Which term describes money used to support a business's operations in the short term, not a loan?

Which term describes money used to support a business's operations in the short term, not a loan?

• A. Debt Capital
• B. Pro forma
• C. Trade Credit
• D. Operating Capital

Answer: (D)

Operating capital, often called working capital, is the amount of money a business uses to run its day-to-day operations in the short term. It encompasses cash, inventory, and accounts receivable that are available to cover current expenses, offset by current liabilities. It isn’t a loan; it’s the fund base the company uses to keep operating smoothly. Debt capital refers to borrowed money and typically involves repayment over time, not simply the day-to-day funds on hand. Pro forma is a financial forecast, not actual funds. Trade credit is a specific form of short-term financing from suppliers, allowing delayed payment, which is a way to obtain operating funds but not the general pool of funds used for everyday operations.

Operating capital, often called working capital, is the amount of money a business uses to run its day-to-day operations in the short term. It encompasses cash, inventory, and accounts receivable that are available to cover current expenses, offset by current liabilities. It isn’t a loan; it’s the fund base the company uses to keep operating smoothly.

Debt capital refers to borrowed money and typically involves repayment over time, not simply the day-to-day funds on hand. Pro forma is a financial forecast, not actual funds. Trade credit is a specific form of short-term financing from suppliers, allowing delayed payment, which is a way to obtain operating funds but not the general pool of funds used for everyday operations.