensity Ratio of 1