Absolutely, accounts payable can be a useful tool to finance working capital. As the video you watched explains, working capital is simply current assets minus current liabilities. Accounts payable represent the money you owe to suppliers for goods or services you’ve already received but haven’t paid for yet. By extending the payment terms with suppliers, you can improve your working capital since you’re essentially deferring payment.

The video provides a great example of a company that buys children’s toys from a supplier. If the company pays the supplier cash on delivery (COD), then the company has no accounts payable and its working capital is high. This is because the company has to tie up a lot of cash in inventory.

On the other hand, if the company can get 45 days credit from its supplier, then the company has accounts payable of $100,000 (assuming the company buys $100,000 of toys from the supplier). This frees up $100,000 of cash that the company can use for other purposes. The company’s working capital is lower in this case, but its cash flow is higher.

In essence, accounts payable allows companies to free up cash that can be used for other purposes, such as inventory or marketing. However, it’s important to note that accounts payable is a form of debt. Companies need to be careful not to take on too much accounts payable debt, as this can strain their cash flow and make it difficult to meet their financial obligations.