Capital intensity ratio of a company is a measure of the amount of capital needed per dollar of revenue. It is calculated by dividing total assets of a company by its sales. It is reciprocal of total asset turnover ratio.
A high capital intensity ratio for a company means that the company needs more assets than a company with lower ratio to generate equal amount of sales. A high capital intensity ratio may be due to lower utilization of the company's assets or it may be because the company's business is more capital intensive and less labor intensive (for example, because it is automated). However, for companies in the same industry and following similar business model and production processes, the company with lower capital intensity is better because it generates more revenue using less assets.
