Circulating Capital

DEFINITION of 'Circulating Capital'

The portion of an organization's investment that is continually used and replenished in ongoing operations. Circulating capital can consist of operating expenses, raw material stock, inventories of finished goods or physical capital on hand. Circulating capital is the opposite of constant (fixed) capital.

BREAKING DOWN 'Circulating Capital'

By calculating circulating capital you will get a better understanding of how much capital is tied up to generate profit. Fixed capital, on the other hand, refers to funds that are tied up, but aren't generating much profit. For example, a very small percentage (or none) of the cash tied up in a building, such as a warehouse, can be associated with the production of goods and therefore profits.

RELATED TERMS
  1. Currency In Circulation

    Currency that is physically used to conduct transactions between ...
  2. Active Money

    The total value of coins and paper currency in circulation amongst ...
  3. Working Capital

    Working capital is a measure of both a company's efficiency and ...
  4. Capital Flows

    The movement of money for the purpose of investment, trade or ...
  5. Capitalization

    1. In accounting, it is where costs to acquire an asset are included ...
  6. Capital Markets

    Capital markets are markets for buying and selling equity and ...
Related Articles
  1. Economics

    Understanding Capital

    Capital has a variety of meanings, but it generally refers to financial resources.
  2. Investing News

    Retail vs. Tech: How These Companies Use Working Capital

    Learn about the difference between retail and tech businesses' use of working capital and why working capital varies so widely in the technology sector.
  3. Fundamental Analysis

    Explaining Capital Employed

    Generally, capital employed refers to all of the assets used in a business that contribute to the company’s ability to earn revenue.
  4. Economics

    How Central Banks Control The Supply Of Money

    A look at the ways central banks pump or drain money from the economy to keep it healthy.
  5. Economics

    Understanding Capital Investment

    Capital investment is a term that describes a company’s expenditures for long-term assets used in the operation of its business.
  6. Economics

    Explaining Cost Of Capital

    Cost of capital is the cost of funds used to finance a business.
  7. Economics

    What's Economic Capital?

    While regulatory and economic capital use some of the same measurements of risk to determine how much capital a firm should hold in reserve, economic capital uses more realistic measures.
  8. Economics

    What are Capital Goods?

    Capital goods are assets with a useful life of more than one year that are used for the production of income.
  9. Investing

    Understanding Capital Gains

    Capital gain refers to the increase in value of a capital asset or an investment security upon sale. In other words, if you buy company stock, real estate or fine art and then sell it for more ...
  10. Fundamental Analysis

    Capital Markets: Where They Matter Most

    See which countries and regions dominate the world's capital markets and why American entrepreneurial spirit and risk-taking give the United States an edge.
RELATED FAQS
  1. How is working capital different from fixed capital?

    Understand the differences between working capital and fixed capital, including definitions and examples of how businesses ... Read Answer >>
  2. What is the difference between financial capital and economic capital?

    Read about the differences between types of financial capital, which companies use to raise money, and economic capital models ... Read Answer >>
  3. What does low working capital say about a company's financial prospects?

    Find out what it means when a company has low working capital, including how this metric is interpreted based on business ... Read Answer >>
  4. What does high working capital say about a company's financial prospects?

    Learn about net working capital and what a high figure indicates about a company's financial prospects, including the importance ... Read Answer >>
  5. What is the difference between capital investment decision and current asset decision?

    Learn how capital investment decisions are long-term funding decisions, while current asset decisions are short-term funding ... Read Answer >>
  6. How much working capital does a small business need?

    Learn about the three primary factors that determine how much working capital is needed by a small business, including business ... Read Answer >>
Hot Definitions
  1. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  2. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  3. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  4. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  5. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  6. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
Trading Center