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.

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  1. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  2. Does working capital include inventory?

    A company's working capital includes inventory, and increases in inventory make working capital increase. Working capital ... Read Full Answer >>
  3. How can I calculate funds from operation in Excel?

    In general, the terms "work in progress" and "work in process" are used interchangeably to refer to products midway through ... Read Full Answer >>
  4. When does Q4 start and finish?

    Most companies such as Facebook have financial years that end on December 31st. For these companies, the fourth quarter begins ... Read Full Answer >>
  5. When is it useful to look at a company's fixed asset turnover ratio?

    It is useful to look at a company's fixed asset turnover ratio when an outside observer, such as an investor, wants to know ... Read Full Answer >>
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    Perfect competition is a microeconomics concept that describes a market structure controlled entirely by market forces. In ... Read Full Answer >>

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