Capital intensity shows an example. How to calculate the return on assets of fixed assets (formula)? Ways to reduce capital intensity
For reading 9 min. Views 133 Posted on 11.11.2018
Every owner of a large company wants to have information about the overall performance of the firm. To assess the performance of the company, special tools are used. To consider the effectiveness of economic activity, it is necessary to conduct a deep analysis, using the data for the last few years in the calculations. This approach allows you to obtain information about the results of labor activity, and determine further ways of development of production. In order to visually reflect the efficiency of production, indicators such as profitability, capital productivity and capital intensity are used. Within the framework of this article, we propose to discuss the question of what is capital intensity and how this coefficient is calculated.
Efficiency is considered one of the basic phenomena for assessing the activities of an enterprise based on the results of the period
Determination of capital intensity
Capital intensity is one of the financial ratios used to reflect the funds that need to be transferred to fixed assets of production. These resources will be used for the subsequent manufacture of marketable products. The use of this tool allows you to find out how much should be spent to make a profit of one ruble. The fixed assets of the company include assets such as real estate, cars and production equipment. All means that are used to ensure the regular operation of production belong to the same category. Also, the tool in question is often used to divide a specific business segment into several groups, according to the volume of investments in fixed assets.
This economic instrument began to be used in the sixties of the last century. For the first time, the concept of capital intensity was used in compiling the reporting balance of fixed assets of the national economy. During the compilation of these calculations, it was revealed that the specificity of the coefficient depends on a specific line of business and product belonging to a particular product group. This explains the recommendation of experts to use this tool only when comparing similar products with similar characteristics.
Capital intensity shows the amount of money that needs to be invested in the development of production in order to reduce overall costs.
Entrepreneurs using this indicator are able to produce more marketable products without increasing the item of regular costs. As a rule, such ratios are used in those industries that require large investments. In most cases, in such a business, production capacities are not tied to other components. This indicator is often used in the fields of mining, construction and timber harvesting.
Varieties of capital intensity
The type of capital intensity depends on the degree of use of fixed assets (OPF) in the process of manufacturing goods. Today, there are the following types of the coefficient under consideration:
- Full view - this indicator reflects the result of the addition of indirect and direct capital intensity.
- Direct view- this indicator is often referred to as incremental capital intensity. The value of the coefficient depends on the total value of fixed assets.
- Indirect view- this indicator is based on the cost of fixed assets used by factories that manufacture components and consumables for the main products of a particular enterprise.
In addition to the above ratios, there is such an indicator as the total capital intensity of goods. This indicator is used when it is necessary to justify the increased rate of expansion of the company. Based on the information obtained using this analytical tool, it is possible to assess the performance of a specific market segment and draw up plans for the effective use of fixed assets.
Capital intensity, along with capital productivity and profitability indicators, allows you to most fully reflect the effectiveness of the organization
How is it calculated
Commodity capital intensity is an indicator that depends on the performance of production activities. A company moving from a one-shift operation to non-stop production consumes key resources significantly more. In such a situation, a drop in the coefficient is noted. A decrease in the value of this indicator demonstrates an increase in production efficiency due to the rational use of appropriate equipment. From the foregoing, we can conclude that in order to increase economic performance, the company's management should optimize the production process. Expansion of the company also allows achieving the required economic result.
The main disadvantage of using this tool is the absence of manufactured products in the cost calculations. This is due to the fact that the leadership of the USSR was aimed at large-scale production. In many industries, costs have increased despite declining end product quality. Based on the foregoing, we can conclude that the use of this tool is advisable only if it is necessary to assess a specific department or to compare one workshop with another. Experts conducting such an analysis need to take into account the fact that a certain part of the products remains unclaimed and is stored in the warehouse. The price of the rest of the goods may differ from the forecasts. This means that the information obtained from the analysis rarely shows the real picture.
Many experts note that the use of equipment that conserves energy, financial and labor resources can lead to an increase in the ratio under consideration. In this case, an increase in the coefficient does not indicate a decrease in the efficiency of the production process. In this case, the capital intensity of products increases due to compensation for losses from a decrease in capital productivity.
Accounting formula (balance sheet)
In order to determine the value of the ratio under consideration, all accounting reports, which reflect the company's income, will be required. In addition, you will need a balance sheet, which describes all fixed assets. To determine the capital intensity, the formula "Line 1150 BB / STR 2110 OFR" is used. The first line indicates the price of fixed assets, and the second - the amount of proceeds received during the reporting period.
In order to find out the capital intensity of goods, the accountant needs to divide the cost of fixed assets by the gross profit received for the reporting period. At the next stage of calculations, it is necessary to divide the cost of fixed assets by the profit obtained from the sale of manufactured products.
Capital intensity shows the ratio of the value of fixed assets to one of the types of profit
General formula
The formula for calculating the capital intensity of the balance is somewhat different from the generally accepted procedure for compiling calculations. In order to determine the value of the considered coefficient according to the general formula, it is necessary to divide the average annual cost of fixed assets by the proceeds obtained through the sale of commercial products. Such calculations can be made only if there is information about the company's income for the billing period. To get this information, you need to multiply the cost of one commodity unit by the total volume of goods produced. To obtain information on the average annual cost of fixed assets, add the cost of fixed assets at the beginning of the year to the price of fixed assets at the end of the reporting period. To determine the value of the ratio under consideration, you can use such an analytical tool as capital productivity. For this purpose, it is necessary to apply the formula "1 / return on assets = capital intensity".
Some financial experts recommend that people making such calculations consider different types of profit. To calculate the coefficient based on the income received from the sale of commercial products, the formula is applied: “Profit from the sale of products / average annual cost of fixed assets”. In order to obtain information about the value of this income item, it is necessary to subtract the costs of supporting the production process from the total revenue. In addition, when making calculations, you can use an indicator such as gross income. In this case, it is necessary to divide the average annual cost of fixed assets by the amount of gross profit. To determine the value of the last indicator, the technological cost of the products should be subtracted from the company's revenue obtained through the sale of goods.
The capital intensity formula given above is often referred to as the commodity capital intensity. This name is explained by the fact that the result of the calculations allows you to assess the level of exploitation of the assets of the enterprise during the production process. It is important to note that such calculations can include even an unfinished production cycle of a commercial product.
Calculation example
In order to better understand the order of application of the considered coefficients, it is necessary to give a practical example. Let's consider the procedure for making calculations based on information from the balance sheet of the organization LLC Vladimir and KO. As we noted above, when compiling such calculations, it is very important to compare several reporting periods. In our example, we will consider a comparison of economic indicators at the end of two thousand sixteen and two thousand seventeen.
The cost of the company's main assets is reflected in line number "1150". In two thousand and sixteen, the price of the OS was ninety thousand rubles. At the end of two thousand and seventeen, this figure increased to one hundred and thirty thousand rubles. The company's revenue is recorded in the "2110" line of the balance sheet. On December 31, two thousand and sixteen, the company earned one hundred and fifty thousand rubles. The following year, the company's revenue was one hundred and ninety thousand.
Gross profit is reflected in the "2100" line. In the sixteenth year this figure was equal to one hundred thousand rubles, and in the seventeenth the company received one hundred twenty thousand rubles of gross income. The profit received from the sale of commercial products is indicated in the line under the number "2200". The value of this indicator at the end of two thousand and sixteen was seventy thousand. In two thousand and eighteen, the company managed to earn fifteen thousand rubles more.
In order to determine the capital intensity of the OS, the company's accountant needs to add together the value of assets at the end of the sixteenth and seventeenth years. The result obtained must be divided by the revenue received at the end of the billing period. Performing simple arithmetic operations, we get the result equal to 0.58 kopecks. It is this amount of fixed assets that is used to obtain one ruble of net profit.
Capital intensity is also reflected as the reciprocal of capital productivity
What affects the performance
The performance of a manufacturing company depends on many factors, among which it is necessary to highlight the speed of supply of consumables, raw materials and components. The value of the total capital intensity depends on the following indicators:
- Direct capital intensity- demonstrates the amount of investment spent on the purchase of fixed assets that are used during the production process.
- Indirect capital intensity- reflects the amount of investments made in the acquisition of an operating system for a company acting in the status of a business partner.
When drawing up such calculations, it is necessary to take into account the number of counterparties with which the company cooperates. This approach allows you to get the most relevant information.
Ways to reduce capital intensity
Based on the above, we can conclude that a decrease in the considered ratio allows you to increase the effectiveness of the company. For this purpose, it is necessary to regularly update equipment and timely repair equipment that is out of order. The coefficient can be reduced by entering new markets.
The use of technological innovations and devices with increased production capacity also increases the efficiency of the company. One of the important factors affecting the final cost of products is the quality of the goods. An increase in this parameter, together with the competitive properties of products, can significantly increase the company's income.
One of the important indicators of the efficiency of using fixed assets of an enterprise (industry) is capital intensity ( TO fund e). Conducting a plan-fact analysis of this value for the selected period will allow us to assess how efficiently fixed capital is used.
Capital intensity is a financial and economic coefficient that characterizes the rationality of using the introduced production assets of an enterprise (intangible objects that ensure the manufacture of goods). It reflects fixed assets in value terms, which are attributable to one ruble of goods issued.
When determining the coefficient for the industry, its value shows the value of the production assets (OPF) of the industry per one ruble of gross marketable output.
This value characterizes the degree of optimization of the product manufacturing process as a whole.
There are 2 types TO fund.e:
1. Straight, which reflects the effectiveness of the use of OPF directly involved in the production of products;
2. Complete, on the basis of which the effectiveness of the operation is determined not only of the OPF, but also of the means that are indirectly related to the production process.
The considered coefficient has no standards, and it is recommended to consider it in dynamics over several years in order to determine the optimal level for the organization. An increase in the indicator reflects a decrease in the return on production equipment. And its decrease in comparison with the previous period shows that the enterprise has become more efficient in using its production capacity, and is increasing its turnover.
That is, the smaller the value obtained, the better for the company. Comparing the value of the coefficient with the industry average, it is determined to what extent the result of the organization's activities lags behind or is ahead of other enterprises.
Capital intensity is the opposite. Thus, if the dynamics of its increase is visible, one should rationally approach the organization of the production process, look for ways to optimize it.
Factors affecting capital intensity
Such factors as have a significant influence on the coefficient:
1. Issue volume and sales volume;
2. Qualitative and structural characteristics of fixed assets, their parameters (introduction of new equipment, duration and number of downtime, forced costs for ergonomics and safety, the number of equipment shifts);
3. Wear level of OPF;
4. Coefficient showing how optimally the production area is loaded;
5. Productive capacity.
Ways to reduce capital intensity
Possible solutions to reduce the indicator include:
1. Renovation of production facilities in order to maintain their optimal condition;
2. Introduction of new high-tech equipment with increased capacities;
3. Improving the quality characteristics and competitive properties of products in order to increase revenue. Studying and entering new sales markets.
(Fw) reflects the extent to which employees are provided with fixed assets.
In other words, FV determines the value of fixed assets per employee. For an objective assessment, a comparison is made of the growth rates of capital-labor ratio and labor productivity (PT). The lag in the growth rate of PT reflects the ineffective use of organizational resources and indicates the need for measures to improve the situation.
Having analyzed in aggregate the values of three indicators - capital intensity, capital productivity and capital-labor ratio - the management can identify in time the problems of the company that threaten the functioning of the company and eliminate these shortcomings.
The value is determined by dividing the cost of the production fund by the volume of manufactured (sold) products or as a coefficient inversely proportional to the return on assets:
In practice, the value is calculated according to the financial statements of the organization using forms No. 1 (balance sheet) and No. 2 (statement of financial results):
or TO fund.e = (line 1150n + line 1150k) * 0.5 / line 2110
Analysis pitfalls
With the introduction of advanced types of equipment and technologies that contribute to the conservation of enterprise resources, the growth rate of capital-labor ratio can outstrip the growth rate of labor productivity. Thus, this leads to an increase in capital intensity (decrease in capital productivity). A decrease in the degree of use of OPF with significant savings in material and labor resources does not mean a decrease in the efficiency of the company.
In this case, an increase in the growth rate of Kfond. It is economically profitable, since there is an increase in other indicators of the state of the enterprise and there is an economy of material and labor assets, which compensates for the losses. Outstripping the growth rate of net profit over the growth rate of the Kfond. e allows you to compensate for losses from an increase in capital intensity.
The disadvantage of the coefficient is that the calculation does not take into account the cost of production. Assessment of the state of the enterprise on the basis of one calculated value is not sufficiently objective. The analysis of the economic situation of the company is carried out on the basis of a group of indicators in the aggregate, and on this basis an objective conclusion is made.
Based on the information above, we can summarize.
Capital intensity- an important indicator of the financial condition of the company, which is more correct to calculate based on the financial statements. It is better to analyze the obtained result in conjunction with other coefficients (capital-labor ratio, capital productivity, labor productivity, and others) to obtain a clearer picture of the state of affairs of the company.
STOCK CAPACITY OF PRODUCTS - an indicator, inverse to capital productivity; used to determine the requirements for fixed assets. It is calculated as the ratio of the average annual value of fixed assets to the value of manufactured products for a certain period. Distinguish between indicators of direct and full capital intensity. Direct capital intensity takes into account the basic production assets of the enterprise. The total capital intensity, along with the main production assets of the enterprise involved in the production of products, includes the cost of fixed production assets that operate at other enterprises and participate in the production and provision of inventory values for this enterprise - the manufacturer of the final product. For example, in the automotive industry, the cost of fixed assets per 1,000 rubles. products is 360 rubles. However, it is associated with the use of inventories of other related industries (metallurgy, instrumentation, petrochemical industry, etc.), as well as with the use of fixed assets, the specific value of which is also taken into account in the automotive industry based on the cost of fixed assets attributable to the volume of supplies of products of related enterprises (i.e., indirect capital intensity). Taking into account the indirect capital intensity, the total capital intensity is 1 thousand rubles. products of the automotive industry exceeds 1.5 thousand rubles.
A Brief Dictionary of the Economist. - M .: Infra-M... N. L. Zaitsev. 2007.
See what "PRODUCT CAPACITY" is in other dictionaries:
Capital intensity- an indicator of Soviet statistics, equal to the quotient of dividing the cost of fixed assets by the annual output of products using these funds. See also: Fixed Assets Finam Financial Dictionary. Capital intensity is an indicator inverse to capital productivity. ... ... Financial vocabulary
capital intensity- An indicator calculated as the cost of fixed assets divided by the annual production output using these funds. Reverse capital productivity indicator. capital intensity Indicator determined by volume ... ... Technical translator's guide
Capital intensity- [capital intensiveness] an indicator determined by the volume of production assets per unit of production: x2 / p (see the notation in the article Production function). At the macroeconomic level, the F. of the aggregate social is measured ... Economics and Mathematics Dictionary
Capital intensity- a parameter inverse to the parameter of return on assets, calculated as the ratio of the cost of fixed assets to the cost of annual output. Dictionary of business terms. Academic.ru. 2001 ... Business glossary
STOCK CAPACITY- an indicator of Soviet statistics, equal to the quotient of dividing the cost of fixed assets by the annual output of products using these funds. The inverse indicator of the efficiency of using fixed assets is called the return on assets. Raizberg B.A., ... ... Economic Dictionary
capital intensity- STOCK CAPACITY and; f. Econ. The ratio of fixed assets to industrial products. Growth of production assets ... encyclopedic Dictionary
STOCK CAPACITY- in Soviet statistics: an indicator equal to the quotient of dividing the value of fixed assets by the annual output of products using these funds. The inverse indicator of the efficiency of using fixed assets is called the return on assets ... Encyclopedic Dictionary of Economics and Law Big Dictionary of Economics
In this tutorial:
- Task 1. Growth of capital productivity and production output by the enterprise
- Task 2. Find the capital intensity and capital productivity, the average annual cost of fixed assets and the profitability of production
Problem 1... Growth of capital productivity and production output by the enterprise
How much additional production will the firm produce with an increase in the use of fixed assets by 2%, if the annual sales volume is 180 million rubles, the average value of fixed assets is 120 million rubles?A comment.
The phrase "an increase in the use of fixed assets" is translated into normal language as "an increase in capital productivity." This indicator was actively used in Soviet times, and therefore it is recommended to read the article "Return on assets". The return on assets formulas are indicated in the same place. The article describes in detail all the inferiority of using this indicator and the reasons for this.
Please note that when a modern economist talks about fixed assets, he means the current residual value (initial cost minus accrued depreciation), and the "Soviet" economist means their initial cost, and it does not matter that all fixed assets are already 50-60 years old ... Therefore, "increasing utilization" simply means increasing production at existing facilities and nothing more.
Solution.
Return on assets = 180 million / 120 million = 1.5
Now "we provide an increase in capital productivity" by 2%
We get a new volume of products.
120 x 1.53 = 183.6 million
Well find the difference
180 - 183.6 = 3.6 million rubles
A comment... As you can see, the answer could also be obtained by simply multiplying the volume of production by 1.02 (since we have increased the use of production facilities by 2%, then the output will be 2% more). But then there will not be such a chain of crazy calculations, which is so necessary for the teacher ...
Answer: 3.6 million rubles
Task 2. Find the capital intensity and capital productivity, the average annual cost of fixed assets
Using the data in the table below, determine for two years:
- the average annual cost of fixed assets, capital productivity, capital intensity;
- retirement and renewal rates of fixed assets;
- capital-labor ratio;
- shift ratio of metalworking equipment;
- overall production profitability.
Indicators |
The values |
Production of marketable products at wholesale prices, thous. UAH | |
The prime cost of the annual output of marketable products, thousand UAH | |
Annual salary fund for employees of the enterprise with deductions for social events, thousand UAH | |
Cost of fixed assets at the beginning of the year, thousand UAH | |
During the year, fixed assets were put into operation at the beginning of the year, thousand UAH. | |
Including by quarters: | |
During the year, fixed assets were decommissioned, the total cost of which is, thousand UAH. | |
Including by quarters: | |
Average annual cost of standardized working capital, thousand UAH | |
Average number of employees, thousand people | |
Observation data for the operation of metalworking equipment within two working days: | |
The number of machine-tool shifts worked in two days | |
Number of metalworking equipment, pcs. |
Solution.
Let's find the average annual cost of fixed assets. It can be found by the formula:
OF N- the cost of fixed assets at the beginning of the year, thousand UAH.
OF in i- the cost of fixed assets introduced in the i-th month, thousand UAH.
t pi- the period from the introduction of fixed assets to the end of the year (the number of months of use during the year of fixed assets that are introduced), months.
OF bi- the cost of fixed assets that were retired in i-m month, thousand UAH
t pri- the period from the moment of retirement of fixed assets to the end of the year (the number of months in a year during which the retired fixed assets are not used), months.
n - the number of cases of the introduction of OPF.
m - the number of cases of disposal of OPF.
Substitute the values into the formula.
OF cf = 1500 + (300 * 9/12 + 300 * 6/12) - (110 * 9/12 + 190 * 6/12) = 1500 + (225 + 150) -
- (82.5 + 95) = 1500 + 375-177.5 = 1697.5 thousand UAH.
Now let's find the return on assets. Return on assets shows the annual production of marketable products per one hryvnia of the average annual value of fixed assets. It is determined by the formula:
TP- commercial products.
OF Wed... - the average annual cost of fixed assets.
Substitute the values into the formula.
FD in = 2000 / 1697.5 = 1.178
Now we will find the capital intensity. This indicator is the inverse of the return on assets, shows what part of the average annual value of fixed assets is used for the production of commercial products worth 1 UAH.
Capital intensity can be found by the formula:
PU = 1,697.5 / 2,000 = 0.84875
Now let's find the capital-labor ratio. The capital-labor ratio can be found by the formula:
H r- the average number of employees of the enterprise, people.
OF Wed- the average annual cost of fixed assets.
Let's substitute the values into the formula:
EF o = 1697.5 / 4 = 424.375 UAH / person
Find fixed asset retirement rate... It is calculated as the ratio of the value of fixed assets retired during the year to the total value of fixed assets at the beginning of the year.
Substitute the values into the formula.
K select = 300/1500 = 0.2
Find fixed assets renewal rate... It is determined by dividing the value of fixed assets introduced during the year by the total value of fixed assets at the end of the year.
To find the value of fixed assets at the end of the year, we need to add to the total value of fixed assets, the introduced fixed assets and subtract the retired fixed assets.
Substitute the values into the formula.
To obn. = 600 / (1500 + 600-300) = 600/1800 = 0.33
Let's find the shift coefficient of metalworking equipment. It shows how many shifts, on average, each piece of installed equipment is used. This coefficient is found by the formula.
Please note that the idea of calculating the indicator is to use the cost of fixed production (and not all available) fixed assets, and without deducting their wear... This is, at the same time, a disadvantage of this indicator, since benchmarking of this indicator for enterprises with different ages of fixed assets with canonical adherence to the initial formula of the indicator is extremely difficult. Why isn't wear taken into account? This is not difficult to understand. If we took into account only the residual (book) value of fixed assets, then (logically) immediately after the launch of a new enterprise, it would have to reduce the volume of output from the second month of its existence. Agree that this looks illogical and does not correspond to the real state of affairs.
For adequate comparison and leveling of the factor of seasonality of production, the indicator is calculated as the ratio of the average annual balance (without deduction of depreciation) value of production fixed assets in relation to the volume of products produced (but not sold) for a given period. That is, since we are interested in the efficiency of the use of fixed assets, we ignore the information about how much of the specified volume of production was actually sold.
Additional materials: Terms and definitions of the concept of fixed assets.
The use of the capital intensity indicator and its essence
In fact, the capital intensity indicator reflects the amount that an enterprise needs to invest in production fixed assets in order to produce products for 1 ruble, dollar, hryvnia, euro, etc. Thus, it is possible to differentiate industries or types of business according to the required volumes of investment in non-current assets.The capital intensity indicator is currently used as an auxiliary one in economic analysis.
For the first time odds capital intensity in the USSR were calculated when developing the reporting intersectoral balance of fixed assets of the national economy for 1966. It turned out that this indicator value is specific for each industry and each type of product. Therefore, the comparison of the value of this indicator should be carried out only for similar industries and similar products.The capital intensity indicator is also used in the practice of planning calculations, in the estimated calculations of the volume of additional capital investments. In addition, it must be remembered that the efficiency of the organization of production at the enterprise has a direct impact on the value of the indicator. For example, when switching to work from a one-shift regime to two-shift or three-shift, the efficiency of using the existing fixed assets increases, and the capital intensity indicator, accordingly, decreases. In addition, the optimization of production and the removal of bottlenecks in individual production areas can give a serious economic effect for the enterprise as a whole.
A significant disadvantage of this indicator is that it does not take into account the cost of production. This is not surprising - in Soviet times, the industry was focused mainly on increasing the volume of production. Often - due to a decrease in its quality and an increase in production costs. Any specialist in the organization of production processes knows that after reaching a certain optimal value in a particular production, an increase in output will lead to an increase in the cost of production (see the graphs in the article "Costs"). The capital intensity indicator makes us think differently. More production, better value. This effect must be taken into account when making management decisions.
At present, the indicator of the capital intensity of production has remained, mainly, in old textbooks and problems for students, which did not have time to be thrown out of textbooks. Business leaders and investors use completely different decision-making tools (ROI, ROA, ROACE, etc.).
Another danger that lies in wait for the analyst is the use of such an indicator as "commodity output" in the formulas for calculating capital intensity (see below). That is, the values of how much money the company would have gained if it immediately sold everything produced during the study period, and even in expected (not actual) prices. Since this never happens, part of the output always remains unsold, a significant part is sold at prices that differ from the expected, then the calculated value is always expected, but not actual. This leads us to the inevitable conclusion that the capital intensity indicator can be used only for evaluative analysis and must always be compared with other evaluations of the performance of production units.
The formula for the capital intensity indicator
Basic formula.
Capital ratio = Initial Cost of Fixed Assets / Produced Marketable Products
The meaning of calculating the capital intensity indicator is to understand how necessary it is to provide the production process with fixed assets in relation to solving the problem of producing a given amount of products. Therefore, we are interested in the initial cost of fixed assets as the sum of the initially invested funds in relation to the volume of products produced. It should be noted that you need to be careful about the denominator. Commercial products released per day, month and quarter are completely different numbers, and the volume of the initially invested funds in the numerator is the same. Therefore, it should be borne in mind that for data comparability ( benchmarking ) should use the annual volume of marketable products.
Additional formulas.
Capital intensity = (Fixed assets at the beginning of the period + Fixed assets at the end of the period) / 2 / Commercial products
Since the amount of fixed assets at the enterprise is not constant (they are retired, new fixed assets are acquired), this formula tries to take this information into account and more accurately determine the capital intensity of the actual volume of marketable output. This formula is applicable when working with the financial statements of the enterprise. For example, the balance sheet contains information about fixed assets at the beginning and end of the period. However, it should be borne in mind that data on the output of marketable products should be taken from production reports, since in the appendix to the balance sheet, the enterprise indicates the sold, not manufactured products.
Capital intensity = Average annual value of fixed assets / Annual production output
If it is possible to obtain more detailed information about the movement of fixed assets, then the value of capital intensity can be calculated more accurately. In this case, the numerator contains the value of the average annual value of fixed assets, which takes into account their movement during the year. This allows you to get a more adequate final value of the indicator. Otherwise, the meaning of the formula does not differ in any way from the previous one.