I mean if I want to ship something, Fed Ex will ask for payment up front but when Amazon.com ships something they probably don't actually send the money right away. I am still trying to grasp this concept credit terms. I must add that I have had no training in this field and have basically just skimmed through the soylent blog post

http://blog.soylent.com/post/133420708272/pricing-soylent-ef...

so in my mind, what we want to do is get the "interest-free loan" from our supplier of equal or greater duration to the credit term we give our customers.

I imagine this is a double whammy because suppliers offers better terms when the going is good and become strict when the going gets bad. Now that I think about it, perhaps Apple sitting on a pile of cash isn't such a bad idea after all right? I mean if they have to go through a rough patch again, won't any credit terms they get (banks, investors, or suppliers) automatically be worse? I don't know the rules about financial stuff but my perception is that as public companies there is only so much information you can withhold (and only for so long) without breaking financial regulations (and those regulations presumably exist for a good reason).

Yes, it is. In both an accounting sense, and a legal sense.

"I mean if they have to go through a rough patch again, won't any credit terms they get (banks, investors, or suppliers) automatically be worse?"

Yes. It's a standard death-spiral path for a company to be viewed as unable to pay their suppliers, and thus becomes unable to generate revenues. The way out is usually some sort of senior or secured (ie collateralized) debt.

I don't know much about finance so for anyone else like me I'd like to point out that this is not a typo.

> In finance, senior debt, frequently issued in the form of senior notes or referred to as senior loans, is debt that takes priority over other unsecured or otherwise more "junior" debt owed by the issuer.

https://en.wikipedia.org/wiki/Senior_debt

> What is 'Senior Debt'

> Senior debt is borrowed money that a company must repay first if it goes out of business. Companies have a number of options for obtaining financing, including bank loans and the issuance of bonds and stocks. Each type of financing has a different priority level in being repaid if the company decides to liquidate. If the company goes under, the holders of each type of financing have different levels of rights to the company's assets.

> If a company goes bankrupt, senior debtholders, who are often bondholders or banks that have issued revolving credit lines, are most likely to be repaid, followed by junior debt holders, preferred stock holders and common stock holders. Senior debt is secured by collateral, and that collateral can be sold to repay the senior debt holders. As such, senior debt is considered lower risk and carries a relatively low interest rate. Even though senior debtholders are the first in line to be repaid, they will not necessarily receive the full amount they are owed in a worst-case scenario.

http://www.investopedia.com/terms/s/seniordebt.asp

I'm sure there is more to this topic than what I've pasted above. Off the top of my head, I can imagine it is unlikely that the courts would just accept that a company going bankrupt got a super senior loan from the chairman's wife if there is no book keeping that the money actually went into the company and was not a ploy to defraud the actual lenders. I think any lender can take the debtor to court if they suspect malice (This is just my hunch.)

Yes, you got it :-) Although it doesn't always work in practice. As a small business, I have a UPS account with net-7 terms (they bill me once a week).

This is not normally considered debt, though. It's a liability, but there is no formal loan agreement. I may have a customer push payment out to 90+ days and I end up getting the same amount as if he had paid me within 30 days as agreed. So if UPS charges me $100 to send them an item overnight, but they don't pay me the $5,000 for that item for 3 months, I still have to pay UPS within 7 days.

They might ask for payment up front, but they'll quite happily take a credit card instead. Yes, credit cards are a form of transactional debt if you pay them off each month; they allow you to enjoy your purchases for ~ 1 month before paying for them.

I didn't think about that. So essentially, the credit card issuer didn't really spend "their money" at all. Wow. The more I learn the more I realize how little I know.

Afterwards, if you do a chargeback, the bank will yank back the funds from any other amounts the bank owes the merchants, but if the merchant has enough proof the cardholder participated in the transaction (aka, swipe and sign, or chip and sign, or use of CVC code online), then the bank will give the money back to the merchant. The bank still takes $30 or so from the merchant as a fee for getting a chargeback though, but I'm sure that amount and terms vary from merchant to merchant, depending on their purchasing power.

A friend told me about this case where a vendor charged his American Express twice. They called the vendor about this and the vendor yelled at him so he called American Express for a charge back. Apparently, American Express went in and did a charge back for the whole amount. I am glad they did the charge back but it must suck for a merchant if the charge was legitimate and the customer was being a jerk.

You don't think buying a stake in a successful company (in this case one that happens to be your own) is buying an asset? The mechanations are slightly different, but you're still buying shares. An effect is rising EPS (due to retired shares), but that isn't the purpose.

   but that isn't the purpose

Putting aside the executive giveaway (because I have a hard time believing that there are executive bonuses so intertwined with EPS that the company can just burn money on buybacks to increase that bonus without any external fuss or anyone questioning why)...

...who or what else matters beyond the shareholders?

Share buybacks aren't a scam. They exist as a method to return capital to shareholders and can be smart or not depending on a variety of financial circumstances. Just like every other financial decision.

http://aswathdamodaran.blogspot.ca/2014/09/stock-buybacks-th...