Circulating Capital

Posted in Finance, Accounting and Economics Terms, Total Reads: 193
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Definition: Circulating Capital

It refers to a firm’s capital which is constantly being used and replenished in the ongoing operations of the firm. It includes operating expenses( incurred in the normal course of operation of a firm), raw material stock( consumed in the production of final goods), finished goods inventories etc.


It is opposite of Fixed Capital. In contrast to fixed capital, a measure of tied up capital which is not generating much profits, it is a measure of tied up capital, which actually generated profits for the firm.

 

Salient components of Circulating Capital are:

• Production expenses

• Material and Labour

• Inventory

• Work in progress

• Cash on hand

 

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