And then their SG amp A is the same.

So therefore, I put it down there.

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

So I'll just write down the number first.

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

So no cash went out of the door.

They're usable over two years.

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

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

So I used half of it in year one.

Our profit, once again, is 30,000.

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

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

Well, you know depreciation, man.

Depreciation is tangible.

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

That's just the gasoline cost.

Nothing fancy.

No, we didn't.

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

And then we have depreciation, and we want to think a little bit in this video, what does the depreciation do to the cash flow statement?

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

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

You'll pay for the breakage?

Our starting cash was 50,000, we had 50,000 from operations, now our ending cash is 100,000.

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

And this is just an arguably long winded way of saying that the way you account for this is you spread out the cost over time, over its useful life, and this spreading out is called the depreciation of an asset.

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

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.

This is the interest rate you assume.

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

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

I paid for the damage.

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

This is all a review of the depreciation video.

I will compensate you for your loss.

look, obviously, i'll pay for whatever the damage is.

You failed to kill the lawyer.

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

The damage was covered by insurance.

He will make amends for the damage.

I claimed damages against him.

After all, we've got to make good the loss.

Their recovered losses are going up.

Who will compensate for the loss?