We are assuming a very simple world, were the is no taxes, we have no debt, we have no intrest or things

And these metrics will tell you that.

So you've probably heard not only the term earnings, you've probably also heard the term earnings per share.

And when people talk about earnings of a company, this is what they're talking about.

And then if you subtract your costs from your revenue, or if you just add these two numbers, because this one is negative, you have your gross profit.

And let's say, assume if I inherited this million dollars, I didn't finance it.

And you'll hear these numbers, gross and operating profit and net profit and pretax profit, and it's very hard to understand that these are actually very, very different things, because they all have the word profit, and what does gross and operating and all that mean?

France will, of course, keep its military bases in Mali.

This was interest. This was non op income.

This guy makes what is this?

And then I'll do a more philosophical video on why these things even exist, and why they're useful, and why people may benefit or may not benefit from these things.

And at least it'll give you a sense of how revenues, gross profit, operating profit, pre tax income and net income really are different.

And this is what goes to the owners of the company.

Company A made 1 per share. 1 of EPS.

Price to Earnings is 1.75 divided by 0.35, would now be a 5 Price to Earnings.

So, let's see, you have to do 1.85.

So it will benefit, because you are discounting some of the cash payments.

But, of course, that's not the money that we get to take home, because we have to pay this interest.

But this is the difference between operating income and EBlT.

They're generating the operating profit, and that's a very important thing to realize in the future when we talk about return on assets.

But in general if you take EBlT and you take out the non operating income, you get back to operating profits.

Let me write that.

These are the only people who really have, arguably the sophistication and the time and the monetary incentive to really look and scrutinize what management is doing.

So that's a nice thing to keep in the back of your mind, this return on asset concept, and it's very closely tied to operating profits and the actual assets of a firm.

Let's say this is what we assume is how many cupcakes we sell.

What's in it for the institution?

They have no interest expense, because that's not the point of this video.

Our interests clash with theirs.

And I won't go into all of the details of an income statement, but any income statement you look at will have this operating profit line.

It is to his advantage.

And so their operating profit, the amount of pre tax income, but you know, we're not considering financing either, so this is their operating profit or their EBlT.

They buy more of your service and they tell more of their friends, which leads to more profit.

No pain, no gain.

And now we're ready to figure out how much money did the operations of this business make?

If the cost to produce the item is 20, so the cost to produce an item is 20, what is the selling price that optimizes the yearly, the yearly, profit?

But again, fun is not enough.

When it's rainy and windy, he gives up.

And if we see how they graphed things here, on the vertical axis, what we normally associate with the y axis, they graphed Abby's earnings.

And this is the profit from the operations of the company, or you could say from the assets or from the business or from the enterprise of the company.

Before Interest and Taxes.

You can talk about the Humanities and that sort of thing, but let's talk about selfish things.

This is what the owners of the company get before they pay the government.

(Laughter) But I know it's the bottom line, or one's perception of it, that motivates people in the end.

So this is the operating profit. This is the money that just comes out of the asset itself.

Then the companies or those factories or whatever you want to think of them,