

Ask HN: Where does Amazon get the money for growth investment despite losses? - Wowbombarder

Where does Amazon get the money to keep investing in growth if its making losses? Is it by just giving away more and more of the company as stock?
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omni
They've got money in the bank. $19B in current assets (assets which could, if
needed, be converted to cash in a short timeframe) as of Q12014. Compare this
to their recent losses of $510M and $146M and you understand why they aren't
really worried about those losses.

IS:
[http://finance.yahoo.com/q/is?s=amzn](http://finance.yahoo.com/q/is?s=amzn)
BS:
[https://finance.yahoo.com/q/bs?s=AMZN](https://finance.yahoo.com/q/bs?s=AMZN)

~~~
MaysonL
Well, actually not so much, with $18B in current liabilities: i.e. money they
are obligated to pay out pretty quickly, and almost $8B in other liabilities
including long-term debt.

EDITS: Note that they're really living off credit extended (not always
voluntarily) by their suppliers: they have almost $17B in payables, and less
than $4B in receivables. In other words, they're really slow payers.

Also, note that their payables are more than twice their inventory!

~~~
lifeisstillgood
That's terrible !

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zxcvvcxz
A business can be losing money but remain cash-flow positive. This is what
allows them to continue investing in growth.

Consider a traditional bookseller, say Barnes and Noble, who has to invest in
physical retail, holding product (books), and training staff BEFORE they can
earn any money at all.

Amazon, on the other hand, takes customer money upfront as soon as they click
buy. Then they can figure out their asset needs based on customer demands.
Getting money upfront, Amazon can continue to invest it back into growth of
the company. Presumably at some point they can "turn the switch" and lower
their growth to earn more profits. But why not delay this until you're
practically a monopoly? That's what will maximize shareholder value long-term.
Perhaps more interesting of a question is how long shareholders are willing to
wait. I suppose it doesn't matter as long as the stock price keeps rising.

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akg_67
From Cash Flow statement in AMZN 10-Q:

Last Quarter (June 30, 2014) Amazon had a net loss of $126M, generated $862M
from its operations, invested $731M in its business, paid off debt of $189M
and only spent $17M of its cash and cash-equivalent assets.

To sum it up, AMZN only spent $17M beyond what they generated from operations,
financing and investing.

[http://yahoo.brand.edgar-
online.com/displayfilinginfo.aspx?F...](http://yahoo.brand.edgar-
online.com/displayfilinginfo.aspx?FilingID=10109702-6497-14911&type=sect&TabIndex=2&dcn=0001018724-14-000025&nav=1&src=Yahoo)

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rahimnathwani
Look at the line in the cash flow statement showing changes in unearned
income. If Prime and any other annual subscription services are growing, then
the cash flow from new payments is greater than the profit recognised from
existing subscriptions.

Also, what other people said: changes in the balance of payables and
receivables; stock-based compensation isn't a cash flow but is recognised as a
cost; debt funding.

In general cash flow is not equal to profit, due to sometimes large
differences in timing.

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NameNickHN
It's the other way around. They make losses because they grow.

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yzzxy
Losses != failure. Just a cash balance sheet. They keep making losses
deliberately for tax and other reasons BECAUSE they have investment to grow.

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logn
Exactly. And profits can be just as fictional too.

