And there's all sorts of intangible assets that you might amortize.

So therefore, I put it down there.

They're usable over two years.

This is the principal amortization.

And then their SG amp A is the same.

And I'm running out of time in this video, and I'll cover it in the next, but you might have also heard of the word

So I'll just write down the number first.

Well, you know depreciation, man.

And amortizing really just means spreading out the cost of this asset, just like depreciation was spreading out the cost of a physical asset.

This is the interest rate you assume.

Really, in my mind, it's very similar to depreciation.

And just so you know, most corporate debt actually works that way.

To figure out the cash from operations from actually how much cash the operations are producing.

So no cash went out of the door.

This is all a review of the depreciation video.

I know that I owe you 150 thousand

Depreciation is tangible.

So essentially, a 30 year fixed rate loan has a 30 year principal amortization.

That's just the gasoline cost.

So I used half of it in year one.

If you divide 50,000 by 4, it's 12,500.

No, we didn't.

Our short term goal for this is to be half the price of solar cells and our longer term goal is to be less than a five year payback.

You'll often hear the words depreciation and amortization used together.

So 20,000 over 3 years is the life of that truck.

And then instead of having an equipment expense, instead of having that expense, they'll have an equipment depreciation expense.

Our profit, once again, is 30,000.

They have no money down, 1 million loan, subprime, negative amortization, they had no credit rating, etc, etc.

So for example, depreciation, this was factory equipment, and it gets old as I use it, so I spread out its cost.

And then at the end of 2010, it'll say the machine is worth nothing.

It just makes economic sense. Right now, solar paybacks are between 30 and 50 years.

Accounts Receivable, that they're not changing over the course of the year.

amortization. Amortization is to spread out a non tangible cost over a period of time.

At this point in time, your patent is arguably only worth 1,000, because you paid 4,000 for four years, and now you only have a year left.

And then the other 250,000 essentially went to an expense called depreciation, which is right there.

Nothing fancy.

So what you do when this comes due, since you can't get any other loans, let's say that you sell these.

So the way you'd think about this is instead of having factory retooling, you could say factory tool.

They didn't make loans and then sell the loans.

And we'll talk later about depreciation and amortization and how we might change what these values are, but a very simple way is, if you went out and bought 10 million worth of stuff, you'd write on your books, I have a 10 million asset.

Because I think the newspapers do that, but a lot of people don't understand the basic accounting.

Objection. There has been no testimony admitted with respect to any one armed man.

Rick Mm hmm.

Hey, Lone Ranger.

Did you get the loan?