What Is Capital Utilization?
In the simplest terms, capital utilization refers to how a company's assets are best used. In economic circles a variety of theories have been put forward regarding how a company our group can make the most of the resources available to it.
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What is Capital
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Capital in this case refers to all of the assets available. This includes machinery, manpower and other resources, including financial assets.
Factors
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A number of factors must be taken into account when considering the best use of capital. If you have expensive machinery then, on the surface, that machinery is not being used optimally when it is not in use. This does not take into account depreciation and maintenance. Will the machine break down more often or depreciate more rapidly if it is used constantly? Other areas of consideration involve employees as well as the hours, working conditions and productivity of those employees. Ultimately, capital utilization involves all of the assets which a company may have at its disposal and how those resources are put to work to achieve maximum productivity and return on investment.
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Historical
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The debate over capital utilization dates back to the 18th century. It was a chief concern of Carl Marx in his discussion on workers rights and the debate over the use of capital was a contributing factor in the standardized work week and the creation of shift work.
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References
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- Photo Credit poids du capital image by rachid amrous-spleen from Fotolia.com
