What is money a business uses to support its operations in the short term called?

• A. Line of Credit
• B. Debt Capital
• C. Bootstrapping
• D. Operating Capital

Answer: (D)

Operating capital is the funds a business uses to run day-to-day activities in the near term. It represents the liquidity needed to pay payroll, purchase inventory, cover rent, and meet other current expenses, typically calculated as current assets minus current liabilities. Keeping enough operating capital ensures operations run smoothly between sales, without needing to secure new financing every time. This differs from debt capital, which is money borrowed for longer-term needs; a line of credit is a borrowing facility used as needed rather than the ongoing funds itself; and bootstrapping refers to using personal funds or reinvested profits rather than external financing.