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Financial Management
book

Financial Management

by Jack Alexander
January 2024
Intermediate to advanced content levelIntermediate to advanced
720 pages
17h 20m
English
Wiley
Content preview from Financial Management

25Capital Management and Cash Flow: Long-Term Capital Assets

CAPITAL INTENSITY

The term capital intensity is used to describe the level of property, plant, and equipment (PP&E; also known as fixed assets) that is required to support a business. Capital intensity will vary significantly from firm to firm, from industry to industry, and from one business model to another. Key among the drivers of capital intensity are the nature of the industry, the effectiveness of capital processes, and the degree of vertical integration.

Nature of Industry Certain industries, such as automotive manufacturing, refining, and transportation require high levels of capital assets. Others, such as consulting, require very little in the way of capital assets. Other industries fall somewhere in the middle of these two extremes.

A set of five graphs of revenue growth and innovation dashboard. 1. Revenue growth from the prior year. 2. Revenue from new products. 3. On-time delivery. 4. Customer returns. 5. Past-due orders.

FIGURE 25.1 Drill-down: Capital effectiveness and asset management.

Effectiveness of Capital Process  Companies that require substantial investments in capital assets must develop effective decision and control processes ...

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Publisher Resources

ISBN: 9781394228362Purchase Link