Investopedia

Capacity Utilization Rate

Dictionary Says

Definition of 'Capacity Utilization Rate'

A metric used to measure the rate at which potential output levels are being met or used. Displayed as a percentage, capacity utilization levels give insight into the overall slack that is in the economy or a firm at a given point in time. If a company is running at a 70% capacity utilization rate, it has room to increase production up to a 100% utilization rate without incurring the expensive costs of building a new plant or facility.

Also known as "operating rate".

Graphically:

Capacity Utilization Rate


Investopedia Says

Investopedia explains 'Capacity Utilization Rate'

Capacity utilization rates can also be used to determine the level at which unit costs will rise. For instance, let's say that Company XYZ currently produces 10,000 widgets at a cost of $0.50 per unit. If it is determined that it can produce up to 15,000 widgets without costs rising above $0.50 per unit, the company is said to be running at a capacity utilization rate of 66% (10,000/15,000).

This is best applied to companies that produce physical goods rather than services, as the capacity measurements are much easier to quantify.

Articles Of Interest

  1. Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  2. Doing More With Less: The Sales-Per-Employee Ratio

    If used properly, this ratio can give you insight into a company's productivity and financial health.
  3. Ratio Analysis Tutorial

    If you don't know how to evaluate a company's present performance and its possible future performance, you need to learn how to analyze ratios.
  4. Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  5. Interpreting A Company's IPO Prospectus Report

    Learn to decipher the secret language of the IPO prospectus report - it can tell you a lot about a company's future.
  6. Strong Volume Gainers, Can It Continue?

    Volume is one of those indicators that gets overlooked, likely because it's shown by default on almost every chart, making it a little dull. But volume is what drives markets. Big volume jumps ...
  7. After A Big Recovery Rally, It's Up To Renew Blue For Best Buy

    Investors have bought Best Buy's story, but this quarter shows that a lot of work remains to be done
  8. Market Summary For May 17, 2013

    The U.S. stock markets moved sharply higher this week, on track for its fourth straight week of gains, driven by ongoing improvements in economic indicators.
  9. If You Don't Mind Volatility, Deere Could Still Do Alright

    Though Deere's shares sold off after earnings, the business model is sound and rolling along.
  10. Agilent Isn't Making It Easy On Investors

    Core operating performance at Agilent needs to improve
comments powered by Disqus
Marketplace
Hot Definitions
  1. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.
  2. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.
  3. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.
  4. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.
  5. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.
  6. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.
Trading Center
Array ( )
taggroups(for debug only):
Array ( [0] => SEG (Business Owners) [1] => Fundamental Analysis [2] => Stocks [3] => SEG (Investors) [4] => SEG (Investors:Instrument-Stocks) [7] => Fundamentals ) time:8ms