Definition of Capacity

Capacity

The maximum volume of products or services that can be produced given limitations of space,
people, equipment or financial resources.

capacity

a measure of production volume or some other activity base

Debt capacity

Ability to borrow. The amount a firm can borrow up to the point where the firm value no
longer increases.

Capacity utilization

The proportion of capacity that is able to be utilized to fulfil customer demand for products
or services.

expected capacity

a short-run concept that represents the
anticipated level of capacity to be used by a firm in the
upcoming period, based on projected product demand

ideal capacity

see theoretical capacity

normal capacity

the long-run (5–10 years) average production
or service volume of a firm; it takes into consideration
cyclical and seasonal fluctuations

practical capacity

the physical production or service volume that a firm could achieve during normal working hours with consideration given to ongoing, expected operating interruptions

productive capacity

the number of total units that could be
produced during a period based on available equipment time
productive processing time the proportion of total time that
is value-added time; also known as manufacturing cycle
efficiency

theoretical capacity

the estimated maximum production or
service volume that a firm could achieve during a period

Excess Capacity

Unused production capacity.

Debt Capacity

An assessment of ability and willingness to repay a loan from anticipated future cash flow or other sources.

Car

A loose quantity term sometimes used to describe a the amount of a commodity underlying one
commodity contract; e.g., "a car of bellies." Derived from the fact that quantities of the product specified in a
contract used to correspond closely to the capacity of a railroad car.

Economic earnings

The real flow of cash that a firm could pay out forever in the absence of any change in
the firm's productive capacity.

Five Cs of credit

Five characteristics that are used to form a judgement about a customer's creditworthiness:
character, capacity, capital, collateral, and conditions.

Supply shock

n event that influences production capacity and costs in an economy.

fixed expenses (costs)

Expenses or costs that remain the same in amount,
or fixed, over the short run and do not vary with changes in sales volume
or sales revenue or other measures of business activity. Over the
longer run, however, these costs increase or decrease as the business
grows or declines. Fixed operating costs provide capacity to carry on
operations and make sales. Fixed manufacturing overhead costs provide
production capacity. Fixed expenses are a key pivot point for the analysis
of profit behavior, especially for determining the breakeven point and for
analyzing strategies to improve profit performance.

Bottleneck

An operation in the midst of a manufacturing or service process in which the
required production level matches or exceeds the actual capacity.

Manufacturing resource planning (MRP II)

An expansion of the material requirements planning concept, with additional computer-based capabilities in the areas of
direct labor and machine capacity planning.

Replacement Capital Expenditures

Capital expenditures required to replace productive
capacity consumed during a reporting period.

Bottleneck

A resource whose capacity is unable to match or exceed that of the demand
volume required of it.

Independent Broker

This is a provincial government licensed independent businessperson who usually represents five or more life insurance companies in a sales and service capacity and who is paid a commission by those life insurance companies for sales and service of life insurance products. We for example, have been in business for 12 years and regularly place new business with over twenty different life insurance companies.

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