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

My head I think implicitly made the numbers work out nicely.

Periods per year

Periods

Anyway, going back to Price to Earnings, we calculated the

Compounded for 64 years.

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.

So wait a minute, you're getting 90 but you spent a total of 53 building the product and keeping the lights on and that leaves right in the middle how much profit you have.

She calculated the up front cost and the payback over time, and it's a net plus on so many levels for the local, national and global economy.

In the last video, I hopefully showed you that if I borrowed P dollars, and I borrow it for a year, and you were to charge me an interest rate of r, or you could say 10r , then at the end and we were to compound continuously.

When we did return on asset, we looked at the operating profit, because this is what our company generated before we paid the bank or Uncle Sam or anything like that.

And now we are left with our we're getting close to where we need to get to pre tax income.

So this kind of the cash income statement,

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.

Minus 500,000.

This is just the money directly from the cupcakes.

We get r is equal to 0.23, or 23 .

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.

I'm just multiplying this times itself.

That equaled 2.613.

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.

The company announced a profit of 200 million after tax.

And we'll make it more complicated in the future

But here you see it means very, very different things.

This is really important to pay attention to, because so many people say, oh, a company made this much.

Before I go into price to earnings and all that, I want to connect the dots between the income statement and the balance sheet.

I'll just abbreviate that as Nl.

Go ahead, eat.

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

Perform symbolic and numeric calculations using Maxima

Just to clarify.

It's much less likely.

Our interests clash with theirs.

At the end of 10 years, I owe 500.

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