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To: Rich Young who wrote (60704)	8/25/1998 11:16:00 AM
From: rudedog	Respond to of 176387

On an accounting basis you are correct. I believe that the impact on income is indirect, as the factoring of the receivables allowed CPQ to move more product into the channel with less impact on the year-end cash position. Obviously, they could have factored without stuffing the channel, which would have affected cash but not income, they could have stuffed without factoring, which would have affected income but not cash. So my previous statement was a little too simplistic... but that's what I meant by a decision based on the present value of the cash. thanks for the clarification.

To: Rich Young who wrote (60704)	8/25/1998 11:54:00 AM
From: Chuzzlewit	Read Replies (1) \| Respond to 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