Capital Intensive Law and Legal Definition

Capital intensive is a business which requires a huge amount of capital to labor for financing a given amount of sales. A business is said to be capital intensive if it requires heavy capital investment in buying assets when compared to the level of sales or profits that those assets can generate. A capital intensive business often has high levels of depreciation and fixed assets on the balance sheet. Some of the capital incentive industries include oil production and refining industries, telecommunications, and transports such as railways and airlines. The characteristics of a capital incentive business are:

high depreciation costs;

high operational measure on operating profit, but much less on pre-depreciation measures;

high operational measure on free cash flows;

high barriers to entry; and

large amounts of fixed assets on the balance sheet.