Capital-intensive refers to industries or businesses that require large amounts of capital investment, such as property, plant, and equipment (PP&E)
. These industries typically have high levels of depreciation and operating leverage, which means they have a high percentage of fixed costs and variable costs
. Some examples of capital-intensive industries include oil & gas, automobiles, manufacturing firms, real estate, and metals & mining
. Key characteristics of capital-intensive industries include:
- High capital investment: These industries require a large amount of capital to start or run, such as investments in machinery, equipment, and other costly assets
- High depreciation costs: Capital-intensive industries often have high depreciation costs, which can be a risk factor for companies in these industries
- High operating leverage: These industries have a high ratio of fixed costs to variable costs, making them more vulnerable to economic fluctuations and changes in sales
- Impact on earnings: Capital-intensive firms generally use a lot of financial leverage, which can affect their earnings and profitability
Capital-intensive industries play a crucial role in improving billions of lives worldwide by providing essential goods and services, such as electricity, clean water sanitation systems, and better communication tools
. However, the high capital requirements and risks associated with these industries can make them more vulnerable to economic downturns and competition
