When organizing the work of an enterprise in the field of production, its leading link necessarily encounters concepts such as capital intensity, capital intensity formula, etc. Without the efficient use of funds, accounting for stock indicators, the stability of the production process is almost impossible.
Calculation Algorithms
So, we know that the capital intensity (calculation formula) shows how many fixed assets of production account for one monetary unit (for example, the ruble) of manufactured products. Here, it is the main production assets that are important , and not all that the company possesses. Depreciation of funds in this case is not taken into account. Likewise, sold products are not taken into account.
Capital intensity - a formula that is used to calculate the balance sheet for a certain time period (quarter, half a year, etc.) and information about the losses and profits of a given enterprise for the same period. First, the average cost of fixed assets spent, for example, for a year is calculated. For this purpose, the cost of these funds is taken at the beginning of the year and at the end. The amount is added up and divided into two. When the planned capital intensity is calculated, the formula for its calculation is filled in with the numbers that are planned in the business plan of the enterprise. Then the cost of the products that the company produced in a year is revealed. In this case, information about the revenue received by the production for the year of work is taken. Such data can be obtained by studying the accounting reports on profit and loss for the period.
Only after the necessary figures are collected, the economist is taken to calculate the capital intensity of fixed assets in production for the period of interest to him. The capital intensity (formula) is filled in with data on what is the average cost of fixed assets for a given year, for example, current or past, and this figure is divided by the value of all output produced for the same period. The numbers obtained at the output will give a real idea of the capital intensity of fixed assets at the enterprise.
If you are interested in the planned capital intensity, its formula should contain data from the business plan, and then the calculations are carried out according to the already known scheme.
It becomes clear that capital intensity is inherently an indicator of how much material resources an enterprise needs to invest in its production fixed assets in order to produce products worth 1 dollar, ruble, euro or any other currency. Thanks to such calculations, it is possible to differentiate production sectors and types of business by the amount of necessary investment in assets that are not involved in the main turnover.
Application
In economics, capital intensity indicators are needed as auxiliary tools for economic analysis. Each manufacturing industry, as well as the type of manufactured products, has its own specific capital-intensity ratios. Therefore, figures and indicators are compared between similar, close or similar industries and the same types of products.
Another area of application of capital intensity indicators is planned calculations, estimation of the volume of additional necessary capital investments. But these indicators depend on how efficiently the labor process is organized at the enterprise. For example, in the winter, a cannery for processing vegetables and fruits works in one shift. With the onset of the summer-autumn season, during the period of mass ripening of fruits and vegetables, the load on the enterprise increases, it begins to function in two or even three shifts. Naturally, the use of fixed assets of equipment is increasing, becoming more efficient, while capital intensity indicators are decreasing. Optimization of production processes, eliminating the deficit and the problem situation in any particular link in this process can also lead to a significant economic effect for the entire enterprise.