Definition of capital intensive

term that describes a company with significant capital asset(e.g., machinery), such as those in the automobile and airline industries. Capital intensive companies run a higher risk; if there is a downturn in sales, profits will decrease sharply because fixed costcannot be reduced in the short-term to meet declining demand. A diagram illustrating the downside risk potential follows:

requiring large investments in capital assets, Motor-vehicle and steel production are capital intensive industries. To provide an acceptable return on investment, such industries must have a high margin of profit or a low cost of borrowing. The term capital intensive is sometimes used to mean a high proportion of fixed assets to labor.