One way of measuring capital intensity is to calculate the physical capital spent per wꦰorker. Automobile production, for example, requires purchasing and maintaining expensive equipment for the use🌼 of every worker on the assembly line.

The operations of capital-intensive businesses require investments in high-priced items, such as facilities, infrastructure, and m⛎ajor manufacturing equipment. In addition to the auto industry, energy, transportation, and semiconductors are near the top of the🥂 list.

Capital Expenditures

Capital expenditures are major investments by definition. They include the facilities and equipment that companies need to maintain or eꦫxpand their opera♋tions.

Because these are assets that provide value and usefulness over several years, companies gradually recover the cost of these acquisitions by depreciating the assets over time on their tax returns.

Generally, businesses are not allowed to deduct the full costs of capital expenditures in the year the expenses are incurred. Therefore, purchases requiring a substantial outlay of capital are carefully planned out🐼, usually years in advanc🌳e.

For these companies, proper management of capital expenditures is crucial for survival and growth. Effective management requires striking the right balance between th🌸e need for resources in the future and the ability to generate profits in the present.

Many business expenses do not qualify as capital expenditures. Most obviously, any money spent on employee salaries and hourly pay is a labor expense rather than a capital expenditure. 澳洲幸运5开奖号码历史查询:Human capital spendiౠng, such as emploဣyee training, also does not qualify.

Energy Firms

The energy industry is one of the most capital-intensive industries. Energy companies can be subdivided into companies that produce energy and those that supply it. Oil, gas, and coal firms are among the mos💯t well-known producers.

Energy companies explore, retrieve, and refine energy sources. Power companies deliver energy to businesses and individuals. Power companies are sometimes categorized in a separate 澳洲幸运5开奖号码历史查询:utility sector, particul꧟ꦆarly if they are heavily regulated businesses.

In any case, both parts of the 澳洲幸运5开奖号码历史查询:energy sector must regularly make substantial capital investments. Oil and gas producers must purchase the equipment required for retrieving and refining natural resources. Power companies inves𝓡t in t💧he massive infrastructure necessary to deliver energy.

Transportation

The 澳洲幸运5开奖号码历史查询:transportation sector also has consistently high capital expenditures. This broad in🎶dustry category i൲ncludes airlines, railroads, and trucking.

Airlines must ev♎entually replace their fleets of aircraft, railroad companies🤡 need new locomotives, and trucking firms must buy trucks from time to time.

Airlines are the most capital-intensive companies in the sector. Even an older commercial airliner can easily cost a few million dollars depending on the type, which far outweighs the crew's salaries. A new semi-truck might cost between $70,000 to $160,000, which is still more capital per worker than in most businesses.

Semiconductors

澳洲幸运5开奖号码历史查询:Semiconductor manufacturing demands substantial capital expendiꦜtures. New processor factories can be multibillion-dollar investments in equipment and manufacturing facilities.

Intel's capital expenditures over the past five years peaked in July 2023 at about $26.5 billion. The average for its fiscal years from 2018 to 2022 was about $18.2 billion.

Furthermore, these facilities must be replaced or extensively upgraded every few years to keep pace with technological changes. Although other semiconductors are generally less expensive to produce than Intel's latest processors, the upgrade cycle keeps capital expenditures high throughout the industry.

The Bottom Line

Capital expenditure𝕴 is the money that companies spend on assets that are required to run their business.

Some businesses are 澳洲幸运5开奖号码历史查询:capital-intensive by nature. Companies that operate in the energy, transportation, and semiconductor industries are some of the most capital-intensive, given the costly assets they need to buy, maintain, and, from time to time, r𓂃eplace.