CapEx Intensity
What proportion of operating cash flow goes to capital expenditure?
Definition
CapEx Intensity measures how much of a company's operating cash flow is consumed by capital expenditure. It distinguishes capital-light businesses from capital-heavy ones.
Formula
Where
Interpretation
| Range | Assessment |
|---|---|
| < 20% | Capital-light — most cash is free |
| 20% – 50% | Moderate — typical for many industries |
| > 50% | Capital-heavy — significant reinvestment required |
Capital-light businesses (software, consulting) can return more cash to shareholders via buybacks and dividends. Capital-heavy businesses (manufacturing, telecom) must reinvest heavily just to maintain operations.
In Finsco
Computed by the audit capital-flow command as part of the efficiency metrics.
Related Metrics
- FCF Conversion — FCF / OCF (complement of CapEx Intensity)
- ROIIC — are the CapEx investments earning adequate returns?