Not that long ago, there was some noise about the amount of cash that Amazon – a company whic rarely makes much profit – had on hand:
Record Christmas takings have swollen Amazon’s cash pile to as much as $9bn (£5.7bn), the online retailer is expected to declare on Tuesday in results that will inflame the debate over its tax contributions around the world.
But here’s the thing: Amazon’s cash isn’t like the cash held by a company like, say, Apple:
Most cash that Amazon.com generates comes not from earnings, but from the fact that it receives payment from its customers much faster than it pays its suppliers. During 2011, 76.8% of Amazon.com’s cash provided by operating activities came from the expansion of accounts payable (source: 10-K). Given that Amazon.com’s revenues are expanding fast, this effect translates into a larger cash hoard on its balance sheet.
This isn’t cash that Amazon can invest in infrastructure, or product development. It’s just cash that it holds for a short period of time.