Working Capital Definition
As you say, if you delay paying your bills, your liabilities will increase. Like say your bills total $10,000 per month. If you normally pay after 30 days, then your short-term liabilities will be $10,000. If you stretch that out to pay after 60 days, then you will be carrying two months worth of bills as a short-term liability, or $20,000. Your liabilities go up. Assume you keep the same amount of cash on hand after you stretch out your payments like this as you did before. Now your liabilities are higher but your assets are the same, so your working capital goes down. For example, suppose you kept $25,000 in the bank before this change and you still keep $30,000 after. Then before your working capital was $25,000 minus $10,000, or $15,000. After it is $25,000 minus $20,000, or only $5,000. So how does this relate to cash flow? While presumably if the company has $10,000 per month in bills, and their bank balance remains at $25,000 month after month, then they must have $10,000 per month in income that's going to pay those bills, or the bank balance would be going down. So now if they DON'T pay that $10,000 in bills this month, but the bank account doesn't go up by $10,000, then they must have spent the $10,000 on something else. That is, they have converted that money from an on-going balance into cash flow. Note that this is a one-time trick. If you stretch out your payment time from 30 days to 60 days, then you are now carrying 2 months worth of bills on your books instead of 1. So the first month that you do this -- if you did it all at once for all your bills -- you would just not pay any bills that month. But then you would have to resume paying the bills the next month. It's not like you're adding $10,000 to your cash flow every month. You're adding $10,000 to your cash flow the month that you make the change. Then you return to equilibrium. To increase your cash flow every month this way, you would have to continually increase the time it takes you to pay your bills: 30 days this month, 45 days the next, 60 the next, then 75, 90, etc. Pretty soon your bills are 20 years past due and no one wants to do business with you any more. Normally people see an action like this as an emergency measure to get over a short-term cash crunch. Adopting it as a long-term policy seems very short-sighted to me, creating a long-term relationship problem with your suppliers in exchange for a one-shot gain. But then, I'm not a big corporate finance officer.
It requires fairly large levels of capital, but what about seed funding/angel investments in startups? This would be before venture capital gets involved, so the amounts are relatively low (tens of thousands, vs. millions of USD), but as valuations this early in the game are also low, you can get a significant portion of equity in a startup that you feel is being run by good people and is in a promising market. Paul Graham of Y-Combinator has a number of articles about this from both sides of the table that you can take a look at and see if this is for you. It's definitely very high-risk, but if you can pick successful startups before their valuation shoots up, get some equity, help them succeed, and they eventually go public or get acquired, you can stand to bring in some big returns. Note that this isn't a hands-off investment. You'll need to build connections in the startup community, and it isn't uncommon for angel investors to become involved in the day-to-day operations of the businesses in which they invest. "&gt; the Soviet union was as capitalist as any other country  According to the Marxists, capitalism is the ""private ownership of the means of production"". In order for ""private ownership"" of *anything* to exist, one must by definition have the right to ""private property"" ownership, or ""property rights"". I would therefore argue from definition that the only metric to measure the degree a state can be said to be capitalist is to examine the degree by which it respects private property rights.  The Soviet Union historically had low respect for property rights, and any system of authoritarianism definitionally has low respect for property rights. One cannot claim the Soviet Union was capitalist as any other country unless you can claim it respected private property rights to the same degree as every other country." Those terms apply for businesses operating in the US, yes. The main takeaway should be to think of whether or not you need access to tons of capital, will have substantial risk of liability, or will operate with a partner. If the answer to all of these is no, you should use the structure which is most convenient/best for your taxes. I would look up sole proprietorships and see if that matches the definition of a sole trader. Totally, right now I'm being stopped by the difficulty of adjusting from being a student with a flexible schedule to working 6 to 6, but it's definitely not for lack of time that I'm having trouble working out.  You're right though, as the blog post mentions, you typically end up scheduling your gym appointments at times when you definitely won't be called in to the office - very late and very early on weekends.  As for sleep, I used to be very dedicated to 8/night, but you learn to adjust to less. The impacts are noticeable, though, and it's certainly not ideal. There is a third type of asset that a GIC falls into: Cash. So while it does share some characteristics of a bond, such as (often) having a fixed interest rate, and having the ability to ladder their maturities, they would generally be considered part of your Cash component of your portfolio. "Instead of ""stocks"" I would refer to that asset class as ""equity.""  Instead of bonds, I would refer to that asset class as ""fixed income.""  Given that more general terminology, GICs would fit into fixed income." Thanks /u/LupusSuperius . Great information. Do you have any terms  or articles(perhaps on investopedia or similar)you can recommend I search for how much debt is ideal to take on for a start up?  I'd like to learn more instead of getting you to do my homework if that makes sense.  My simulation is similar to Capsim. We've made two strategic decisions: 1. We went capital intensive in the first year to build up factory capacity. Year 1 we have very little R&amp;D, but year 2 we plan to increase R&amp;D budget.   Since it is a capital intensive year, should that capital expenditure be funded by debt entirely and I leave equity alone? I noticed this drives down my WACC, but I see a decrease in NPV because of increased interest payments. Also does it make sense to increase the debt to pay for R&amp;D as well? The way I see it paying for the manufacturing plant on debt isn't bad because you get an asset out of it at the end, but paying for a R&amp;D program seems foolish because in this simulation there's a chance your R&amp;D program fails and does not provide results, so we would  see no return on the debt in that case.   Thanks again. "You are comparing ""market caps"" and ""enterprise value"".  If the company has four billion dollars cash in the bank, then the value would be four billion plus whatever the business itself is worth as a business. If the business itself is only worth 400 million, then you would have 4.4bn market caps and 400 million enterprise value. The ""enterprise value"" is basically how much the business would be worth if it had no cash or no debt.  These numbers would be a very unusual situation. It could happen for example if a big company has sold 90% of its business for cash. When you buy a share of the company, you get a tiny share of the business and you own a tiny share of the cash. This stock will very likely keep its value, but won't make much money.  On the other hand, more common would be a company where the business is worth 4bn, but the company has also 4bn debt. So it is worth exactly zero. Market caps close to zero, but enterprise value $4bn, because you ignore the debt in the enterprise value.  Edit: Sorry, got the ""enterprise value"" totally wrong, read millions instead of billions: Your numbers would mean that you have a huge, huge company with close to 440bn debt. Most likely someone made a mistake here. A ""normal"" situation would be say a company with a business that is worth $500 million, but they have $100 million debt, so market caps = $400 million but enterprise value = $500 million.  PS. Yahoo has the same nonsense numbers on their UK site, and for other companies (I just checked Marks and Spencer's which apparently has an enterprise value of 800 billion pound with a totally ridiculous P/E ratio."