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 / Sales at full capacity. Given the ratio is 1.25, the sales at full capacity would be $1,900 / 1.25 = $1,520. The current sales are $1,400, so the firm is operating at $1,400 / $1,520 = 92% capacity.

Tasty Ice Cream Has a Capital Intensity Ratio of 1