Capacity Utilization

Capacity utilization is the extent to which an enterprise or a nation actually uses its installed productive capacity. It is the relationship between output that is actually produced with the installed equipment and the potential output which could be produced with it if capacity was fully used.

Capacity utilization or capacity utilization is the extent to which an enterprise or a nation actually uses its installed productive capacity. It is the relationship between output that is actually produced with the installed equipment, and the potential output which could be produced with it, if capacity was fully used. One of the most used definitions of the "capacity utilization rate" is the ratio of actual output to the potential output. But potential output can be defined in at least two different ways.