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Your model is too simplistic here. The actual cash leaving Amazon's bank account may not be due to their supplier until 30 or 60 days after delivery. If it take

Your model is too simplistic here. The actual cash leaving Amazon's bank account may not be due to their supplier until 30 or 60 days after delivery. If it takes Amazon 6 days to sell that $100 worth of goods, they can effectively sell $1000 worth of product before that initial cash is due to the supplier if we're talking net 60. This is how a $100 initial cash investment in inventory can produce $17 worth of cash at the end. You use your leverage with lots of small suppliers to force them into offering generous credit. Note: this ignores the fact that these numbers are based on net profit instead of gross profit which would be the actual relevant number here. And the gross profit in groceries is a lot higher than 1.7%.

8166284 10y ago
You're desperately trying to contrive a scenario that does not exist, the rate on buying merchandise and selling it in groceries is still 1.7%. Borrowing money and playing with the time window does not change this.
- ryanworl 10y ago
  I'm not going write a long explanation about this, but "borrowing money" and "playing with the time window" is the foundation of so many different kinds of businesses I can't list them all.
  - CodeWriter23 10y ago
    Float doesn't change the profit MARGIN.
- SomeCallMeTim 10y ago
  Real estate appreciates at 4% (on average, but let's say it's constant for the sake of argument). I buy a house that costs $100,000. My down payment (cash out of pocket) is $20,000. I pay 3.5% interest on $80,000 as I'm paying down the loan, plus property taxes and insurance, and it comes to $546.74/month [1]. The rent comes in at $550/month, pretty much canceling out the mortgage. Am I making 4% per year on my investment, then, because that's the amount the real estate appreciates? No, I'm making 4% of $100,000 per year, or $4,000, on my $20,000 investment. That's 20% per year. [2][3] Leverage properly applied can raise your net profit. You're welcome. [1] http://www.mortgagecalculator.org/ http://www.mortgagecalculator.org/ [2] The numbers can realistically be much better than this, given the right circumstances. I am personally using this as an investment strategy, and yes, it doesn't just work this way "in theory." [3] I'm ignoring repairs and vacancy rate for simplicity. Those obviously hurt profitability. But as I mentioned in [2] above, if you pick your investment property strategically, your margins are much higher, so that's your cushion.

8166284 10y ago

You're desperately trying to contrive a scenario that does not exist, the rate on buying merchandise and selling it in groceries is still 1.7%. Borrowing money and playing with the time window does not change this.

ryanworl 10y ago
I'm not going write a long explanation about this, but "borrowing money" and "playing with the time window" is the foundation of so many different kinds of businesses I can't list them all.
- CodeWriter23 10y ago
  Float doesn't change the profit MARGIN.
SomeCallMeTim 10y ago
Real estate appreciates at 4% (on average, but let's say it's constant for the sake of argument). I buy a house that costs $100,000. My down payment (cash out of pocket) is $20,000. I pay 3.5% interest on $80,000 as I'm paying down the loan, plus property taxes and insurance, and it comes to $546.74/month [1]. The rent comes in at $550/month, pretty much canceling out the mortgage. Am I making 4% per year on my investment, then, because that's the amount the real estate appreciates? No, I'm making 4% of $100,000 per year, or $4,000, on my $20,000 investment. That's 20% per year. [2][3] Leverage properly applied can raise your net profit. You're welcome. [1] http://www.mortgagecalculator.org/ http://www.mortgagecalculator.org/ [2] The numbers can realistically be much better than this, given the right circumstances. I am personally using this as an investment strategy, and yes, it doesn't just work this way "in theory." [3] I'm ignoring repairs and vacancy rate for simplicity. Those obviously hurt profitability. But as I mentioned in [2] above, if you pick your investment property strategically, your margins are much higher, so that's your cushion.