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Technology Stocks : Dell Technologies Inc.

DELL 133.35

+0.1%

Nov 28 9:30 AM EST

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To: Rich Young who wrote (60704)	8/25/1998 11:54:00 AM
From: Chuzzlewit	Read Replies (1) of 176387

Rich, factoring an account decreases the profit in the account. Essentially you are pre-paying interest on a non-recourse loan against your receivable. Suppose for example that you factor an account that is due in 60 days for $.90 on the dollar. In effect, the factor is lending you $.90 and expects $1.00 repayment in 60 days, so you have prepared .10 in interest (just like "points in a mortgage). So, .10/.90 = 11.1%. Annualized, this interest amounts to 88%. This is extremely expensive financing. I am not familiar with the way Compaq does business, but generally the lost profit is not explicitly broken out as an interest charge. TTFN, CTC

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