A production function is a function that can be seen as a function of labor and capital as: Q ¼ f (K, L), where K ¼ capital and L ¼ labor. The capitallabor ratio (K/L) is generally used to measure a firm’s degree of capital intensity. Capital intensity results in increased total risks and generally results in an increase in beta. If the capital-labor ratio is greater than one – that is, if K is greater than L – a firm is capital intensive. If the ratio is less than one, then there is a deduction in capital intensity and a shift towards human-resource investment.