"Behind The Numbers" and the WSJ are on the case:

"Just how long can Amazon put off paying its bills?"

"It's no secret that Amazon's financial success is partly based on its ability to take in money for selling merchandise before it has to pay suppliers for those goods. But lately Amazon has gone one better: steadily lengthening the time it takes to pay suppliers. That has been a factor behind the retailer's soaring cash flow.

In the third quarter, for instance, Amazon stretched out its bill-payment to 72 days, up from 63 in the year-earlier period. As Behind The Numbers analyst Brian Evans notes, this "theoretically means that Amazon has not paid suppliers for sales consummated in mid-June." Amazon's sales rose 28% in the quarter, but accounts payable nearly doubled, helping push free cash flow up 116% to $696 million.

Averaged through the year, Amazon's accounts-payable days have risen from 49.25 days in 2003 to 59 last year before jumping to an average of 64.6 so far this year. Free cash flow has grown to $1.36 billion in 2008 from $346 million in 2003.

Such efficient working capital management is to be envied, of course. But investors shouldn't get too used to it. Amazon can't keep extending payment terms with its vendors indefinitely. When it stops, one source of free cash flow growth will disappear.

Charles Mulford, an accounting professor at Georgia Institute of Technology, notes how sharply boosting accounts payable helped Robert Nardelli transform Home Depot's cash generation after he took charge at the end of 2000. The retailer went from reporting negative free cash flow to $2.57 billion in fiscal 2002. But gains from working capital efficiency petered out after a few years. Such things won't flow Amazon's way forever."