The capital intensity ratio is generally defined as follows:
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 sales to current assets.
D) The ratio of current assets to sales.
E) The amount of assets required per dollar of sales, or A0*/S0.

Question

Quizplus · Accepted Answer

The capital intensity ratio measures the amount of assets required to generate a dollar of sales, represented by A0*/S0. Therefore, the best choice is E, which matches this definition. The other choices either refer to different ratios or do not directly relate to the concept of capital intensity.

The Capital Intensity Ratio Is Generally Defined as Follows