CAPEX/Total Assets is a measure of company’s investment intensity. The ratio shows what part of company’s total assets was spent to buy new or invest in already existing property, plant and equipment with a useful life extending beyond the taxable year. CAPEX is made by companies to maintain or increase the scale of their business.
Generally, the lower the ratio the better. That is because CAPEX is a long term investment which will not bring immediate returns. But lack of CAPEX can undermine company’s ability to operate properly and thus may have negative effect. CAPEX/Total Assets ratio vary across industries, because some industries are very capital intensive and some not.
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