which of the following items is not an example of circulating capital

Analyze the question: You are asked to pick the item that is not circulating capital. So we need to know the difference between circulating (working) capital and fixed capital.

Explain the concept:

• Fixed capital is capital goods that are used repeatedly over a long period in production and are not used up in a single production cycle. Examples: machinery, buildings, tools, vehicles.
• Circulating (working) capital is capital that is used up or changes form in a single act of production, or that is kept in liquid form to run the business day to day. Examples: raw materials, fuel, money (cash for paying wages and expenses), and goods in process.

Step-by-step solution:

• A. Raw material: it is consumed or transformed into the finished product, so it is circulating capital.
• B. Money: it is spent on wages and other running costs and keeps circulating through the business, so it is circulating capital.
• C. Fuel: it is burned up during production, so it is circulating capital.
• D. Machinery: it lasts for many years and is used again and again, so it is fixed capital, not circulating capital.

Answer: The item that is not an example of circulating capital is D. Machinery.

Exam tip: Ask yourself, "Is it used up quickly, or does it stay and work for years?" If it is used up or changes form in one production cycle, it is circulating. If it stays and is used repeatedly (machines, buildings, equipment), it is fixed. You can also remember "Fixed = Stays; Circulating = Changes or goes."