There is a negative relationship between the capacity utilization rate and the profit margin.

Question

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The capacity utilization rate measures the extent to which an enterprise or a nation uses its installed productive capacity. A higher capacity utilization rate often indicates a higher level of demand for a company's products or services, which can lead to higher sales volumes and potentially higher profit margins. Conversely, a lower capacity utilization rate can indicate weaker demand, potentially leading to lower sales and profit margins. However, the relationship is not inherently negative, as various factors, including operational efficiency, cost management, and market pricing, also significantly influence profit margins.

There Is a Negative Relationship Between the Capacity Utilization Rate