Circulating Capital

Also known as Working Capital, circulating capital are all of the elements of a business that will constantly be utilized, and be either incoming or outgoing. Cash, credit lines, raw materials, inventory, products in the midst of manufacturing, and goods that are shipped and thus become accounts receivable, are all part of Circulating Capital. It is a criteria to reference for business management efficiency and for seasonal adjustments, as may be required. Warehouses, factory buildings, etc. are all part of fixed capital.

For example, carrying excess inventory may indicate too much production of fewer "in demand" items, while too much accounts receivable may be stretching cash flow unnecessarily.

In sneaker trade parlance, “cash and kicks, along with boxes and laces, are circulating capital. The van I borrowed from my neighbor when he’s not using it at his job is is part of my fixed asset cost, although the $50 I slip him each time I go out on a run with it is also circulating capital.”