Capacity utilization rate

Capacity utilization rate,

Definition of Capacity utilization rate:

  1. Percentage of the production capacity (of a firm, industry, or industrial sector) actually used for production during a month, quarter, year. Also called operating ratio.

  2. The capacity utilization rate measures the proportion of potential economic output that is actually realized. Displayed as a percentage, the capacity utilization level provides insight into the overall slack that is in an economy or a firm at a given point in time. The formula for finding the rate is:.

  3. (Actual Output / Potential Output ) x 100 = Capacity Utilization Rate.

Meaning of Capacity utilization rate & Capacity utilization rate Definition