How to determine the capital intensity
Video: Labour and Capital Intensity 2024, July
The efficiency of using fixed assets of the enterprise is characterized by several indicators. One of these indicators is the capital intensity. It reflects how many fixed assets account for 1 ruble of manufactured products.
Instruction manual
1
The capital intensity of fixed industrial production assets is defined as the ratio of the average annual value of the fixed assets involved in the production process to the volume of output in value terms. If this indicator at the enterprise decreases, it means labor saving.
2
The capital intensity ratio allows you to determine how much money you need to invest in fixed assets in order to obtain the required volume of production. If fixed assets are used at the enterprise more efficiently, then this indicator decreases.
3
The inverse of capital intensity is capital productivity. It characterizes the volume of products that the organization receives from each ruble of fixed assets. Return on assets is used to determine the economic efficiency of existing production assets at the enterprise.
4
When analyzing return on assets from all production assets, their active part (working machines and equipment) is distinguished. In order to determine the effect of the structure of fixed assets on the efficiency of their use, it is necessary to compare the growth rates and percentages of fulfilling the plan for capital productivity per 1 ruble of the cost of production assets and 1 ruble of the cost of their active part. The second indicator should increase, provided that the proportion of the active part of fixed assets increases.
5
Increasing the level of efficiency in the use of fixed industrial assets allows increasing output without additional financial investments in fixed assets and in a shorter time. If the capital productivity increases, and the capital intensity, respectively, decreases, this indicates an acceleration of the pace of production, a decrease in the cost of reproduction of new funds, and therefore, a decrease in production costs.
