Spongetech Delivery Systems Inc (fka SPNGQ)

[FMorgan]

>>Thanks pantherj. The stuckholders in this company just don't get it. If you have a company that's borrowing money at interest rates of 57% per year, and is using those funds to manage a business with pretax margins of 20% per year, that's a negative arb.<<

LOL you make it sound like it's 37% more than their margins. If you compare it as a cost of sales it's 4%. Spin the numbers anyway you like but they turn over receipts of $100,000 and they get 96,000 in cash. How hard is that to understand. The only way it could be 57% APR is if they repeatedly paid 4% on the same $100,000.

12*100,000=1.2M
12*96,000=1.152m
total cost 48,000

The bottom line is you can't convert it to an APR. You can toss around all the calculations you want, but it still won't be 57%. The most realistic figure I saw was about 24% calculated by Christy from Google. I'm not sure I agree with her figure either, but her logic was much better than yours.

The last thing to remember is that no cost born by the business isn't passed on to the consumer. I play approximately 3% on every transaction I process in my restaurant. It's basically the same as paying somebody 3%. Since I do roughly 1000 credit card transactions per month, by your logic I'm paying 30% per month or a whopping 360% APR. I don't think so.

Am I absorbing that cost...nope, I raise the prices to cover it.