capacity utilization
Capacity utilization measures how much of an organization's total production capacity is actually being used. It is expressed as a percentage, calculated by dividing the actual output by potential output. For example, if a factory can produce 100 widgets but only makes 80, its capacity utilization is 80%. Higher utilization indicates efficient use of resources, while lower rates may suggest inefficiencies or excess capacity. Understanding this helps businesses assess performance, manage costs, and make informed decisions about expanding or reducing operations.
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Capacity utilization measures how much of a company's production capacity is actually being used. It’s expressed as a percentage, where 100% means the company is producing at its maximum potential. For example, if a factory can produce 1,000 units but only makes 800, its capacity utilization is 80%. This indicator helps businesses understand efficiency: higher utilization can signal strong demand and effective operations, while lower rates may suggest overcapacity or inefficiencies. Monitoring capacity utilization is important for planning, resource management, and financial performance.