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Capacity Utilization Rate
The extent to which a company uses its facilities at capacity, expressed as a percentage. That is, the capacity utilization rate states how much a company produces as a percentage of what it can produce. For example, if a factory produces 1,000 widgets per day but could produce 2,000 for the same cost, it has a capacity utilization rate of 50%. The capacity utilization rate is most useful for companies producing goods rather than services because goods are simply easier to quantify.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
capacity utilizationthe proportion of a firm's available CAPACITY which is currently being employed in producing output. This depends to a great extent on the state of demand and a firm's competitive abilities. A fall in demand, or a failure to win orders against competition, may force a firm to operate at below BREAK-EVEN levels of capacity utilization. See INDIVISIBILITIES, BUSINESS CYCLE, MACHINE UTILIZATION.
Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson