Business fundamentals are concerned with cash flow and the balance sheet. It's irrelevant to have positive cash flow if it can't service your debts (see, e.g.,

Business fundamentals are concerned with cash flow and the balance sheet. It's irrelevant to have positive cash flow if it can't service your debts (see, e.g., almost every company destroyed by a private equity firm, for example, Toys R Us). In other words, yes they have more money, but no, it does not make them more profitable. They're not profitable in either Scenario because they don't have any income in either. But in one scenario, they have $100k spendable cash, and in the other all they have is sweat equity that they claim is worth $200k compensation. With spendable cash, you have runway and the opportunity to acquire external products or services that they need for the business. With sweat equity, you have sweat and dreams of success.