n Management Dynamics : Journal of the Southern African Institute for Management Scientists - The evaluation of traditional and value-added measures of capital intensity




The large number of different measures of capital intensity in existence are, in most cases, used in isolation when determining capital intensity. However, since capital intensity is not a one-dimensional phenomenon, this could lead to an inaccurate indication of an enterprise's degree of capital intensity. Furthermore, it has been found that a number of measures which are based on value-added figures are not always suitable to use as indicators of capital intensity.

In this study special emphasis will be placed on determining the suitability of the different measures including value-added figures to be used as indicators of capital intensity. The suitable measures are included in a composite measure of capital intensity based on principal component analysis and biplot methodology, which is used to classify a sample of South African enterprises.
The benefit of the proposed measure in comparison with individual measures is that it focuses on a number of different aspects that can influence an enterprise's degree of capital intensity, therefore reducing the risk of providing an inaccurate classification.


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