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theoretical capacity

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Definition of theoretical capacity

Theoretical Capacity Image 1

theoretical capacity

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



Related Terms:

ideal capacity

see theoretical capacity


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


Capacity utilization

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


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.


Theoretical Capacity Image 2

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


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 futures price

Also called the fair price, the equilibrium futures price.


Theoretical spot rate curve

A curve derived from theoretical considerations as applied to the yields of
actually traded Treasury debt securities because there are no zero-coupon Treasury debt issues with a maturity
greater than one year. Like the yield curve, this is a graphical depiction of the term structure of interest rates.



 

 

 

 

 

 

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