Financial Terms
Capacity utilization

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Definition of Capacity utilization

Capacity Utilization Image 1

Capacity utilization

The proportion of capacity that is able to be utilized to fulfil customer demand for products
or services.



Related Terms:

Capacity

The maximum volume of products or services that can be produced given limitations of space,
people, equipment or financial resources.


capacity

a measure of production volume or some other activity base


Debt capacity

Ability to borrow. The amount a firm can borrow up to the point where the firm value no
longer increases.


Debt Capacity

An assessment of ability and willingness to repay a loan from anticipated future cash flow or other sources.


Excess Capacity

Unused production capacity.



expected capacity

a short-run concept that represents the
anticipated level of capacity to be used by a firm in the
upcoming period, based on projected product demand


ideal capacity

see theoretical capacity


Capacity Utilization Image 2

normal capacity

the long-run (5–10 years) average production
or service volume of a firm; it takes into consideration
cyclical and seasonal fluctuations


practical capacity

the physical production or service volume that a firm could achieve during normal working hours with consideration given to ongoing, expected operating interruptions


productive capacity

the number of total units that could be
produced during a period based on available equipment time
productive processing time the proportion of total time that
is value-added time; also known as manufacturing cycle
efficiency


theoretical capacity

the estimated maximum production or
service volume that a firm could achieve during a period



 

 

 

 

 

 

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