Definition of practical capacity

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

Debt capacity

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

Capacity

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

Capacity utilization

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

capacity

a measure of production volume or some other activity base

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

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 standard

a standard that can be reached or slightly
exceeded with reasonable effort by workers; it allows for
normal, unavoidable time problems or delays and for
worker breaks; it is often believed to be most effective in
inducing the best performance from workers, since such
a standard represents an attainable challenge

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

Excess Capacity

Unused production capacity.

Debt Capacity

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

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