The term capital intensive is most widely used in reference to specific industries or business sectors. Businesses in capital-intensive sectors require large amounts of fixed assets in order to deliver their products or services.
Capital intensive businesses typically have high investment requirements and fixed operating costs, and narrow profit margins. This means they must sell large quantities of their products or services in order to make a profit.
Examples of business sectors which are capital intensive include mining, heavy industry such as steel or cement production, public transportation, freight transportation, petroleum extraction and refining, and heavy machinery manufacturing. All of these industries require large investments in physical assets such as real estate, construction and equipment. At the same time, the products or services they deliver are relatively low-cost, which means they require high sales in order to make a profit, taking the high investment requirements into account.
Capital intensive businesses are best suited to long-term investments. While it can take a capital intensive company many years to reach profitability, the high initial and ongoing investment required to found these businesses means they are difficult to replace, and typically remain in operation for long periods of time.
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