Question

Firms with high capital intensity ratios have found ways to lower this ratio permitting them to achieve a given level of growth with fewer assets and consequently less external capital. For example, just-in-time inventory systems, multiple shifts for labor, and outsourcing production are all feasible ways for firms to reduce their capital intensity ratios. True or False

Answer 1

Answer: True

Explanation:

The capital intensity ratio of a company

is used to measure the amount of capital that is required per dollar of revenue. The capital intensity ratio is calculated when the total assets that a company has is divided by its sales.

It should be noted that firms that has high capital intensity ratios have found ways to lower this ratio which allows them to achieve a given level of growth with fewer assets and consequently less external capital.