circulating capital

A factory uses circulating capital to purchase raw materials and pay its workers.

Definition

1. Noun:
   • Capital used in current operations: "circulating capital" refers to the portion of a company's capital that is used for day-to-day trading activities and is continually turned over in the course of business. It includes assets such as cash, raw materials, work-in-progress, and finished goods, which are consumed or converted into cash within a single operating cycle.

Usage Examples

• (The cash and inventory used for daily operations were not enough to pay short-term obligations.)
• (Sufficient funds for raw materials and wages are necessary for continuous operations.)

Advanced Usage

• "to tie up circulating capital": to invest or immobilize funds in current assets, reducing liquidity.

  • Excessive inventory ties up circulating capital, making it harder to pay suppliers. (Holding too much stock uses funds that could be used elsewhere.)

• "circulating capital turnover": a ratio measuring how efficiently a company uses its circulating capital to generate sales.

  • A high circulating capital turnover indicates efficient use of short-term assets. (The company quickly converts its current assets into revenue.)

Variants and Related Words

• Circulation (n): the movement or flow of something, such as capital or money.

  • The circulation of money in the economy stimulates growth. (The continuous use of currency in transactions.)

• Capital (n): wealth in the form of money or assets used to generate income.

  • They raised capital to expand their factory. (Money invested for business growth.)

Synonyms

• Working capital: the funds available for daily operations, synonymous with circulating capital.
• Current capital: another term for capital used in short-term business activities.

Related Idioms

• To keep the wheels turning: to maintain the flow of resources or operations.

  • Without enough circulating capital, it's hard to keep the wheels turning. (To sustain ongoing business activities.)

• To grease the wheels: to facilitate smooth operations, often by providing necessary funds.

  • A loan helped grease the wheels of the company's circulating capital. (To make daily operations run smoothly.)