Utilization rates measure how effectively a resource, such as a workforce or equipment, is being used compared to its total capacity. For example, if a factory can produce 100 units per day but only produces 80, the utilization rate is 80%. This metric helps organizations assess efficiency and identify areas for improvement. In service industries, utilization rates can indicate how much of a staff member's time is spent on billable work versus non-billable tasks. A higher utilization rate often suggests better productivity, while a lower rate may highlight inefficiencies or underemployment. Understanding these rates can guide strategic decisions.