If the demand for net circulating capital is higher than the level of net circulating capital, the company financial liquidity may be threatened.
Net circulating capital management includes the development of capital structure as well as management of corporate circulating assets which determine the demand for net circulating capital.
The basic goal of corporate net circulating capital management is the maintenance of the optimal volume and structure of circulating assets and most advantageous structure of financing sources.
Replacing Ricardo's concept of circulating capital as demand for labor with the alternative notion of demand for goods as demand for labor, McCulloch argued as follows (see O'Brien 1975, 227-8): If product demand is unitary elastic such that price falls induce proportionate rises in quantity demanded, then labor re-absorption is complete.
Labor's marginal productivity, not the stock of circulating capital, constitutes labor demand.
circulating capital, as if this characteristic belonged
Marx himself implied this when he emphasized Smith's confusion of circulating capital with capital of circulation.
With regard to Marx's observation that Smith confused circulating capital and capital of circulation, it should be noted, however, that in a society with division of labor, circulation is as necessary as production in the process in which the national revenue is reproduced.
The growth rate of circulating capital is determined as in the Simple Model, except that equation (1) is now
Therefore the effect of these parameters of the fixed capital growth-rate function (24) are incorporated into (29) although it is formally identical with (27), the growth rate of circulating capital only.
The property of invariability of the circulating capital in the period means that the endowment of circulating capital goods is a datum.
This hypothetical property (not assumed by Walras, but determined by the logic of consistency), which may be more formally stated as the proposition that produced goods are not made available before the end of the period, provides a sound basis for the hypothesis of invariability of the circulating capital in the period.