Circulating capital includes intermediate goods and operating expenses, i.e., short-lived items that are used in production and used up in the process of creating other goods or services. This is roughly equal to intermediate consumption. Finer distinctions include raw materials, intermediate goods, inventories, ancillary operating expenses and (working capital). It is contrasted with fixed capital. The term was used in more specialized ways by classical economists such as Adam Smith, David Ricardo and Karl Marx.
Where the distinction is used, circulating capital is a component of (total) capital, also including fixed capital used in a single cycle of production. In contrast to fixed capital, it is used up in every cycle (raw materials, basic and intermediate materials, combustible, energy…). In accounting, the circulating capital comes under the heading of current assets.
