Capacity utilization rate measures the percentage of an organization's potential output that is actually being realized. The capacity utilization rate of a company or a national economy may be measured in order to provide insight into how well it is reaching its potential.The formula for finding the rate is: (Actual Output / Potential Output ) x 100 = Capacity Utilization RateA number under 100% indicates that the organization is producing at less than its full potential.Capacity utilization rate is a key metric for a business or a national economy. It indicates the slack in the organization at a given point in time.A company that has a utilization rate of less than 100% can, at least theoretically, increase its production without incurring the additional expensive overhead costs that are associated with purchasing new equipment or property.A national economy with a ratio of under 100% can pinpoint areas in which its production levels can be increased without significant costs or disruption. The concept of capacity utilization is best applied to the production of physical goods, which are simpler to quantify.Become a supporter of this podcast: https://www.spreaker.com/podcast/investment-terms--4432332/support.

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