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.

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.

Minus 500,000.

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.

This was interest. This was non op income.

And then I was left with 1 million.

And these metrics will tell you that.

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

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

That's what it is generating.

And then, how much am I making from the business now?

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

Let me write that.

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 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.

So now we add an interesting line.

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

I'm talking about all companies.

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.

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

And that's because they have the same exact asset.

(Laughter)

Our profit, once again, is 30,000.

let's actually talk about this for a second.

And we add back the interest, at least in this example, we get to an operating profit number.

But anyway, here I want to figure out what is my return on asset?

But this is the difference between operating income and EBlT.

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

By directing that industry, so that the industry in control of that individual actor in such a manner, as its produce may be of the greatest value, he intends only his own gain.

So in any of these periods, the depreciation expense should be added back to the operating profit, to figure out the cash from operations.

And the way we saw that is that, their everything, their revenue, gross profit all the way down to their operating profit was exactly the same.

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.

Thus The Pirate Bay isn't idealistic.

They're the things that are needed to generate the operating profit.

And then it adds back the taxes and interest.

EBlT in this case would be the operating profit plus this investment income.

It doesn't think about things like interest income from your bank account, or interest expense on any loans you have.

I need to make or what price I have to charge.

This is just the money directly from the cupcakes.

So this kind of the cash income statement,

And we'll make it more complicated in the future

And I'll write the common acronym in there, COGS.

Periods per year

Periods