Which term describes funds used to cover day-to-day operations?

• A. Working Capital / Operating Capital
• B. Start-up Capital
• C. Fixed Capital
• D. Financial Capital

Answer: (A)

Funds used for day-to-day operations are called working capital. This is the liquidity a business relies on to run daily activities—like paying wages, buying inventory, settling bills, and covering utilities. It’s commonly defined as current assets minus current liabilities, showing whether the firm can meet short-term obligations as they come due. A positive amount indicates ready access to cash for ongoing needs; a negative amount signals potential liquidity trouble.

Start-up capital refers to money set aside to launch a new venture, not to everyday spending once the business is up and running. Fixed capital involves long-term assets like buildings and equipment, not daily operating cash. Financial capital is a broad term for funds used to finance activities and investments, not specifically tied to day-to-day operations.