operating capital
The company uses its operating capital to purchase raw materials for production.
Noun: - Capital available for day-to-day business functions: "Operating capital" refers to the financial resources a company uses to fund its regular, ongoing business activities. This includes expenses like purchasing raw materials, paying employee wages, covering utility bills, and managing inventory. It is distinct from capital reserved for long-term investments or financial market activities.
This term is used in business and finance contexts to discuss the liquidity and short-term financial health of a company. It focuses on the funds required to keep the core business operations running smoothly.
- The company secured a line of credit to boost its operating capital and ensure it could meet its monthly payroll and supplier payments.
- A shortage of operating capital can force a business to halt production, even if it has valuable long-term assets.
- Effective management of operating capital—such as inventory and accounts receivable—is crucial for a firm's survival.
- Working Capital vs. Operating Capital: While closely related, "working capital" is a broader accounting metric (Current Assets - Current Liabilities). "Operating capital" often refers more specifically to the of working capital actively deployed in core operations.
- Operating Capital Cycle: Refers to the time it takes for a business to convert its investments in inventory and other resources back into cash from sales.
- Working Capital (n): The capital of a business used in its day-to-day trading operations, calculated as current assets minus current liabilities.
- Liquidity (n): The availability of liquid assets to a market or company.
- Cash Flow (n): The total amount of money being transferred into and out of a business.
- Working funds
- Circulating capital
- Short-term capital
- Fixed capital (capital invested in long-term assets like buildings and machinery)
- Investment capital (capital used for financial investments or long-term projects)
The company uses its operating capital to purchase raw materials for production.
- capital available for the operations of a firm (e.g. manufacturing or transportation) as distinct from financial transactions and long-term improvements