Amazon Shows Time Value of Money

Just how long can Amazon (AMZN) put off paying its bills?

It’s no secret that Amazon’s financial success is partly based on its ability to take in money for selling merchandise before it has to pay suppliers for those goods. But lately Amazon has gone one better: steadily lengthening the time it takes to pay suppliers. That has been a factor behind the retailer’s soaring cash flow.

In the third quarter, for instance, Amazon stretched out its bill-payment to 72 days, up from 63 in the year-earlier period. As Behind The Numbers analyst Brian Evans notes, this “theoretically means that Amazon has not paid suppliers for sales consummated in mid-June.” Amazon’s sales rose 28 percent in the quarter, but accounts payable nearly doubled, helping push free cash flow up 116 percent to $696 million.

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