1. What is the Capital Intensity Ratio?

The Capital Intensity Ratio (CIR) measures how much a company must invest in capital to generate one dollar of revenue. It's calculated by dividing interest expense by revenue and multiplying by 100 to get a percentage.

2. How Does the Calculator Work?

The calculator uses the CIR formula:

Where:

• Interest Expense — Total interest payments made by the company
• Revenue — Total income generated by the company

Explanation: The ratio shows what percentage of revenue is consumed by interest expenses, indicating how capital-intensive the business is.

3. Importance of CIR Calculation

Details: A higher CIR indicates a more capital-intensive business, which may require more investment to generate revenue. This is important for investors and analysts assessing a company's financial structure.

4. Using the Calculator

Tips: Enter interest expense and revenue in dollars. Both values must be positive (revenue must be greater than zero).

5. Frequently Asked Questions (FAQ)

Q1: What is a good CIR value?
A: Lower values are generally better, indicating less capital is needed to generate revenue. The ideal ratio varies by industry.

Q2: How does CIR differ from other financial ratios?
A: Unlike profitability ratios, CIR specifically measures the relationship between capital costs and revenue generation.

Q3: When should CIR be calculated?
A: It's most useful when comparing companies within the same industry or tracking a company's capital efficiency over time.

Q4: Are there limitations to CIR?
A: CIR doesn't account for debt structure differences and should be used alongside other financial metrics.

Q5: Can CIR be negative?
A: No, since both interest expense and revenue should be positive numbers, CIR will always be positive or zero.