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18 April, 15:08

The fabric house has sales of $411,800, total equity of $237,400, and a debt-equity ratio of. 55. what is the capital intensity ratio?

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  1. 18 April, 18:20
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    Let's start by defining what capital intensity ratio is. The equation for capital intensity ratio (CIR) is:

    CIR = Total Assets/Sales

    The sales is equal to $411,800. The missing information is the total assets which is equal to

    Total assets = Liabilities + Equity

    Liabilities are also equal to debts. We know equity to be $237,400. We get liabilities from the debt-to-equity ratio:

    Debt-to-equity ratio = Liabilities/Equity

    0.55 = Liabilities/$237,400

    Liabilities = $130,570

    Now, we can solve it backwards:

    Total assets = $130,570 + $237,400

    Total Assets = $367,970

    CIR = $367,970 / $411,800

    CIR = 0.893
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