The capital used for the operations of a company is know as operating capital. Sometimes people confuse operating capital with working capital and use both terms interchangably. But operating capital is a broader term than working capital because operating capital comprises of factory, plant and machinery, inventories, raw materials, cash and cash equivalents. In other words all of the assets a company uses in it’s daily operations is called operating capital.
Operating Capital Example:
For example, for an aeroplane manufacturer, operating capital would include plant and machinery used in production, as well as all of the aeroplane parts, manufactured aeroplanes and cash available to the company.
Working capital is a narrower term than operating capital. Working capital focuses on the day-to-day operations and, therefore, oincludes only items such as inventory, cash, raw materials and accounts receivable.
Working capital is a narrower term than operating capital because it’s more focus is on day-to-day operations of the company. Therefore, it only includes currents assets(after deducting current liabilities) of the company.
Working Capital Example: