Capital efficiency refers to a company's ability to generate profits relative to the capital it has invested. It helps measure a company's liquidity, efficiency and overall health. Higher capital efficiency means a company invested less but earned more. Analyzing capital efficiency is important for business analysis and allows investors to assess how effectively a company uses its capital to achieve profits. When capital efficiency is low or unstable, it can lead companies to face financial insolvency, outgrow themselves, or prematurely fail businesses. Therefore, capital efficiency provides a useful indicator of a company's financial performance and stability over time.