![]() ![]() With a capex of $1.84 billion, Amazon's FCF would have been only $530 million instead of the reported $2.64 billion. How much of its free cash flow and cash from operations would have been? However, if Amazon paid for its suppliers and its expenses directly after receiving money from its customers, and collecting its receivables during the quarter, Amazon's CFO would be just $2.37 billion, 47% lower. What if Amazon pays suppliers earlier than it does? What implications that would have on its CFO?įor example, in Q3 2016, by postponing paying to the suppliers and paying business expenses, Amazon generated $4.48 billion in CFO. We just want to inform investors that the most important metric they are using to value Amazon is not as good as it seems. After all, that's simply an exchange of interests - most suppliers are willing to let Amazon pay late for the sake of selling their goods on a platform that has one of the highest turnover ratios. Just to make it clear, we are not attacking Amazon for doing such a thing. While we believe that is a rare case (the three years thing, not the paying late one), it opens an un-answered question about why Amazon has one of the highest days payable outstanding in the industry, and to what degree that inflates its cash from operations, Amazon's most important metric?Īmazon takes advantage of its high turnover rate to push suppliers to wait more for their payments (you don't complain about being paid late when you sell your inventory quickly at a suitable price).Īmazon has a history of its ruthless negotiations with its suppliers (check here and here). MusicBrainz, a non-profit UK firm, has been waiting since 2013 (!) to get its payments from Amazon. These distributors have been waiting for years for receiving payments from the biggest e-commerce company in the world, but still nothing happened. Months ago, several distributors (Amazon suppliers) in the UK complained about Amazon taking so much time to send them their payments. Here's why investors should look again into Amazon's cash from operations. However, what if Amazon's cash flows are of low quality? Unfortunately, so many Amazon (NASDAQ: NASDAQ: AMZN) investors base their thesis around this assertion. In his latest letter to shareholders, Jeff Bezos restated his assertion that investors should be looking at cash flows, not GAAP net income. "When forced to choose between optimizing the appearance of our GAAP accounting and maximizing the present value of future cash flows, we'll take the cash flows." ![]()
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