Revenue generated per dollar of total capital. Capital-efficient businesses need less money to grow, meaning less need for debt or stock issuance. Above 1.0 means the company generates more than one dollar of revenue for each dollar of capital.
Formula
Description
Measures how much revenue each dollar of total capital (debt plus equity) generates. Capital-efficient businesses need less funding to grow, which means less dilution for shareholders and less dependence on external financing. It is a simple but powerful indicator of business model quality.
Interpretation
Above 1.0 means the company generates more than one dollar of revenue for each dollar of capital. Higher is better. Compare within industry, as capital intensity varies dramatically between sectors like software and manufacturing.
Related Quality Indicators
The percentage of revenue left after paying all operating expenses but before interest and taxes. This shows how efficiently the core business runs. Above 15% is generally strong. Consistently expanding margins signal improving business quality.
The percentage of every revenue dollar that becomes bottom-line profit after all expenses. Above 10% is strong for most industries. Persistently high net margins often indicate a company has a competitive moat protecting its business.
Profitability before the effects of debt, taxes, and depreciation. Useful for comparing companies across different tax jurisdictions and capital structures. Above 20% is generally strong. Often used in merger and acquisition analysis.
The percentage of revenue that converts to free cash flow. This is arguably the most honest profitability metric because free cash flow is difficult to manipulate. Above 10% is strong. Capital-light businesses like software companies tend to have the highest FCF margins.
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