The difference between capital-light and capital-intensive, and asset-light and asset-heavy
Every investor should understand the difference between capital-light and capital-intensive, and asset-light and asset-heavy.
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🌱 Capital-light: Business requires minimal capital investment to operate and grow.
🏦 Capital-intensive: Business requires significant investment into assets and infrastructure to operate and grow.
📊 INSIGHT: Look for a low CAPEX / OCF ratio.
💡 Asset-light: Business relies more on intangible assets than physical assets to operate and grow.
🏗️ Asset-heavy: Business relies on physical assets to operate and grow.
📊 INSIGHT: Look for a high Intangible Assets / Total Assets ratio.
🔍 Note: Asset-heavy companies are often capital-intensive, needing significant CAPEX to maintain physical assets.
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