Capital Intensive

In finance, the term capital intensive is used for a business process or even for an industry requiring huge amounts of cash and financial assets to continue with its production of goods and services. A business or an industry becomes capital intensive depending on the ratio of the required capital to the amount of labor required for production. Telecommunication and transportation industries such as railways and airlines, industries engaged in production of oil and refining are mostly considered as capital intensive. Usually in such industries, a large amount of financial resources is required just to hit the initial unit of produced goods or services. The requirement of large financial commitment makes entry to such type of businesses a difficult task, thus creating a small number of competitors and high levels of entry. High levels of fixed assets and depreciation are often used to mark capital intensive industries on the balance sheet.

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Edited and Updated 31st May 2014

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